September marks the start of the very busy holiday customer fulfillment surge period, and as it build toward its quarterly apex in a mere few weeks, multi-industry businesses and their associated global supply chain networks are facing an unprecedented set of challenges. From our Supply Chain Matters lens, this should not be described as the new normal, rather, a point in time when resiliency and/or agility can no longer be sustained for many.
Something has to give, especially for smaller or mid-sized businesses.
Impacts of Global Trade Conflicts Deepen
This week, business and industry media are reporting on impacts of new U.S. and China imposed import tariffs that went into effect on Sunday. The U.S. is now imposing 15 percent import tariffs on an assortment of end-item consumer goods, which will likely impact future product demand for such goods. China imposed similar added import tariffs on U.S. agricultural goods, crude oil and pharmaceuticals. While President Trump continues to urge U.S. businesses to find alternative sources of supply, preferably in the U.S., Chinese leaders are encouraging the high-tech manufacturing sector to reduce supply network dependencies on U.S. based suppliers. Business and industry leaders meanwhile, are becoming increasingly vocal and concerned.
Across high tech and consumer electronics supply chains, the escalating trade tensions among Japan and South Korea are also causing supply chain disruption and material shortages, which will further equate to added material costs.
Across the United Kingdom and the Eurozone, the threat of chaotic no-deal Brexit looms very large for the end of October, just-in-time for disrupting multi-industry supply networks in the all-important holiday and end-of-year quarter. Manufacturing across the U.K. has dropped to a seven-year low as high levels of uncertainty are showing signs of supplier dis-location. A political showdown is forthcoming, testing the constitutional powers of the British Parliament and its anyone’s guess.
Added Quantitative Evidence
With the bulk of the month of global-wide August PMI levels now reported, the overall picture now points to global contraction and signs of structural sourcing changes.
The JP Morgan Global Manufacturing PMI produced by JP Morgan and IHS Markit, contracted for the fourth consecutive month in August. Report authors noted that new orders contracted at the fastest rate in nearly seven years, led by sharp reductions in international trade. 
The August 2019 Manufacturing ISM Report on Business official reached contraction level at a value of 49.1 confirming fears of a trade induced U.S. slowdown and: ”the end of a PMI expansion that spanned 35 months.” New Orders, Production and Employment indices each contracted.
Across the globe, regional PMI headlines were eye-catching:
IHS Markit Eurozone Manufacturing PMI– “Manufacturing sector contracts at fastest rate since end of 2012”
Jibun Bank Japan Manufacturing PMI– “Deterioration in manufacturing conditions among the strongest in over three years.”
IHS Markit Mexico Manufacturing PMI– “The drop in the PMI reflected near survey-low readings for factory orders, production, stock of purchases and employment.”
IHS Markit India Manufacturing PMI– “Manufacturing PMI dips to 15-month low in August.”
IHS Markit Vietnam Manufacturing PMI- “Slowest rise in output for 21 months.”
All of the above data make product demand, supply planning and added global capital and other investments extremely challenging, not knowing where the end point resides among all of these current trade conflicts.
Natural Disaster Threats
With each passing year, the notion of what constitutes historic, record breaking storms is tested.
As we pen this blog commentary, Hurricane Dorian, a now downgraded but rather strong Category 2 storm, continues to crawl between the Bahamas and U.S. Florida coasts, delivering catastrophic damage to the Bahamas region and now threatening major seaports and logistics facilities across Georgia and the Carolinas.
The Ports of Savannah and Charleston are expected to suspend operations for the bulk of this week, pending the passing of the storm. On Monday many computer models had suggested Dorian not likely make landfall anywhere on the East Coast, but forecasts today suggest the storm center could come ashore in the Carolinas. The area is not only key for global transportation and logistics links, but also resident to a number of automotive, aerospace and other manufacturers. North Carolina is home to a large population of hog and other farming interests, which were economically battered by prior hurricanes including Hurricane Michael in 2018, and now increased tariff restrictions on pork exports.
In Summary
We hesitate to even mention that within our 2019 Predictions for Industry and Global Supply Chains, we included our belief that” unprecedented levels of global supply network challenges would concern C-Suite and Industry Supply Chain Senior Executives. And so, it has come from multiple dimensions and fronts.
Whether readers elect to cite the current supply chain management business landscape as the new normal, or not, multi-industry teams approach the final three months of 2019 with an extraordinary level of challenges to overcome in global sourcing, supply and demand network disruption, exploding costs and more demanding customers. Companies with vast resources and supply chain leadership may again overcome current challenges, but with considerable efforts. Companies with limited resources or means may succumb setbacks and crisis.
The axiom remains: “A chain is only as strong as its weakest link” and the remaining three months, will test many weak links and vulnerabilities.
Be prepared and diligent.
Bob Ferrari
© Copyright 2019, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
