The Supply Chain Matters blog provides a news capsule format follow-up to previous supply chain management related developments we have previously posted. News capsule updates involve Tesla, Foxconn, Amazon and the ongoing disruption and explosive rate hikes occurring in global shipping.
Tesla’s Elon Musk Identifies Two Suppliers Hindering EV Production
Earlier this month we provided highlights of Tesla’s Q2 financial performance including mention of having challenges with semiconductor supply.
This week, Electrek and some other news outlets highlighted that Tesla CEO Elon Musk made specific mention of suppliers Renesas and Bosch as being the most problematic in meeting the EV maker’s needs for semiconductor devices. Reportedly this was the first time that the EV maker has specifically cited suppliers.
What was important about this revelation is that both of these suppliers also support a number of global automotive producers. Musk was additionally more direct in indicating that Tesla is still facing “extreme supply chain limitations.”
The Electrek report further reported that Tesla’s Shanghai production facility produced a total of 32,968 vehicles in July, 20,000 of which were exported to other countries and nearly 9,000 to fulfill China based consumer orders. The automakers policy is to ship export orders in the first month of any quarter to account for transit times.
Foxconn to Build EV Production Plants in the U.S. and Thailand
In three prior blog commentaries we have updated readers on contract electronics manufacturing provider Foxconn Technology new efforts for presence within the supply networks of electric powered vehicles including autonomous driving software, semiconductor devices and contracting manufacturing services. Specific contracted customers thus far include Geeley, Fisker and Stellantis.
In our most recent posting, we highlighted that the CMS is now acquiring a small-scale semiconductor fab production facility in Taiwan to produce semiconductor devices specially for automotive needs.
Nikkei Asia reported this week (Paid subscription or metered view) that the contracts manufacturer has announced plans to construct electric vehicle production facilities in both the United States and Thailand, and possibly in Europe as well. The announcement came as part of Foxconn latest announcement of financial results.
Reportedly the U.S. facility will serve customer for EV start-up Fisker with a plan to build vehicles in the U.S. by the end of 2023. Nikkei reports that the publication has learned of negotiations underway among three U.S. states including Wisconsin, which has had a challenging relationship with adherence to Foxconn’s prior pledge to build a large consumers electronics manufacturing presence in Southern Wisconsin.
The Thailand facility will be part of an agreement with Thai oil and gas conglomerate PTT to develop a platform for EV and component production.
The global contract manufacturer reported 27 percent increase in revenues for the first seven months of this year coupled with a 30 percent rise in profits, the highest quarterly profit reported in the provider’s history.
Stop The Madness in Global Shipping Rate Hikes
Supply Chain Matters along with transportation and logistics industry media have all been highlighting the current state of exploding freights rates in ocean container shipping including the implications to the bottom lines of many global companies.
In our Supply Chain Matters prior blog commenting on shipping industry leader A.P. Moeller Maersk’s announced acquisition of two different regional E-Commerce firms, shelling out nearly a billion dollars to do so, we pointed out the parallel contrast to also announcing a 200 percent increase in profitability amid the ongoing global shipping disruption.
American Shipper in a published report last week questioned why are shipping rates so high when overall shipping volume increases are in the single digits compared to prior year levels.
What caught our eye this week was a published report from The Loadstar with the headline, This madness must stop’- clients go bust as shipping lines pile on surcharges. This report begins with the opening that “ocean carriers have become ever more creative with new names for added surcharges piled on top of already colossal FAK rates.” Noted is that many carriers are not informing shippers in advance of new surcharges let alone what their meaning implies. The report further observes: “carriers across a growing number of trade lanes are now ignoring contracts and forcing shippers to accept their sky-high FAK’s and hefty surcharges. The report quotes one UK forwarder with the comment: “This madness has to stop,” he said, and added that the way that some shipping lines had treated their customers was “shameful”.
To add more insult, shipping line Hapag-Lloyd reported financial results with the headlines being total revenues growing 37.6 percent amid an overall 4.3 percent increase in volumes. EBITDA margin reportedly increased 0.2 percent compared to 18.4 percent in the year earlier quarter. Average freight rates rose by 46.1 percent.
Indeed, what continues to occur in exploding freight rates amid a global wide disruption in shipping schedules and on-time performance are increasing calls for industry reforms and added regulatory measures.
China’s Ningbo Port Container Terminal Shut Down
What logistics and transportation teams did not need was news of another potential port disruption but that was not the case.
On Wednesday, Chinese authorities closed the Port of Ningbo, the globe’s third largest port, after a dock worker tested positive for COVID-19. Reportedly all operations at the Meishan Container Terminal were immediately suspended. Container lines impacted have sent out customer advisories and some are already adjusting schedules and estimated arrival and shipping dates.
Unclear at this point is how long the operationally suspension will last before operations are returned to some semblance of normal. Reportedly any lengthy suspension of operations significant it could rival the prior disruption that occurred at the Port of Yantian in southern China.
Amazon Opens its Highly Touted $1.5 Billion CVG Kentucky Air Hub
Global online retail platform and logistics services provider Amazon has officially opened its $1.5 billion new hub in northern Kentucky. The air hub which was conceived four years ago as a means toward supporting same day delivery across many areas of the U.S. is a major milestone for the online provider. The ground-breaking ceremony or this facility occurred in 2019.
This facility is the culmination of an increasingly unfolding multi-year strategy for the online provider ability to control its own logistics and order fulfillment distribution including the establishment of what is now Amazon Prime Air.
The complex spans a campus exceeding 600 acres and includes seven buildings along with aircraft ramp facilities. One of the buildings is an 800,000 square-foot automated sortation center where packages can be sorted by destination and loaded into trucks.
The hub itself provides capacity for 100 aircraft and can reportedly control upwards of 200 flights per day. The complex is expected to employ over 2,000 workers at peak.
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