There is substantial geopolitical risk with China. Look no further than the South China Seas. Philippine officials say Chinese forces seized two naval boats in a disputed South China Sea shoal. A few days prior, a Philippine ship and a Chinese vessel collided. It is a risky situation in the South China Seas.
In attending the Southern California E-Commerce & Logistics Summit, it is clear that focusing on global logistics as a system of systems is paramount (special shout out to Fran Inman for the use of her phrase). Not one link in the supply chain can succeed on its own.
The risk of China has increased dramatically over the years. Early on, executives were concerned about intellectual property theft. Although that is still a concern, there are much bigger issues.
If you are dependent on any region, non-friendly country, customer, supplier, material, or anything noteworthy to your success, you must diversify. Although this concept has always been true, the pandemic highlighted the critical importance. Some companies simply lost their source of supply overnight and have not recovered if not diversified.
According to UPS's CEO, UPS’ network flexibility gave it an edge over FedEx in landing a deal with the U.S. Postal Service. Instead of following a hub-and-spoke model to service the USPS, UPS can use its regional gateways to support the local and regional requirements of the USPS customers.
According to The California Policy Center, 237 companies have left California since 2005. Most companies cited the expanding regulatory and taxation environment.
The aerospace supply chain has been struggling to recover since the pandemic. The industry has been plagued with shortages, labor issues, and supply chain issues. According to McKinsey, demand was back to 97% of pre-pandemic levels as of December 2023.
California's minimum wage went up to $20/hr. for fast food restaurants with at least 60 locations nationwide that do not make bread. This law is causing widespread unintended consequences. For example, Fosters Freeze in Lemoore closed suddenly after the wage hike. Mod 5 Pizza is closing five locations.
Horribly, a container ship collided with the Francis Scott Key Bridge, and much of the bridge collapsed. From a supply chain point of view, it has caused significant near-term impacts and extended disruptions in the region.
Manufacturers wish they left supply chain shortages behind after the pandemic, but they remain top of mind. Concerns remain. According to KPMG, “71% of global companies highlight raw material costs as their number one supply chain threat for 2023.”
