10


Issue 5 2012


///NEWS


‘Cluster effect’ puts global supply chain at risk, says expert


The geography of the modern global supply chain is making it vulnerable to the weather and natural disasters, says a leading consultant. Dave Alberts, director at UK-based ‘end-to-end’ supply chain experts Crimson & Co, says that concentration of manufacturing in specific areas of the world makes supplies of many components particularly vulnerable to disruption. For example, he says, a quarter


of the world’s hard drives come from a relatively concentrated area around Bangkok. “Clearly there are disadvantages to sourcing products from countries that suffer from extreme weather conditions, especially when supply is so geographically focused,” Alberts says. He adds: “Last year’s Tsunami


in Japan wreaked havoc on businesses and supply chains alike, with widespread effects across the globe. Now the floods in Thailand have hit two-thirds of the country; factories and supply chains face disruption. Companies such as Western Digital and Honda Motor have been forced to stop production in central Thailand due to disruption


Dave Alberts


to local supply chains and some Japanese car manufacturers such as Toyota and Nissan are also experiencing production disruption. Sony temporarily closed its facility in Ayutthaya and Seagate Technology has also said its production of hard drives in this quarter will be affected, and that supply will be constrained until at least the fourth quarter.” Companies are now taking action to find alternative sources, but it may be a case of locking the stable door aſter the horse has bolted. Clusters of specialist


manufacturing occur all over the world, in many different segments and for a variety of reasons, says Alberts. It might be because of the


presence of a specific raw material – that was certainly a factor in the concentration of automotive paint pigmentation in Japan that was badly upset by the earthquake and tsunami last year. Climate or the local ecosystem could come into it, as with wine making or specialist cheese production. It could be the presence of universities or research centres


for pharma


manufacturing. Sometimes it is down to tax incentives – this is one reason why the Tianjin province of China has become a major automotive cluster or why Ireland emerged first as a centre for computer assembly and later as a hotbed of the life sciences industry. The digital media centre outside Seoul is another example of the successful use of tax incentives to create a centre of excellence. Or it may be a combination of


several factors or, even, a simple historical accident. The West Midlands emerged as a centre for the UK car industry in the 1920s and 30s, partly because of its established manufacturing base, the fact that new technologies such as disc brakes first emerged there and, to some extent, because the Government encouraged it


by building new factories and industrial estates.


Silicon Valley


is perhaps the best example of a cluster that ‘just happened’ – a few local entrepreneurs followed by venture capital and which in turn encouraged more high-tech start ups – until it all got to a point where the region was too crowded and expensive and some dispersal away from the Valley has now started to occur. Some manufacturers’ purchase


policies may have fuelled the trend, Alberts adds. Single- sourcing was very much in vogue in the car industry until a few years ago as they brought in lean production methods. Now, though, there are signs that car makers are having a rethink and once again diversifying their suppliers. Clustering doesn’t always though,


occur, says Alberts.


Pharmaceutical manufacture in the developing world tends to be a fairly localised affair, for example, mainly because the manufacturers want to set up as close to their markets as possible. But where significant has


clustering taken place,


Crimson advises its clients to carry out contingency planning


Pall-Ex flies to the Canaries


Pall-Ex Iberia is to extend its service to the Canary Islands, the operator announced on the first anniversary of


its operations in Spain and


Portugal. Launched in June 2011, Pall-Ex Iberia has a central hub in Madrid and serves mainland Spain and Portugal, as well as the Balearic Islands, where it became the first network of its kind. It has expanded its network to include 33 leading hauliers and handled over 100,000 pallets and pallet volumes are now over 750 every night. Pall-Ex Iberia managing director


Enric Estruch explains: “We are now in a position to start operating in the Canary Islands, which opens up a host of further possibilities for us. The network is already helping to drive down costs for manufacturers, importers and distributors in the Iberian Peninsula and there is no reason why similar methods of operation and the subsequent


benefits cannot be transferred here.” Pall-Ex Iberia is one of three


European networks operated by UK-based Pall-Ex, working alongside Pall-Ex Italia and Pall-Ex Romania. Pall-Ex France will go into operation within the next 12 months and there are plans to sign further national partners by the end of the year and to continue to increase coverage in Germany, Scandinavia and Turkey, as well as other areas of the Continent and beyond. Earlier, Pall-Ex said its Polish


domestic network will be fully operational by May 2013 after appointing


local logistics KMC-


Services as its national partner. The new network will operate from a central hub in the Łódź region. Pall- Ex Polska will be Pall-Ex’s second ‘last-mile’ network in Eastern Europe, following the launch of Pall-Ex Romania in December 2011. CEO of Pall-Ex Polska, Katarzyna


Chabinka, commented: “We have the ability to revolutionise the distribution of small consignments of freight in Europe.” He says that Poland is one of


the larger territories in the region and has managed to weather the Euro crisis better than most in Europe. Foreign Direct Investment and infrastructural development continuing to improve, and the country is set to become a major logistics gateway. Chabinka added: “I would


encourage any hauliers interested in joining us on that journey to get in


touch.” Anand Assi, project director


in charge of Pall-Ex’s European expansion, said: “We are actively developing the Eastern European region by seeking out suitable National Partners across the whole continent. As ‘near-sourcing’ continues to become a reality in this geographical region, our networks will be best placed to respond to changing trends.” Pall-Ex is also seeking partners in Germany, Scandinavia


and


Turkey, as well as other areas of the continent and beyond.


and risk analysis. “Companies tend to look at manufacturing and distribution costs.” But what they don’t always take into account are contingency costs if anything should go wrong. While there are exceptions,


there is usually no reason why goods should be sourced from a single point on the planet. For example, there is in fact plenty of hard drive manufacturing capability throughout China, and the raw materials needed are not particularly specific. Sometimes, companies


supply chains are not agile and dynamic enough to support what the business is trying to do, Alberts adds. There are cases where retailers publish rapidly changing catalogues, but where all manufacturing is in China, several weeks away, making it impossible to respond to sudden changes in demand. Oſten, a multi-tier approach


works best – low cost, bulk manufacturing in a faraway low-cost country like India or China, a second tier in a nearer location such as Turkey for Europe or Mexico for the US and a third in the actual country of


Dachser has added a regular direct line-haul link from the UK to its Strykow branch in Poland, for delivery across the whole of the country. The new direct Polish service complements the existing hub and spoke network and will help improve transit times to the Polish market. Dachser’s UK managing director,


Nick Lowe says that despite a slight strengthening of Sterling against the Euro a few months ago, the exchange rate still favours UK exporters, adding: “Of course, the tailing-off in demand across almost all economies makes


European Parliament President Martin


Schulz has


consumption. The weather is also already


affecting global supply chains. Marks & Spencer, Starbucks and The Body Shop are just a few examples of companies who have contributed to research on how flooding, drought and other extreme weather conditions are threatening supply of particular goods. Unfortunately, Alberts


explains, “there is no way in which to fully prepare for such natural disasters as they are unexpected.” However, their frequency


justifies having


contingency plans wherever possible and organisations must attempt to protect product supply through efficient, planned out strategies and best practices. “Research into the effects is a good start and companies participating in this are clearly at the forefront of successful and adaptive supply chains,” he continues. The jury is out on whether


these events are linked to global warming, Alberts says, “but in board rooms around the globe supply chain resilience is back on the agenda.”


Dachser goes direct to Poland trading conditions very difficult, but UK exporters certainly have an opportunity to gain market share.” Lowe adds: “We continue to


experience demand from all sizes of UK companies for single and multiple pallet consignments to destinations throughout Europe. We appreciate that it is critical for all exporters, and especially new ones breaking into the market, who are oſten reacting to short notice demand from their customers, to have a high quality distribution service.”


European Commission President José Manuel Barroso asking him to postpone plans to allow 25.5 metre trucks – so called ‘gigaliners’ - to operate cross-border between countries that allow them on their domestic territories. It follows a letter sent to member states by Transport Commissioner Siim


MEPs see red over longer lorries Kallas on 13 June reinterpreting Directive 96/53/EC. Members of the EP’s Committee


written to


on Transport (TRAN) are reportedly furious over what they see as a move to override their rights under the EU’s co-decision procedures. Moreover, they point out that the Commission is due to make a formal revision of the directive.


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