Within our Ferrari Consulting and Research Group 2019 Predictions for Industry and Global Supply Chains that were published in December 2019, we included a prediction of unprecedented levels of global supply network challenges to continue to concern C-Suite and industry supply chain executives. The principal motivator of that prediction was the increased threat of a full-blown trade war involving China and the United States. Global trade

As we observed in a posting earlier this month, as supply chain managements teams approach the all-important final quarter of 2019, there is increasingly a brutal new normal unfolding for supply chain management teams. Our 2019 prediction has come to pass in many dimensions.

One of these dimensions concerns the disproportional impact of global supply network challenges of small and medium manufacturers, retailers, wholesalers and other businesses.

Today. The Wall Street Journal reinforced such impacts with a report indicating that the current level of increased tariffs are indeed taking a toll on small businesses. Reported was that more than 16,000 companies has filed more than 16,000 requests for exemptions from the recent $200 billion tranche of tariffs on imported goods from China. Upwards of 62 percent of that total have originated from an aftermarket automotive and lawn equipment repair parts distributor located in Minnesota.

The sum total assessment of this WSJ report was that while small businesses, with limited resources,  have little recourse but to file individual appeals and provide specific detailed evidence with the Office of the U.S. Trade Representative, in order to gain some monetary relief. However, larger, global based companies can rely on connected lobbyists, influence industry trade groups or trade lawyers to gain attention and action from U.S. government officials. We suspect that the same conditions apply among China’s smaller businesses as-well.

Further noted  by lawyers and consultants are that some companies remain in an anger and denial stage, not coming to the realities that tariffs have indeed become an added and significant cost aspect for doing business.

As Supply Chain Matters has consistently pointed out since our inception, are the realities that in many industry sectors, robust product value chains and manufacturing networks have long since departed the United States, leaving regions such as China and other Asian regions a sole source for competitive products. This especially applies to repair or aftermarket supplies and parts that have small product margins.

The takeaway for our readers is that regardless of the final outcome of the ongoing escalated trade tensions, global supply chain structural change is indeed underway. Small and mid-sized companies that elect to deny or ignore such changes do so at-peril.  Indeed, for SMB C-Suites and senior supply chain executives, unprecedented supply network challenges are a reality, and no company can singly take-on such challenges.

An active presence among Industry associations, political action teams and joint collaboration focused on global supply network landscape challenges and needs are obviously warranted. However, there is yet another reality, one that concludes that trade wars indeed have casualties and consequences, and that politicians had best understand that the economic future of many SMB businesses rests with access to industry competitive global supply networks.

Global and domestics supply networks are indeed undergoing significant change and where they end-up is yet to be settled. In the meantime, this period oh high uncertainty requires a considerable focus on supply management options and contingency planning. High supply and product demand network uncertainty and business impact remain reality for several months to-come, especially for SMB businesses.

 

Bob Ferrari

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