The Friday Report: April 18th, 2019

Is Cybersecurity Keeping Pace with Supply Chain Technology?

As most supply chain professionals know, the supply chain is highly interconnected.  Knocking out a node or two can put an entire company in jeopardy.  Because there are more connections that in the past, supply chain businesses face a greater susceptibility to attack due to the number of technology connections.

Malicious actors do not merely steal company secrets, code or formula for manufacturing products.  Today cyber hackers erase entire systems. Without proper backups and disaster recovery efforts, 90% of companies that experience a wiper attack are down for months.  The loss of customer data often leads to mistrust and loss of business, if not to lawsuits.  Proprietary data is also particularly valuable and immeasurably harder to replace.  When a manufacturing facility, warehouse or logistics service provider is impacted, the data loss can mean damage to an entire supply chain.

Identifying company assets is the first step to protecting them.  for more information on cybersecurity issues involving the supply chain, read more here.

Proposed 25% Auto Tariffs Projected to Drop Auto Imports from Europe and Asia by 11%

Presuming that the new 25% tariffs on automobiles will be imposed in the second quarter of 2019, vehicle imports from Northern Europe and Asia are anticipated to drop by 11%, impacting numerous American ports.  The most significant imports would be felt at the Ports of Baltimore, Los Angeles, Long Beach, New York and New Jersey. 

Industry experts foresee that much of the extra costs related to the new tariffs would be either passed along to supply chain partners or to consumers.  It is feared that this policy would tip off a trade war with the European Union due to the important nature of the commodities involved.  It is anticipated that manufacturers will boost manufacturing before the tariffs would take effect.  Mexican and Canadian finished vehicle and auto part manufacturers may benefit from added tariffs imposed on Europe and Asia.

Stockpiled Goods Weigh on the U.S. Economy in 2019

Fears across the supply chain industry in 2018 led to a stockpile of cars, furniture and other goods.  An average of 1.2 percentage points from inventory accumulation was added to U.S. growth in the final two quarters of 2018.  This appears to have been instrumental to the year’s 3 percent expansion, the fastest since 2005.  This is anticipated to have the opposite effect on the economy in 2019, beginning in the second quarter. 

Two issues caused the American inventory hangover.  Manufacturers and retailers purchased imported goods in huge quantities ahead of the announced imposition of new tariffs.  This is especially true of China.  Related to this is the inability to move other goods that were impacted by the imposition of tariffs, such as meat.  Secondly, retailers have reported disappointing sales, notably with declines in two of the past three months. 

According to the Federal Reserve, factory output dropped at a rate of 1.1 percent annual rate in Q1 of 2019.  This is the poorest performance since late 2017.  This is believed to be a signal that manufacturing is softening as producers are struggling to handle the build up of inventory.  Ford Motor Company reported that truck inventories have increased to 70 days, an increase from 66 days in the same time period in 2018.  The inventory build up seems to be slowing demand, adding more drag on sales. 

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