The Supply Chain Matters blog and The Ferrari Consulting and Research Group alerts clients, subscribed and general blog readers, that our Q2-2019 Quarterly Newsletter published on Thursday of this week. Registered blog subscribers and existing clients will find notification and links to the Q2 newsletter in respective email inboxes.
Once again, the past quarter was incredibly busy as well as challenging for multi-industry supply chain management teams, with global trade and tariff developments along with industry and company specific supply and customer demand network developments.
Global Supply Chain Activity Levels
The second calendar quarter of 2019 reflected continued ongoing contraction in global manufacturing and supply chain activity as represented from various global wide PMI Index reports. The JP Morgan Global Manufacturing PMI index reached technical contraction by the end of June, and according to the index authors, provided the strongest indication that the six-year growth run has reached a stumbling point.
There was added evidence of further moderation of manufacturing and supply chain activity among the Developed Economies being tracked with the U.S. remaining as the only Developed region reflecting some growth, That stated, the June 2019 Manufacturing ISM Report on Business for June provided added evidence of a slowdown related to trade tensions among the U.S. and China. Leading indicators such as New Orders, Export Orders and Inventories were in decline. The most concerning Developed region is that of Taiwan, with the Q2 average PMI now at 47.4, a reflection of that region’s dependency on China’s manufacturing economy.
Our ongoing review of indices among six Developing regions (China, India, Indonesia, Mexico, Vietnam, Thailand) reflected an overall average Q2 PMI of 50.8, an indication that this grouping of countries are holding their own in manufacturing growth, despite a continued global slowdown. However, there remains looming concerns across Asia as to declining business. Other data points reflect internal sourcing shifts- Malaysia’s average Q2 PMI reflects a 3.6 percentage point increase since the start of this year, while Myanmar’s PMI was trending at a 1.1 percentage point increase since the start of this year.
After publishing of our Newsletter, the International Monetary Fund (IMF) once again cut its global forecast for economic output this year. The IMF is now forecasting that growth in world trade will slow to 2.5 percent, a full one percentage drop from the April forecast. In October of last year, the agency forecasted 2019 global growth to be 3.7 percent. The latest forecast is now 3.2 percent.
Dominant Themes in Q2
Dominant industry and global supply chain management developments during Q2 again centered on three dominant topics:
They once again included the ongoing trade negotiations among the United States and China and the consequent ongoing responses from individual industries and companies. For the first time, there are developments involving the restriction of supply to certain of China’s high technology companies such as Huawei Technologies, which have far reaching implications. We elected to include a specific added newsletter global trade commentary in the Q2 newsletter.
By far the most far-reaching industry development was in commercial aerospace, and specifically the ongoing grounding of the Boeing 737 MAX aircraft that occurred in March. Each passing week came with further developments and implications both for industry supply networks and for product design and management implications. We added a separate Newsletter entry regarding the product design aspects of the aircraft.
Regarding specific industries and companies, the business media looking glass remained focused on the supply chain management development related to automotive industry, specifically Tesla, high tech and consumer electronics, consumer goods and retail industry.
Other Q2 Newsletter Additions:
As noted, a separate entry: Added Evidence of Structural Sourcing Shifts Underway Among Certain Industry Supply and Demand Networks was added including various reports indicating that multiple companies are actively investigating or already initiated sourcing actions away from China.
An entry: The Inside Story of Boeing’s 737 MAX Flight Control System, references an in-depth published investigative report by the Seattle Times which traces the various design decisions involved with the suspect MCAS flight control system. Upon our read of the report, we believed it provided important lessons for product management teams dealing with critical systems, and in assumptions related to the interaction of autonomous control software with existing hardware.
Finally, we reiterated our recent announcement of availability of a new Research Advisory Report, The Increased Importance of Integrating Agile Postponement and Product Packaging Customization Among Consumer Goods Supply Networks, which was also highlighted in a recent Supply Chain Matters blog. We have another Research Advisory in the final stages that will address: The Intelligent Business Network as the Foundation of Digital Transformation, due to be announced soon.
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