The Friday Report: August 16th, 2019

Quick wrap up of a few hot topic newsworthy stories in the supply chain logistics industry

Advance Auto Parts Turns to Supplier Collaboration and Price Hikes to Mitigate Tariffs

In preparation for the imposition of the list 3 tariffs covering $200 billion in Chinese exports, Advance Auto Parts has elected to collaborate with its suppliers to utilize on-hand inventory instead of purchasing at higher costs to help mitigate cost increases.  With the decrease in its adjusted gross profit margin, Advance Auto Parts is struggling to control costs related to inflation and tariffs.

Advanced Auto Parts uses a last in, first out (LIFO) accounting strategy.   In this strategy, the most recently purchased or produced goods are expensed first as the cost of goods sold (COGS).  This enables it to absorb cost increases as soon as higher-priced products are received, however the LIFO strategy will lose its impact over time.       

Humans More Fearful of Being Replace by Humans than Robots

According to a study by the Technical University of Munich and Erasmus University in Rotterdam, uncovered that in general, people approve of other people replacing others rather robots.  Respondents indicated this preference with the exception when this involved their respective jobs.  In that instance, they indicated that they would prefer to be replaced by technology.  The survey revealed a significant fear of robots taking over human jobs in the long term.

Survey researchers interpreted these paradoxical results as being due to the human need to relate to other humans rather than to machines.  They felt that respondents had indicated that being replaced by a machine was less damaging to their self-worth.

Additional results included the need to upskill workers to prepare them to work side-by-side with technology.  Enhancing or building proficiency with new technology not only enables a more effective workforce, but also helps to build confidence and reduce fears of being replaced by technology in the long run.

Tariffs and Trade War Pushing Electronics Production Out of China

Tariffs and the escalating U.S.-China trade war have resulted in movement of electronics production out of China.  Companies like Pegatron have elected to move production elsewhere in Southeast Asia, such as to the Indonesian island of Batam or Vietnam.  For its part, Batam has been readying an array of incentives to attract more investment to enable a major shift in global manufacturing.

Companies report that they are unsure when the China-U.S. tensions will fade and are weary of the uncertainty.  HP laptop manufacturer Inventec Corporation announced plans to move production of U.S. bound laptops from China to Taiwan within months.  Other electronics manufacturers are following suit.

As a result of the U.S. sanction of Huawei, Chinese-based companies are “de-Americanizing” their supply chains to decrease their dependence upon American core technology. 

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