The Friday Report: February 21st, 2020

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

Blue Collar Worker Shortage Turns Severe

 The younger generation is eschewing trade school and apprenticeship opportunities, turning instead to college for white collar jobs.  The agriculture, mining, manufacturing, construction, transportation and supply chain logistics industries have been affected by this shift.

Many baby boomers, the largest group in the blue-collar labor market, have reached the age of retirement or are nearing the point of retirement.  The severe labor shortage of blue collar and manual services workers is a significant problem and not one easily solved.

Although men are leaving blue-collar jobs, an increasing amount of women aged 25 to 54 are joining the labor force but not in large enough numbers to make a major impact.  This has led to changes in hiring practices.  For example, employers have demonstrated a willingness to hire candidates that are not qualified or who have been out of the labor market for years.

India Faces Supply Chain Disruptions from Coronavirus Outbreak

Indian business leaders are bracing for supply chain disruptions due to the coronavirus outbreak in China.  China is the largest source of India’s intermediate goods and supplies much of the components essential in the products India manufactures. 

This is causing problems in India’s manufacturing and export sectors especially with products in the fields of medicines, electronics, textiles and chemicals.  The outbreak of coronavirus has caused the disruption of the supplies of raw materials to numerous countries, needed to manufacture goods.  Up to 70 percent of active pharmaceutical ingredients and 90 percent of specific mobile phone parts are sourced from China.

The supply chain disruption has caused prices to shoot up 15 to 50 percent in antibiotics, vitamins and some medicines.  Concerns about shortages of active ingredients for drug products including paracetamol and ibuprofen may last for over two weeks and others two to three months.

Production Costs Escalate Due to Coronavirus

American giants Caterpillar, Deere & Co and Komatsu including others are facing increasing costs to avoid disruptions in production largely due to the coronavirus outbreak.  Higher prices on components such as tubes and metal pieces are damaging the chances of solid earnings.  The downturn in the U.S. industrial economy is also playing a significant role.

Companies are now shifting sourcing.  Doing so often means that new tools must be purchased.  Additional money sometimes must be spent to make sure that new parts fit the specifications provided by the equipment makers.  Additional measures are also being employed which necessitate more costs.  One measure involves a shift to air freight is increasingly being used as compared to normal sea freight.  This is being done because use of roads and ports has been restricted in China due to the coronavirus outbreak.

Coming on top of the China-U.S. trade war, the cost of imports of industrial parts and components from China has risen.  The impact has caused layoffs and cuts in production at manufacturing plants such as Caterpillar and Deere.

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