Supply Chain, Global Logistics

By pjain      Published June 25, 2019, 10:47 p.m. in blog Invest   

Global to Local Logistics Key Factors

Breaking supply chains is hard to do

Cheapest Labor Wins

Manufacturing Automation failed in USA and Japan

Some US companies thought in Semiconductors and Disk drives they could continue their fabs domestically using more robotics. The sad reality is the high cost supervisors and engineers were far cheaper, and capital costs and long R&D and inflexibility of robotics and automation always lagged.

Japan Display Inc and chipmaker Rohm Co Ltd say potential shifts to full automation for labour-intensive back-end processes done overseas could lead to new assembly lines being built at home where more advanced manufacturing takes place.

Heavy Robotics Usage can be done in China also

The proven highest productivity boosting automation could be adopted side-by-side of the cheapest labor. So if a Japanese or German manufacturing tool was so good, the cheap capital and FDI within China, would ALSO allow that equipment to be installed, and the manufacturing tool companies would often offer lease back, cheap finance, and ongoing training and support as needed.

Ironically due to cheap labor, such manufacturing tool services and support costs would be FAR LOWER in China than their own home countries!

Cheapest Capital - M&A Rollups by Chinese Giants

Foxconn dominates electronics - IP, Machinery, Knowhow, Procurement and more

  • Sharp produces ultra-thin panel cells in Japan, which are shipped to China where backlights, connectors and other parts are added - a process that requires constant manual testing and machinery adjustments. "The back-end process has long been done in China because it’s labour intensive," said a spokesman at Sharp, which was acquired by Taiwan’s Foxconn in 2016.

  • Apple expansion in India would ONLY Be done under Foxconn

  • Foxconn rolled

AVGO - uses cheap Chinese Capital to do M&A Rollups, help control 5G

Promise of Domestic market - attracted Car Assembly Plants (USA and China)

For Japan’s car makers, reliance on Chinese suppliers in the world’s biggest auto market is also just good business. "Even if we wanted to, it would be difficult to lower our exposure to China-made parts," an executive at a Japanese automaker told Reuters, declining to be identified as he was not authorised to speak to media.

He added that over the past decade, Chinese suppliers had upped their game and now provide a vast range of quality, low-cost parts.

Toyota Motor Corp, Nissan Motor Co Ltd and Honda also have at least three R&D centres each in China, and their suppliers are following suit.

"Where the software is developed dictates where the hardware is developed and made," said an official at a Japanese parts supplier, speaking on condition of anonymity.

JIT chains/Transport costs - parts need to be made near assembly

"The parts we make are so big that we need to be near our customers to control our costs," said Chikara Haruta, a spokesman at Yorozu Corp, which makes suspension and other auto components. Its plant in Wuhan, China is located just seven kilometres from a Honda Motor Co Ltd assembly factory.

AI, IT and Global Supply chains

=== 2018+ Trade War with China

How Companies will cope over Long Term

Stockpiling, gaming timing

  • In Q4'18 a LOT of imports happened

China will change/fraud on country of origin

  • Label Laundering - What prevents supplier from shipping over land to Vietnam and then "manufacturing"
  • This will be mainly for smaller off-brands

Raw Materials still sourced in China

---- Factors Supply Chain Re-routing Progress 2020 and Beyond

Slow Progress in Supply Chain Moving

Threat of Tariffs driving need to Diversify SOME out of China

Supply chain

IP

India Losing as new hub

Thailand, Bangladesh, Vietnam fast movers

Japan wants manufacturing back from China

Abe’s government has earmarked $2 billion to help companies shift production home eg making facemasks. The policy, part of a massive stimulus package to cope with the pandemic, has even been termed by some bureaucrats as a matter of national security. Economy Minister Yasutoshi Nishimura told reporters last week. "We need to make supply chains more robust and diverse, broadening our supply sources and increasing domestic production." = Jun 09, 2020

India as Targeting Manufacturing

Key factors India as new hub

Cheap labor not enough - Need land, control unions

Vietnam

China tech -> Overseas Chinese Factory owners moving mainly

Vietnam was low labor cost already in lowest cost

  • Materials, speciality products - still imported from
  • Nike already manufacturers a lot in Vietnam

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