For those of you unfamiliar with MFG.com you might want to read their brief quarterly survey of North American manufacturers. The study splits questions for two distinct groups: “buyers” (large manufacturers and OEM’s and “suppliers” (small to medium sized manufacturers). Truthfully, we haven’t followed their quarterly surveys as faithfully as we would like but luckily for us, they posted the previous three quarters worth of data as well as the current quarter’s data. This quarter’s report (conducted in June) provides some interesting data we thought metal-buying organizations might want to take a look at. The first area of interest involves supply chain disruptions – both buyers and suppliers reported an uptick in disruptions forcing organizations on the buy side to seek new suppliers and on the sell side, an uptick in the number of inquiries or new orders from companies who had been affected by supply chain disruptions. The second data point we found interesting involves the uptick reported by both buying organizations and selling organizations in “back-shoring” and/or “near-shoring” (e.g. bringing production into or closer to North America).
We’ll start with the second and move to the former. MFG.com asked buying organizations whether in the last three months they had returned any of its production from low cost countries to North America. In the first quarter, only 12% had made the move but in the second quarter, 21% made the move. On the supply side, when asked a similar question, supplier organizations reported 38% had moved production to North America whereas 31% had said so for the first quarter. Does this mean companies perceive more risk exists in doing business overseas or is the switch due to declining cost advantages? We’re not sure, perhaps some of both.
The issue we also find timely and of interest to metal buying organizations falls straight to a topic we will address in a webinar later this morning on Supply Risk Management. According to the MFG.com survey, 51% of buying organizations faced a supply disruption during the past three months whereas 44% said so during the first quarter. These numbers have risen from late 2009 where 37% (Q3 ‘09) and 35% (Q4 ‘09) of buying organizations faced a supply disruption. The numbers also went up from a supply organization standpoint – meaning these organizations received either additional inquiries or orders from companies in which a supply disruption has occurred. 42% of supply organizations in Q2 as opposed to 36% of supply organizations in Q1 saw this type of activity.
How shall we interpret the data? Clearly supply risk management appears to have increased (and may still be on an upward trajectory). It’s not too late to join us for a free webinar hosted jointly by MetalMiner and SpendMatters with a case study on ArcelorMittal:
Real Time Supply Chain Risk Webinar – Thursday, July 29 at 10:00am CDT. Click to register for this free webinar here.
–Lisa Reisman
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When Environmental Good Intentions Destroy Jobs
by stuart on July 29, 2010
As an example of what could be in store in the US if the country is ever stupid enough to embrace wholesale the subsidy of renewable energy sources via levies on electricity users a recent report in Bloomberg details the impact of actions taken by the British government on consumers in the UK. Factories will pay 18 to 141% more for gas, electricity and carbon-reduction programs by 2020, adding about 7 million pounds ($11 million) to the bill for a typical large energy consumer the report has calculated.
Tata Steel, owners of Corus, the UK’s largest steel maker have threatened to leave the country if costs rise as expected. “Many of the taxes and costs identified in this report are UK specific and will reduce the competitiveness of Corus’ British operations,” Kirby Adams, managing director and chief executive officer of Tata Steel Europe is reported as saying on review of the report into the impact of climate policy released this week and written by the London-based Energy-Intensive Users Group and Britain’s Trades Union Congress.
A major fertilizer manufacturer called GrowHow is quoted as saying the climate change policy will almost certainly make carbon leakage a reality. Carbon leakage is a term used to describe factories moving operations to countries where permits for emitting carbon dioxide are not needed.
The UK has committed to cut its emissions by 34% below 1990 levels by 2020, way beyond a European-wide initiative to cut emissions by 20%. The UK’s manufacturing industries, which include steel, ceramics, paper, cement and fertilizers employ about 225,000 people and could produce components such as wind turbines, electric cars and home-insulation materials needed to cut the nation’s emissions, according to the report. But if many are forced overseas or worse forced to close by the increased costs, the country will end up importing the parts, losing employment without achieving any net global reduction in emissions.
Nor is this an industry sponsored “less than independent report,” an earlier report by Civitas covered in the Independent came to the same conclusions saying the previous Labour Government’s climate change strategy added an extra 14% on homeowners’ electricity bills and 21% on business bills, at the time of writing earlier this year. And last year’s renewable energy strategy if implemented will create “surcharges” of up to 70% for businesses, and 33% for domestic customers by 2020.
As we wrote recently when we covered the technology of combined heat and power there are opportunities to make money from reducing carbon emissions. Both government and industry should be encouraged to embrace such opportunities by every means available, but simply pushing up tariffs to subsidize less reliable wind power projects sounds like a typical bureaucrat’s answer to a problem that requires a more holistic approach.
–Stuart Burns
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