Contributing Editor Toby Gooley is a freelance writer and editor specializing in supply chain, logistics, material handling, and international trade. She previously was Editor at CSCMP's Supply Chain Quarterly. and Senior Editor of SCQ's sister publication, DC VELOCITY. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
Threats of punitive tariffs between the Trump administration and China have set the international trade community on edge. Exporters of agricultural products, and retailers whose businesses depend on imports, worry the trade tit-for-tat will jeopardize their profitability or even their survival. However, some industry observers say it's unlikely the dispute will mushroom into a full-on trade war.
Although the U.S. trade deficit with China reached record levels in 2017, the U.S. position relative to trade with China has improved in some respects as China becomes less focused on exports and more on internal expansion and development, according to Mario O. Moreno, senior quantitative economist, maritime research, for the maritime research and consulting firm Drewry. For example, in 2006 the U.S. imported 4.5 ocean containers from China for every box it exported, Moreno said. In 2016, the ratio was 3.4 to 1, he told the Coalition of New England Companies for Trade (CONECT) Northeast Trade and Transportation Conference in Newport, R.I. late last week.
The value of Chinese products affected by the U.S.' "Section 301" tariffs, proposed in response to China's policies on the transfer of U.S. companies' technology and intellectual property, was about $50 billion in 2017, while the value of U.S. exports affected by retaliatory tariffs was approximately $47 billion last year, Moreno said. This is on top of tariffs on steel and aluminum previously imposed under "Section 232" authority, which relates to national security.
Although both countries continue to ratchet up their rhetoric, several factors indicate a full-on trade war is unlikely, Moreno said. China's proposed tariffs are already close to the total $130 billion value of U.S. exports in 2017. This suggests the Chinese government would have to find other ways to retaliate, such as devaluing its currency to make U.S. products more expensive in China or using regulations to make it more difficult for U.S. companies to do business there.
However, the impact of such actions could reverberate far beyond U.S.-China trade, according to Moreno. For example, trade with other nations would also be affected by any currency devaluation. If the U.S. were to compensate affected industries, such as agricultural products, with subsidies, other countries would file complaints with the World Trade Organization (WTO) and potentially take punitive actions against the United States.
"In my view, the situation is very unlikely to become an all-out trade war because both countries have so much to lose," Moreno said.
Peter Friedmann, CONECT's Washington Counsel and principal of the Washington, D.C., international-trade lobbying firm FBB Federal Relations, said he does not think a trade war will actually come to pass. On April 12, the day Friedmann spoke at the conference, the National Retail Federation and 106 other industry associations, including CONECT, sent a letter to the House Ways and Means Committee asking it to prevent the imposition of tariffs and find other ways to force China to change its policies.
Friedmann said the two countries' supply chains are so interconnected that any major retaliation by one country against another's industries would almost certainly hurt both sides. For example, U.S. automakers have very successful manufacturing and assembly plants in China to serve the domestic market, he said. In addition, U.S.-based Smithfield Foods, the world's largest producer of pork products and a major exporter of U.S. pork to China, is wholly owned by Chinese company WH Group Ltd.
"There's not going to be any retaliatory tariffs ... there is so much integration that it's not going to happen," Friedmann predicted. In his view, it will be more important to President Trump that he be able to say when he runs for reelection that he stood up to countries like China, South Korea, Mexico, and Canada, solving trade disagreements and protecting American interests.
So what's a shipper to do while all this gets sorted out? There are "too many unknowns," Drewry's Moreno said, but, he concluded, perhaps the best course is to "watch what they do, not what they say."
A coalition of freight transport and cargo handling organizations is calling on countries to honor their existing resolutions to report the results of national container inspection programs, and for the International Maritime Organization (IMO) to publish those results.
Those two steps would help improve safety in the carriage of goods by sea, according to the Cargo Integrity Group (CIG), which is a is a partnership of industry associations seeking to raise awareness and greater uptake of the IMO/ILO/UNECE Code of Practice for Packing of Cargo Transport Units (2014) – often referred to as CTU Code.
According to the Cargo Integrity Group, member governments of the IMO adopted resolutions more than 20 years ago agreeing to conduct routine inspections of freight containers and the cargoes packed in them. But less than 5% of 167 national administrations covered by the agreement are regularly submitting the results of their inspections to IMO in publicly available form.
The low numbers of reports means that insufficient data is available for IMO or industry to draw reliable conclusions, fundamentally undermining their efforts to improve the safety and sustainability of shipments by sea, CIG said.
Meanwhile, the dangers posed by poorly packed, mis-handled, or mis-declared containerized shipments has been demonstrated again recently in a series of fires and explosions aboard container ships. Whilst the precise circumstances of those incidents remain under investigation, the Cargo Integrity Group says it is concerned that measures already in place to help identify possible weaknesses are not being fully implemented and that opportunities for improving compliance standards are being missed.
By the numbers, overall retail sales in August were up 0.1% seasonally adjusted month over month and up 2.1% unadjusted year over year. That compared with increases of 1.1% month over month and 2.9% year over year in July.
August’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.3% seasonally adjusted month over month and up 3.3% unadjusted year over year. Core retail sales were up 3.4% year over year for the first eight months of the year, in line with NRF’s forecast for 2024 retail sales to grow between 2.5% and 3.5% over 2023.
“These numbers show the continued resiliency of the American consumer,” NRF Chief Economist Jack Kleinhenz said in a release. “While sales growth decelerated from last month’s pace, there is little hint of consumer spending unraveling. Households have the underpinnings to spend as recent wage gains have outpaced inflation even though payroll growth saw a slowdown in July and August. Easing inflation is providing added spending capacity to cost-weary shoppers and the interest rate cuts expected to come from the Fed should help create a more positive environment for consumers in the future.”
The U.S., U.K., and Australia will strengthen supply chain resiliency by sharing data and taking joint actions under the terms of a pact signed last week, the three nations said.
The agreement creates a “Supply Chain Resilience Cooperation Group” designed to build resilience in priority supply chains and to enhance the members’ mutual ability to identify and address risks, threats, and disruptions, according to the U.K.’s Department for Business and Trade.
One of the top priorities for the new group is developing an early warning pilot focused on the telecommunications supply chain, which is essential for the three countries’ global, digitized economies, they said. By identifying and monitoring disruption risks to the telecommunications supply chain, this pilot will enhance all three countries’ knowledge of relevant vulnerabilities, criticality, and residual risks. It will also develop procedures for sharing this information and responding cooperatively to disruptions.
According to the U.S. Department of Homeland Security (DHS), the group chose that sector because telecommunications infrastructure is vital to the distribution of public safety information, emergency services, and the day to day lives of many citizens. For example, undersea fiberoptic cables carry over 95% of transoceanic data traffic without which smartphones, financial networks, and communications systems would cease to function reliably.
“The resilience of our critical supply chains is a homeland security and economic security imperative,” Secretary of Homeland Security Alejandro N. Mayorkas said in a release. “Collaboration with international partners allows us to anticipate and mitigate disruptions before they occur. Our new U.S.-U.K.-Australia Supply Chain Resilience Cooperation Group will help ensure that our communities continue to have the essential goods and services they need, when they need them.”
A new survey finds a disconnect in organizations’ approach to maintenance, repair, and operations (MRO), as specialists call for greater focus than executives are providing, according to a report from Verusen, a provider of inventory optimization software.
Nearly three-quarters (71%) of the 250 procurement and operations leaders surveyed think MRO procurement/operations should be treated as a strategic initiative for continuous improvement and a potential innovation source. However, just over half (58%) of respondents note that MRO procurement/operations are treated as strategic organizational initiatives.
That result comes from “Future Strategies for MRO Inventory Optimization,” a survey produced by Atlanta-based Verusen along with WBR Insights and ProcureCon MRO.
Balancing MRO working capital and risk has become increasingly important as large asset-intensive industries such as oil and gas, mining, energy and utilities, resources, and heavy manufacturing seek solutions to optimize their MRO inventories, spend, and risk with deeper intelligence. Roughly half of organizations need to take a risk-based approach, as the survey found that 46% of organizations do not include asset criticality (spare parts deemed the most critical to continuous operations) in their materials planning process.
“Rather than merely seeing the MRO function as a necessary project or cost, businesses now see it as a mission-critical deliverable, and companies are more apt to explore new methods and technologies, including AI, to enhance this capability and drive innovation,” Scott Matthews, CEO of Verusen, said in a release. “This is because improving MRO, while addressing asset criticality, delivers tangible results by removing risk and expense from procurement initiatives.”
Survey respondents expressed specific challenges with product data inconsistencies and inaccuracies from different systems and sources. A lack of standardized data formats and incomplete information hampers efficient inventory management. The problem is further compounded by the complexity of integrating legacy systems with modern data management, leading to fragmented/siloed data. Centralizing inventory management and optimizing procurement without standardized product data is especially challenging.
In fact, only 39% of survey respondents report full data uniformity across all materials, and many respondents do not regularly review asset criticality, which adds to the challenges.
Artificial intelligence (AI) tools can help users build “smart and responsive supply chains” by increasing workforce productivity, expanding visibility, accelerating processes, and prioritizing the next best action to drive results, according to business software vendor Oracle.
To help reach that goal, the Texas company last week released software upgrades including user experience (UX) enhancements to its Oracle Fusion Cloud Supply Chain & Manufacturing (SCM) suite.
“Organizations are under pressure to create efficient and resilient supply chains that can quickly adapt to economic conditions, control costs, and protect margins,” Chris Leone, executive vice president, Applications Development, Oracle, said in a release. “The latest enhancements to Oracle Cloud SCM help customers create a smarter, more responsive supply chain by enabling them to optimize planning and execution and improve the speed and accuracy of processes.”
According to Oracle, specific upgrades feature changes to its:
Production Supervisor Workbench, which helps organizations improve manufacturing performance by providing real-time insight into work orders and generative AI-powered shift reporting.
Maintenance Supervisor Workbench, which helps organizations increase productivity and reduce asset downtime by resolving maintenance issues faster.
Order Management Enhancements, which help organizations increase operational performance by enabling users to quickly create and find orders, take actions, and engage customers.
Product Lifecycle Management (PLM) Enhancements, which help organizations accelerate product development and go-to-market by enabling users to quickly find items and configure critical objects and navigation paths to meet business-critical priorities.