Shares of Logistics companies falling as a result of the global stock market’s downturn
As China’s economic growth is slowing down, logistics and transportation companies like FedEx Corp., UPS, Deutsche Post AG, A.P. Møller-Mærsk A/S and YRC Worldwide Inc. felt the market’s setback as their stocks took a tumble this week. During the last few years, with global economic growth, logistics companies extended their businesses all over the world and their revenues grew remarkably. This is why now, as international economic growth and demand is slowing down, they have a lot to lose. As a consequence of the slowdown, there have been several acquisitions by logistics companies. However, the desired profits have not yet set in because of the differing operating systems.
Although supply chains are tending to become more regional, David Ross, transportation and logistics analyst at Stifel, says that in the long term, global trade will continue to grow constantly and so will logistics companies.
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Update: Effects of the explosion in Tianjin on supply chains worldwide
Bindiya Vakil, CEO of the Resilinc Corp. and one of the leading authorities in supply chain risk management, is convinced that the effects of the explosions in Tianjin are worse than the media and the Chinese government communicated. She states that it will take months or years until the operations in the global supply chains are able to return to normal operation. Some of her forecasts have already turned out to be true, particularly the ones regarding the number of people affected by the explosion, which has been constantly adjusted upwards since the beginning. For Bindiya Vakil, there are four main reasons why the blast will eventually have a greater impact on supply chains than we think.
The first one is that the port of Tianjin is even more important than reported by the news. It is among the biggest by cargo volume and container traffic. The second reason she points out is that the Chinese government supervises the news and deemphasizes the consequences, in particular concerning the impacts for the environment and human health. Because of the high levels of Cyanide in the area, workers cannot go back to work, which leads to delays in the supply chains. Third, Vakil also warns of the long-term effects on the environment and public health, as toxic chemicals were released to the air and water. She stresses that governments of China and other affected countries could tighten the rules for firms regarding the use of the chemicals forever. The fourth reason, according to Bindiya Vakil, is that many firms are lagging behind in investing in capacities to handle risks and crises in their supply chains. The companies who did, however, can regenerate easier from the blast and continue business.
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U.K. establishes Modern Slavery Act
A new law fighting modern slavery will be implemented in the U.K. in October. It affects all firms with a gross revenue of £36 million that conduct a part of their business in the U.K. They are obligated to release a “slavery and human trafficking statement” once a year, providing information about the company and their supply chains, especially the high-risk parts that may contain slavery or human trafficking. Furthermore, companies will need to indicate their measures to fight slavery and human trafficking along the supply chain. The report then needs to be authorized and signed by the top management or the directors and disclosed on the website of the firm. The U.K. Modern Slavery Act is based on the California Transparency in Supply Chains Act, however, there are some differences regarding applicability, financial threshold, compliance and enforcement. If companies violate this law, they can be taken to court. Moreover, they will be condemned by the public and business partners.
The actions that companies now need to take include checking if the law affects the firm, examine the policies in their supply chain, examine the verification procedures of the policies and the training procedures for the employees, as well as stimulate debate about the law’s content.
For more information on this topic, click here.
Have a nice weekend!
