Planning Supply Chain around Chinese New Year

Each year supply chains around the world must plan around Chinese New Year, which falls somewhere in either January or February each year. The varying date is due to CNY being based on the lunar calendar, which in itself adds confusion to production planning. Furthermore, there is no real rule of thumb on how long factories or other service orientated companies will be closed. The official government holiday is only one week; however, it is safe to say that production operations will be affected for up to 4-6 weeks each year. Unfortunately for buyers, it will affect your supply chain for much longer.

 

This year CNY is Saturday, February 16th. There are many variables that have buyers and supply chain personnel nursing headaches already. Our goal is to help minimize the complexities of product planning and offer a guideline to help navigate through the holiday this year and years to come.Here are basic tips to help minimize the impact of CNY:

1) Work with trusted manufacturers – suppliers that are well organized will inform you of any impacts in advance. That’s exactly how we managed to provide you with this information, by working in close collaboration with experienced and trusted manufacturers. However, we take it a step further with the 889 QA Program which goes much deeper as a hands-on approach. As some may know, even suppliers that are not as busy just use CNY as an excuse for being slow. But this isn’t the only reason to be hands on – larger factories that are approaching capacity may subcontract to smaller factories to meet demand. Quality issues may arise as these factories do not have the same quality assurance programs. One of the advantages of working with a manufacturing partner is that they usually have years of experience building a trustworthy supplier network and can help you navigate during this stressful time of year.

2) Plan inventory – By the end of 3Q factories should notify their valued customers to place orders that need to be shipped before CNY. Here is what you will need to do to plan inventory:

– Analyze sales from previous years to forecast inventory needs during January – April
– In October, confirm when your supplier is closing and reopening for the CNY
– By November discuss the optimal time for placing a pre-CNY order considering capacity and lead time
– Based on your supplier’s response to the above, place your order before the CNY (usually in first two weeks of December)
This year more factories are reaching capacity sooner. We have found that many clients are looking to place orders in August and September to get ahead of the production capacity concerns as well as lack of freight availability. In July there were not enough carts for rail freight.

3) Stay on top of production – Stay on top of production so that you are aware of production status and if schedules are slipping. Highlight and work aggressively with suppliers to keep them on schedule, in our experience, often the customer with the loudest voice gets priority.

a. Factory Closing Date – have products ready for shipment 1.5 – 2 weeks before the factory closing date. This include a couple days of cushion in case you need to get the goods sorted or reworked before shipping. Also, makes sure with the competitive shipping industry that your goods will get out.
b. Factory Opening Date – any inventory needed for March and April should be shipped prior to CNY. It is critical to specifically confirm the deadline to place an order for a shipment directly after CNY and the first shipment date after CNY. Most factories resume production with only about a third of their workforce. Not to mention the back-orders received during CNY.
c. Deadline to place an order for a shipment before CNY – depends on the supplier’s production capacity, complexity and size of the order. Make sure you know your supplier’s production lead time minimum and maximum days.

4) Have a quality plan – create a quality standard (sooner the better) with the manufacturer and establish a thorough inspection plan. This will reduce the risk of shipment delays caused by quality issues. If you work with a third-party QC partner based in China like 889, you probably have better chances of avoiding quality driven delays. Either way, pre-plan your inspection services ahead during the holiday as you are not the only one in a rush and workload is high. For more concrete quality and inspection planning feel free to contact anybody on the 889 Team.

5) Plan for shipment – sea freight can get expensive with peak pricing during that time. Plan and ship ahead of time to save cost and avoid delays. Smaller shipments should be at the port 2-3 weeks before CNY and booked a minimum of two weeks in advance to ensure a spot on the ship. Larger shipments should be booked 5-6 weeks in advance. These seem like aggressive timelines, but with unpredictable variables like weather they are necessary. Working with a trusted freight forwarder or manufacturing partner will be helpful here as they usually work with shipping companies that are well organized and better versed to deal with high demand caused by CNY.

6) Forward plan for future CNY and other important Chinese holidays
– CNY 2019: February 5
– CNY 2020: January 25
– CNY 2021: February 12
– CNY 2022: February 1
– CNY 2023: January 22


How Have Value-Added Logistics Services Changed the Manufacturing Sector? 

 

As technology advances and tariff activities continue to complicate supply chains in 2018, the value of niche 3PL services has never been higher. According to Grand View Research, in 2015 the global 3PL market was nearly $700 billion and is now estimated to be about $850 billion. The increase in growth can be credited to the need to reduce capital expenditure and optimize spend. The ability to mitigate risks, manage inventory, and liberalize a business operation to focus on its core competencies will become significant. Also, as the growing trend of relying on “Big Data” and the increasing availability of industry specific logistics services continues, middle market companies will increasingly outsource these services. The below graph highlights the expected breakdown of market share by 3PL services.

At 889, we have had significant growth by leveraging specific software and processes to reduce supply chain complexities while continually penetrating emerging countries. Most competitors are hesitant in making such capital investments, however, globalization has increased the need for efficient fulfillment of on-time deliveries to OEMs and the end-users. Adding in freight brokerage and leveraging unused warehouse space and resources has proven to improve service and cost-effectiveness.

Over the next 5-7 years, Value-Added Logistics services (VALs) are expected to have the fastest growth rates in the market. Optimizing economic comparative advantages is becoming more attractive to OEMs, meaning reduced spending on daily functions and overhead costs such as transportation. By collaborating with industry experts and regional partners here at 889, we can leverage knowledge of local markets to increase profit margins and decrease overhead costs.


Material Trends and Price Points for Aluminum and Steel

Since the price surge in April for aluminum and June for steel, both have begun downward trends. The surge in prices was mainly due to the tariffs imposed by the US and the subsequent retaliations by other nations. After April, though, aluminum prices fell; that trend continued into July, but at a slower pace. On the other hand, steel continued to face rising prices in June, but has recently seen decreasing prices in July.

Many experts believe that the downward trend in the price of aluminum is due to the expectation that Rusal, the world’s second largest aluminum producer, will receive sanctions relief from the US. Because this is the expectation within the industry, the market has already seemed to adjust to it. However, there are those who believe the US will not grant relief to Rusal, as it could be a bad move politically. So, if sanctions relief does come for Rusal, the price effect will most likely be negligible, as the market had preemptively adjusted for it. However, if the relief does not come, the price can likely shoot up again, possibly upwards to 00 per ton. There are some who believe the recent drop in prices has been caused by a general softness in commodity prices due to fears of a trade war, not an expectation that Rusal will receive relief.

The increasing price of US domestic steel has also recently started to slow down and even fall, signaling what may be an end an increasing price trend we have seen for much of the summer. It is forecast that global demand for steel will grow throughout the rest of 2018 and 2019, while steel supply has tightened recently. If supply continues to tighten, this could certainly cause a supply-side shortage, thus creating another price surge. However, it is not expected for the supply to remain tight.

Overall, the markets for aluminum and steel continue to face uncertainty. The rumors of sanctions relief for Rusal could have an effect on aluminum prices in the future. There is also uncertainty with future actions that the US or other countries will take in terms of tariffs. For now, all there is to do is wait and see what further actions are taken in the global economy, both politically and industrially.


Trumpdate: Tradewar News

Now that the new tariffs have gone into effect, how will the economy respond? That is the $34 billion dollar question.  Some believe that the tariffs will provide the US with higher quality manufacturing jobs, while others anticipate increased costs for American industry.

The new international trade policy is expected to shake up global supply chains and cause a reevaluation of cash flow for American manufacturers, and industry leaders are keeping their eyes on the market for developing trends.  For now, some supply chain turbulence is to be expected as changes take effect.

There have been some reports of Chinese ports holding goods for longer than expected.  Delays in customs clearing have occured while officials wait for word on how exactly to impose the added tariffs.

International response has varied.  Some nations have given vocal critiques of the new trade policies and others have responded with specifically formulated tariffs of their own.

For example, one of the targeted responses from China has been a new, lowered import commitment to US soybeans, down 66,000 tons from last year. With the United States exporting over 50% of their soybean yield to China, the reduced quota is expected to change the agricultural landscape.

President Trump committed to moving forward on the tariffs the day before they went into effect on July 6th, maintaining that the taxed goods, valued at $34 billion, have the potential to be followed by an additional $16 billion of taxable goods in the future. There are rumblings that as much as $450 billion of taxable imports are up for consideration.

As the tariffs go into effect and new market forces take shape, logistics and supply chain managers watch with anticipation for what will happen next.  International market forces are always in flux, so expect that these changes are only the beginning.


Community Involvement and Corporate Citizenship

Columbus Business First released “The List” in Corporate Citizenship for 2018, ranking of the top 100 companies in Central Ohio giving back to the community.  In total, over $69 million and 225,000 volunteer hours were given to a wide range of local organizations.  We at 889 are honored to be recognized among the leading businesses who have donated to local nonprofits.  With the combined support of these companies, we are able to ensure their continued contribution.

 
One of the standout philanthropic efforts this year is The Buckeye Ranch, a nonprofit that provides emotional, behavioral, and mental health services for children and their families.  Partnering with companies to orchestrate their annual fundraiser, Rally for the Ranch, they have raised more than $2.1 million to date.

Another great project is the “living laboratory” at the E3 Solar House and Past Innovation Lab in Columbus.  Serving as custom-built learning environments, these labs provide a hands-on way for students from grades 3-12 to learn about green energy.  A $270,000 grant and numerous hours of volunteer involvement have allowed the project to move forward with education and research plans for future-facing alternative energy.

In addition to generous cash donations, some nonprofits benefited from in-kind donations of resources and time.  The Mid-Ohio Foodbank is one such organization aided by philanthropic efforts from Corporate Citizenship Award winners.  They utilized volunteer researchers to carry out studies to better understand the sensitivities around poverty and hunger.  In discovering the stereotypes, stigma, and racism surrounding public discourse on this topic, the Mid-Ohio Foodbank was able to design messages that better convey the harrowing statistic that one is six people in Ohio, and one in four children, struggles with hunger.

And of course, 889 Global Solutions was proud to be involved with the Stefanie Spielman Fund for Breast Cancer Research, which has raised over $1.8 million to date.  This year, with the combined efforts of everyone involved, we successfully raised funds for a Stellant® Injection System. This system works with current Spielman Center equipment to enhance the visualization of cancer cells through various imaging processes, like x-ray, tomography and MRI, to increase the accuracy of detection and better interpret mammograms.  We are looking forward to the awards in 2019 and hope that everyone outdoes themselves next year.


889 Second Annual Step-Up for Stefanie

Last month, our friends and families came together at the Stefanie Spielman Comprehensive Breast Center for the 4-mile run / 1-mile walk. In 1999 Chris Spielman established the fund in honor of his wife. All the funds raised by Step-Up for Stefanie go towards breast cancer research at Ohio State’s Comprehensive Cancer Center as well as the James Cancer Hospital and Solove Research Institute.

This year eyes were set on getting a Stellant® Injection System. This system works with current Spielman Center equipment to enhance the visualization of cancer cells through various imaging processes, like x-ray, tomography and MRI, to increase the accuracy of detection and better interpret mammograms.

This year unfortunately we were not able to top the record breaking year in 2017 where there were over 1,700 participants, 138 teams, and $100,000 raised. However, we were able to raise enough for the Stellant® Injection System. With our 889 team growing we were able to grow our efforts as well. This year 889 Global Solutions was the 5th largest corporate supporter taking part in over $50,000 raised for the battle against breast cancer.

Although the event has passed, the battle has not ended. With about $1.8 million raised since the foundation of the Stefanie Spielman Fund for Breast Cancer Research we have been able to make great strides. By making a donation, you can join us in creating a cancer-free world. One person and one discovery at a time. We encourage you to support the cause devoted to finding the cure: Step-Up for Stefanie’s Champions


Honda Executive on Bringing Overseas Manufacturing to the U.S.

It was great to listen to Shige Yoshida, retired Executive VP and Chief Operating Officer of Honda as he enlightened members and guests of the Columbus Rotary Club last week on his experiences. Rotarians learned about developments and the eventual selection of the Honda Marysville plant making Ohio home for its first U.S. manufacturing plant.

Some of you may be more aware than others of the Honda story and the lessons it provides on bringing flexible manufacturing, industry leading technology, and local Ohio workers to create vehicles such as the 2018 Honda Accord recently named Car of the Year. However, Mr. Yoshida’s first ever public speech on Honda’s growth through the 1970’s, full auto production in 1982 and on to his retirement in 1987 added to that storyline.

Besides Honda, Ohio has proven a great home for many manufacturers such as Worthington Industries. Yoshida mentioned that John McConnell was one his biggest mentors through his career which has led him to be described as “the most influential automaker executive of the past 50 years”. The small Japanese company came to the U.S. as a non-union shop without substantial financial incentives.

Now today, we are taking pages out of their book on how to build cross cultural relationships within U.S. manufacturing. Tom Shoupe, current Executive VP and Chief Operating Officer of Honda of America Manufacturing picked up Yoshida’s trip down memory lane by describing the past twenty years of Honda’s success in Ohio as well as provide a preview of future directions.

The self-reliant North American company now manufactures motor vehicles in the same market where they are sold with over 10,000 American workers in their Ohio manufacturing plants alone. We are eager to see how the Honda story plays out and are excited to be a part of bringing overseas manufacturing practices to the U.S.


889 Wins Silver Stevie® Award in 2018 Asia-Pacific Stevie Awards

Winners to Be Celebrated at Gala Banquet on 1 June in Hong Kong

[COLUMBUS, OH] – 19 April 2018 – 889 Global Solutions, Ltd. was named the winner of a Silver Stevie® Award in the Excellence in Innovation in Manufacturing Industries category in the fifth annual Asia-Pacific Stevie Awards today.

The Asia-Pacific Stevie Awards are the only business awards program to recognize innovation in the workplace in all 22 nations of the Asia-Pacific region. The Stevie Awards are widely considered to be the world’s premier business awards, conferring recognition for achievement in programs such as The International Business Awards® for sixteen years.

Nicknamed the Stevies for the Greek word for “crowned,” the awards will be presented to winners at a gala banquet at the Mira Hotel in Hong Kong on Friday, 1 June.

More than 800 nominations from organizations across the Asia-Pacific region were considered this year in categories such as Award for Excellence in Innovation in Products & Services, Award for Innovative Management, and Award for Innovation in Corporate Websites, among many others.

“We are delighted to be recognized by the Asia-Pacific Stevie Awards for innovation in the manufacturing space,” said Judy Huang, CEO of 889 Global Solutions, Ltd. “In our 18 years of business we’ve found that innovation is vital to business growth. We congratulate all the winners and appreciate our clients who allow us to collaborate closely in order to lower costs, speed production and produce a durable product.”

Gold, Silver and Bronze Stevie Award winners were determined by the average scores of more than 100 executives around the world acting as judges in March and April.

Details about the Asia-Pacific Stevie Awards and the list of Stevie Award winners are available at http://Asia.Stevieawards.com.

About 889 Global Solutions, Ltd.

889 Global Solutions is a US-based contract manufacturer with offices in Shanghai, Beijing, Ningbo and Guangzhou, China. Established in 2000, the company specializes in the creation of custom metal and plastic components and assemblies for the healthcare, oil & gas and general industrial industries. The management team has over 30 years of combined industrial sourcing experience and are adept at establishing long-term relationships across East Asia.

About the Stevie® Awards

Stevie Awards are conferred in seven programs: the Asia-Pacific Stevie Awards, the German Stevie Awards, The American Business Awards, The International Business Awards®, the Stevie Awards for Women in Business, the Stevie Awards for Great Employers, and the Stevie Awards for Sales & Customer Service. Stevie Awards competitions receive more than 10,000 entries each year from organizations in more than 60 nations. Honoring organizations of all types and sizes and the people behind them, the Stevies recognize outstanding performances in the workplace worldwide. Learn more about the Stevie Awards at http://www.StevieAwards.com.

Sponsors and partners of the 2018 Asia-Pacific Stevie Awards include PR Newswire Asia and the Korea Business Communicators Association.


Marching Toward a Smarter City

Join us as we stay up date on the Smart Columbus and Hyperloop One projects which will have a tremendous positive impact on the city.  If you have followed our newsletters in the past, then you know that this is an exciting time for Columbus.  These developments are happening at a time when the city is experiencing 1.5-2% growth in employment annually and offering over 20,000 new jobs.  This seems to be just the beginning of the growth spurt.  Alongside aggressive new plans for the city, city leaders are predicting that in the next 20 years an additional one million people will populate Columbus. It is critical during these times to not just make moves forward but make the right moves forward.

The city’s chief innovation officer and co-leader of Smart Columbus, Michael Stevens said it himself when talking about the residents and businesses who will benefit from the Smart City solution: “We have to understand: What are their needs?… We’re developing solutions that are solving a problem, and not a solution in search of a problem.” It was for this reason that Smart Columbus took a bit of a pause from their rapid planning and development cycle in 2017 to reallocate the granted funding.

During the pause period, feedback was gathered on some of the plan proposals from the people who were expected to directly benefit from them the most.  From there, Smart City planners determined what people liked about the project, and what they didn’t.  Parts of the plan that were undervalued, such as a proposal to create an app that would assist delivery drivers in getting access to reserved loading zone spots, were scrapped, enabling resources to be more efficiently directed elsewhere.

Now that the feds have given the OK to the altered Smart City plans, the committee has hit the ground running.  In the first 20 months, the program spent just under half of the budget from the U.S. Department of Transportation grant for making the city’s transportation system more efficient, safer, greener, and better at connecting people with jobs.  Planners have purchased the 1st batch of electric vehicles and added strategic charging stations for them around the city.  Optimizing transportation has been central to the project, as Mayor Andrew Ginther was quoted as saying, “Mobility is the great equalizer of the 21st century.”  Smart Columbus just recently chose a Columbus IT consulting firm to design and build the central integrated data hub that all other infrastructure of the project will build on.

Linden has received special attention from the project planners, with public meetings and extensive surveys with residents and local businesses being deployed to uncover how best to use resources to improve major metrics in the area. Surveys determined a significant factor to be improved prenatal care in the area as Linden has the highest rate of infant mortality in all of Columbus. The improved infrastructure is expected to help make necessary medical care more accessible to pregnant mothers.

At the forefront of the Linden prenatal care project is the Moms2B program, based out of Ohio State University. The co-founder of Moms2B Dr. Particia Gabbe spoke upon the importance of Smart Columbus targeting the infant mortality issue, “If transportation were solved – not just for getting to the prenatal appointments, which are critically important – but also for getting food, for getting laundry done, for getting things done that help have a healthy baby, a healthy home… all those things have a huge impact on our disparities.”

Overall the Smart Columbus design process aims to serve as a model for other cities to follow in future, a blueprint for planners in other regions to execute similar initiatives competently.  In late February, The Mid-Ohio Regional Planning Commission (MORPC) announced that the next step will be to study “rapid-speed” transportation options. The goal is to complete a two-pronged research project exploring a high-speed rail and the feasibility of a Hyperloop by the end of 2018.   The high-speed rail research will encompass a Tier I Environmental Impact Study (EIS), part of which has already begun for the Chicago-Columbus segment of the project.

Including the City of Columbus, MORPC, partners in Indiana, Marysville, and Lima, there has been just under $1 million committed so far. There is an expected $1.5 million of additional funding coming from private partners. The Hyperloop has been embraced by Smart Columbus as well as Executive Director William Murdock who stated, “Being in one of the fastest growing regions in the Midwest and with the potential to add up to one million people by 2050, we are taking the next steps in exploring the best transportation options for both passengers and freight that will better connect Columbus to Chicago and Pittsburgh.”  Stay tuned to our upcoming newsletters as we keep you updated on these storylines and more.


The Foreboding Theory of Secular Stagnation

For years after the Great Recession, economists scrutinized the market for signs of recovery.  What they saw were slowly rebounding numbers that indicated a less than stellar turnaround from the lows of 2008-2009.  For those of us involved in supply chain management and international trade, this was a point of concern.  Some economists used the term “secular stagnation” to explain why growth had been so sluggish, why the economy hadn’t rapidly reestablished its growth trajectory.  The theory holds that minimal market growth is the eventual equilibrium in a fully developed economy.  Its proponents believe that, in the long run, the endgame of a mature market is stagnation.  The question then becomes, does this theory provide a helpful framework for understanding the market?

Coined by Harvard economics professor Alvin Hansen, “secular stagnation” theorizes that the horizon towards which mature markets progress eventually becomes a boundary.  It holds that the upward trajectory of macroeconomic potential eventually hits a ceiling, where growth gives way to a long plateau.  The idea was first put forth in 1938, during the tail end of the Great Depression, and has reemerged to describe the economic downturn of 2008-2009 and subsequently lagging markets.  Believers in secular stagnation hold that markets will reach a state of maximum aggregate demand with minimal prospects for future growth.  They maintain that a set point exists where aggregate demand stalls out in relation to supply, resulting in a perpetually stagnant economy.

It is not coincidental that the term “secular stagnation” arose during the tail end of the Great Depression.  In 1938, after many withering years of financial loss and instability, many felt that the world economy was destined to remain low forever.  And now again, in the post Great Recession economy, some have wondered if signs of slow recovery in world markets means that the economy is ultimately destined to stay that way in the long run.

Keep in mind that the disparity in market behavior between the Great Depression and the Great Recession is dramatic, however.  The Great Recession bookends a drop in worldwide GDP between 2008 and 2009 of less than 1%, while during the Great Depression between 1929 and 1932, worldwide GDP dropped around 15% percent.  From the Q2 2009 low of $14.355 trillion in real GDP, the United States is up 20% to $17.271 trillion in Q4 2017, and per capita GDP increased from $47,000 to $52,000 from 2009 to 2016.

As far as supply chain concerns overseas, some economists say that China was one of the least affected markets during the Great Recession.  As early as Q4 2009, Chinas GDP growth rate rebounded to pre-crisis levels at 11.4% per year, and in Q1 2010 the GDP growth rate was above its long-run average at 12.2% per year.  In 2009, Chinas real GDP was $5.11 trillion, 7 years later, it was $11.2 trillion.  For businesses fearing a long-term contraction of international trade, those numbers are reassuring.  Whether or not secular stagnation is the true fate of mature markets, only time will tell.  But for now it appears that the economy has found the frontier once more.