Friday, 2 September 2016

Global Supply Chain in jeopardy

quote [ The bankruptcy of the Hanjin shipping line has thrown ports and retailers around the world into confusion, with giant container ships marooned and merchants worrying whether hundreds of tonnes of goods being carried by the South Korean company will reach shelves. ]

It is an event like this that underscores how fragile the global economy really is. The cumulative effects of this, if it is not seen to quickly are an immediate rise in shipping fees and layoffs in manufacturing and retailing across the globe. Oh....and sparse shelves come Christmas....
[SFW] [business] [+3 Underrated]
[by Morris Forgot his Password @3:19pmGMT]

Comments

HP Lovekraftwerk said @ 3:34pm GMT on 2nd Sep [Score:2 Underrated]
A weakened economy since the 2008 recession hurt global demand and trade at the same time that steamship lines continued to build more and larger vessels — immense ships that were conceived as cost-effective when freight costs were higher several years ago.

Gee, maybe this has something to do with the fact that corporations, in a race to the bottom, aren't paying workers enough to even afford cheap-ass shit from Asia anymore? They're also producing said cheap-ass shit as if there was still a thriving middle class. I'm sure they find it baffling, and I'm sure they will until the bubble they live in pops.
kylemcbitch said @ 3:46pm GMT on 2nd Sep
Well, hopefully this time when it pops, it wont be on us to bail out the idiots.

I have no tears to shed for Hanjin, and even less for the globalization nuts who thought it was a great idea to outsource manufacturing, while also simultaneously pushing to relax monopoly regulation across the world. Enjoy the fruits of your labor, idiots.

The only people I feel bad for in this is everyone else, who are mostly unwilling/unaware participants.

Suffice to say however, I hold absolutely no hope that our current generation of leaders have any means of answering this challenge. They are great at exploiting existing infrastructure, but have proven to be totally shit at making new ones.
XregnaR said @ 3:29pm GMT on 2nd Sep
Most of the utter shite goods coming from Asia intended for X-Mas arrived in the 1st & 2nd Quarter of this year. Source - Go have a look in Walmart, Home Depot, etc.

As for the rest of your prediction, yeah, this is a big deal.
Morris Forgot his Password said[1] @ 3:40pm GMT on 2nd Sep
Just in Time delivery etc etc.... streamlined logistical operations....

Retailers do not have the luxury of having inventory lying around in warehouses intended for sale 2 quarters later and having 100s of millions of dollars in investment doing nothing other than collecting dust... so no, retailers do not have the seasons goods already warehoused. They have neither the warehouse space or for that matter, the lack of knowledge to waste money so foolishly.
By the way, my wife is a store manger at home depot. While not a big christmas season player (Oh darling! you gave me a new roof for christmas!) 90% of their products are NOT delivered from a HD warehouse... they come direct from the manufacturers or their distributors right to the store, thus eliminating the need for large warehouses or cash tied up in warehoused inventory.
arrowhen said @ 1:10am GMT on 3rd Sep [Score:1 Funny]
Dear SEcret Santa: I would totally like a new roof for Christmas!
machpi said @ 12:36am GMT on 3rd Sep
As Home Depots are basically big-ass warehouses already, I'm not surprised there are no super-big-ass HD warehouses filled with light bulbs and two by fours.
avid said @ 3:42pm GMT on 2nd Sep
Seems really strange for the company to go bankrupt during the high season. Usually, the water rises a little too high in the low season and the company drowns. This must mean that this company is losing money on every container, regardless of the season.
satanspenis666 said @ 10:54pm GMT on 2nd Sep [Score:1 Interesting]
The problem here is that the rates are driven by supply & demand for shipping. In the past decade, there have been too ships built and they keep getting bigger. A few years ago, the shipping industry hit a point where there too much capacity to move cargo and only so much stuff to ship. Shipping companies had to lower prices to make sure that their ships were full. The problem is that ship builders continued to build more and more large ships, which only pushed shipping rates lower.
While it may seem counter intuitive to accept losses on shipping, you have to think about it this way. These ships are very expensive and are typically funded by long term debt, which needs to be repaid. The losses are less if the ship is carrying cargo, as opposed to sitting on the dock. In such an environment, it should be expected that some shipping companies will fail.

Crude shipping containers have been in a similar environment for some time as well. Shipping rates were so low at certain points that energy traders were buying oil and storing it at sea with the hopes to sell it at a higher point later on.
bbqkink said @ 3:45pm GMT on 2nd Sep
Global Supply Chain in jeopardy

Ah no it is not...one company went broke.
kylemcbitch said[1] @ 3:47pm GMT on 2nd Sep
I don't think you understand how important Hanjin is? They are one of those institutions that are "too big to fail." They failed, this is going to hurt badly for those that rely on import/exports. There are companies which move greater amounts of shipping, but they do so with larger fleets, of smaller ships. For the most part, the top #7 shipping companies are usually working at full capacity, all the time.

Hanjin was 8th ranked, and there is serious question if there is enough shipping capacity between the lower ranked shipping to make up for it, because there almost certainly isn't in the higher ranked ones.
Morris Forgot his Password said @ 3:55pm GMT on 2nd Sep
Seventh largest shipper in the world.... and now there are 200 very large ships doing nothing... It remains to be seen whether the other carriers can jump in and take the business.
kylemcbitch said @ 4:05pm GMT on 2nd Sep
They can't. That's the issue, now, hopefully sanity reigns and Hanjin sells their ships at a loss to someone able to afford to run them. Otherwise, we have a serious shipping deficit, which will then lead to market panic since globalized economies require consistent shipping to operate.
bbqkink said @ 4:06pm GMT on 2nd Sep
It remains to be seen whether the other carriers can jump in and take the business.

I'm sure they will be delays. If their fleet is worth having it will be purchased by other companies. But the world wide supply chain is not in jeopardy. It is not like the failure of one company will bring down the others.

It is about time somebody got reminded there are risk in shipping goods around the world. Buying parts essential to your business from 1/2 way around the world is a risk.
Morris Forgot his Password said[1] @ 4:43pm GMT on 2nd Sep [Score:2]
It is more complicated than that. The supply chain is more than ocean shipping. It is a plant in mexico waiting for materials so that their product can be shipped to Alabama to be finished, then shipped overseas to Europe to market.

And just to make it a little more fun, there is something that all seaports have, finite capacity. The over half million containers in Hanjin's possession or that have already been offloaded and will not be moved until direction from the receiver has been given. These containers sitting in ports around the world are taking up space that another carrier could use, but can't so while the failure of one company will not collapse others, the supply chain is still in jeopardy and in the extreme, could face a temporary paralysis.
bbqkink said[1] @ 5:55pm GMT on 2nd Sep
It is a plant in mexico waiting for materials so that their product can be shipped to Alabama to be finished, then shipped overseas to Europe to market.

Having a hard time feeling sorry for a manufacture that would stretch out his supply chain that far trying to save a couple of pennies.

>could face a temporary paralysis

Good, a few empty shelves may wake people up.
Morris Forgot his Password said @ 7:12pm GMT on 2nd Sep
More than a couple of pennies. Again, it is more complicated than just saving pennies. There are reasons why firms will have multiple manufacturing plants etc that pertain to logistics and the ability to ship to market efficiently. Vertical integration can be even a greater risk.
HP Lovekraftwerk said @ 9:22pm GMT on 2nd Sep
And yet I think they sacrifice more on the long run, much like when they shipped most customer service and programming tasks overseas, only to discover it caused far more problems than it solved. Yes, your hourly rate per worker dropped, but making up for everything else cost just as much if not more.

Having things spread out so much impacts quality control, either requiring more on-site people to ride herd on those who are actually making your crap or you roll the dice and hope it doesn't catch fire or explode when consumers use it.
machpi said @ 12:41am GMT on 3rd Sep
If the system can be paralyzed by the 7th largest shipping company going out of business, then the system lacks some very basic back-ups that it should have had all along. If this incident fails to produce back-ups, a more serious incident will.

These things either fix themselves or they get displaced by something more robust.
InsipidUsername said @ 2:39am GMT on 3rd Sep
The system won't be paralyzed - but what will happen is there will be aftershocks felt throughout the system, and it will take time to sort it out. That's what happens when a major player goes through bankruptcy, because everyone who was dealing with them suddenly is dealing with additional uncertainty.

The immediate effect is that the price of shipping something from Asia right now has almost doubled overnight. That price will go down over time as more ships become available, but there are only so many ships with available capacity in the area right now. And it will go down, because there are a lot of cargo ships on the sea.

And that's the part of the problem. There was a run up in the Baltic Dry Index into 2008, where it crashed like most of the global economy. Suddenly, there was a lot less demand for shipping goods, a lot of raw commodities became cheaper and therefore less necessary to ship, there were declines in demand for shipping coal and iron, and even shippers who were doing well had problems getting the necessary credit to load and unload ships. And all the ships that were being built when the BDI was 11,793 suddenly didn't look so great when it was 663, so there were bankruptcies and consolidations in the ship-building industry as well.

Hanjin's bankruptcy is part of the market working these things out. These things fix themselves over the long run. In the long run, however, we are all dead. In the short run, some people will experience a lot of pain trying to figure out where their stuff is, what ship it is on, and whether they can unload it.

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