Can the world survive China’s supply chain monopoly?

Companies should look for flexible methodologies to support supply chain from a holistic approach

By Mohammad Al Remeithi

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Reuters file photo
Reuters file photo

Published: Tue 13 Sep 2022, 6:47 PM

Last updated: Tue 13 Sep 2022, 7:22 PM

I can’t get over the events of February 2020, when the pandemic hit. The world stood still, causing gigantic interruptions of numerous crucial global supply chains. It was an unprecedented catastrophe in the history of mankind. Since WWII, no reduction in trade output volume had happened on this magnitude.

Airlines who were meant to fly us across continents, became bankrupt one after the other, and fell out of the skies like dried leaves in autumn. Emirates group documented annual losses of up to $6b, and it was the least successful year that Emirates had in three decades.

A paper published by Nature on human behaviour reminded us that companies, livelihoods, and small businesses just collapsed. Eighty per cent of the world is said to have shut down during the early global spread of the pandemic. This lasted in many places for two months, while the global supply chain industry lost about $20 trillion. What went wrong?

For the first time, medical personal protective equipment (PPE) became as omnipresent a bread, which every country in the world suddenly needed. It reminded me of the oil crisis of the 70s.

Everything rested on China. Almost any material, chip, or shipping a product, was connected with China. But was this the first time we had heard this? No. Was it a bad thing? That depends on who the provider was. Was it China’s fault they became the world largest supply chain factory (SCF)? Or were the corporations to blame for wanting to cut costs and make more profits for investors? Or perhaps it was us, the customers, who wanted more competitive prices. To me it all looked like a win-win-win situation. China increased their market share, companies made more revenues, and consumers got good deals. What could possibly be wrong wrong with that, I wondered? Why should anyone be upset?

Isn’t this just capitalism in full swing? Who wouldn’t want to be in China’s position? Professor Michael Porter’s diamond model, also known as the national competitive advantage of industries, mentions: “A state’s attractiveness in a manufacturing to be governed by on the volume of the business to revolutionise, and advance. The diamond shaped structure emphases on amplifying why certain trades within a specific country are competitive globally, while others might not.”

For better or worse China’s unipolar supply chain domination was well established by 2019, and I am not trying to say that some other country should take China’s positing in supply chain supremacy now, or even that we pursue bipolar economic supply zones.

The reason I am writing about this today is to shed light on a long overlooked broken supply chain system.I was part of the affected societies. This was something we had known for years but decided to ignore.

Like others who wanted to help by volunteering for their countries, I pulled my sleeves up and headed to support during Covid-19. I joined the emergency task force on day one. No one was allowed to leave their homes, except in case of an emergency, or to get food supplies from the supermarket with permission from the authorities. Everyone was confused, we didn’t even know if we should be shaking hands? How much distance should we keep? Is wearing gloves and masks the appropriate things to do? I would be wrong to claim that we had things under control. But the whole world was out of control. It was the first day of our meeting regarding the pandemic, at ground zero.

I had experience working in labs before. My background in life sciences helped me understand the situation. But frankly speaking, I had worked previously in several high intense capacities and developed myself to handle work under pressure. No procedure, or expert could provide clarity at that moment in time about what ought to be done. We’d seen movies like this before, and struggled to adapt Hollywood as a frame of reference. In Contagion (2011), directed by Steven Soderbergh we found life’s imitation of art: “The death of Beth Emhoff and her son leads to the discovery of a deadly virus. While the US Centers for Disease Control and prevention CDC struggles to curb its spread, with worldwide panic arises”..

I took responsibility for coordinating manufacturing, and identifying what was missing from our national supply chain. I wanted to make sure that doctors and nurses at hospitals got all the support they could get to save patients from this deadly virus.

Large companies were affected by the pandemic, since all were connected to the largest supply chain factory, China. The signs were clear: China is closed for business until further notice.

I started contacting the free zone representatives in my city, hoping to gather enough information on suppliers and manufactures to find a workable solution to coordinating the production of the missing PPE items needed by the hospitals.

I was on the phone with Dubai DP World almost every day. I spoke to the CEO of Dubai Design District. She was amazing, and happily introduced me to two female entrepreneurs that had already started supplying the health authorities. One in particular impressed me with her work. She’s a fashion designer from Egypt, specialising in haute couture female dresses. But during this pandemic she went out of her way, got blueprints, and material requirements for PPE.

She bought the fabric specific for these types of products, and started producing them in her boutique workshop. So I asked her, “You’re a fashion designer, with nothing to do with the PPE business. Where did you get the information for the type of material required for producing masks, and garments for medical uniforms?” She replied, “From the FDA links. I already delivered the first batch. Now I’m ready to deliver the second consignment. Where would you like me to drop the items? I am still looking for more materials as prices have gone up. If you could help me, I can deliver more.” I was speechless!

Then I got a call from another manufacturer who offered to produce masks and plastic face protection guards, but didn’t have the materials. Most of these basic raw materials are made in China. Prices of these material sky-rocketed, and China became the largest supplier of PPE in the world. Talk about a competitive advantage.

I determined to get to the bottom of this, and understand a little history about why China became the way it is now. After reading a handful of papers, I discovered how China positioned itself as the, “the right partner supply chain factory.” I identified recurring patterns that justified the majority of corporate preferences for Chinese supply.

Two fascinating things came up in my search. Firstly, everyone is after China’s colossal market, to sell their products. They are under the assumption (perhaps delusional) that China is going to open its arms to the world for them to come and sell their products in China. The other reason is cheap manufacturing that reduces production costs.

This brought to me a memory from about 18 years ago. I used to travel to one of the largest manufacturers in the world for work, and over time built a solid relationship with a diplomat in that country. I recall a discussion on trade, manufacturing, supply chain, and other matters. China abruptly came up, and I asked his Excellency, “Why doesn’t your country diversify its risk more, and build fewer factories in China, and more in other friendly countries, to manufacture your products?”

With a smile that I hardly could see his eyes he replied, “China is enormous, and 1we’re hoping to capitalise on their population, and their love for our high quality products.” Little did they know that China was learning from them, and the way they optimise manufacturing.

China is not wrong in doing what any other country would do, and I am not picking on China in this discussion, but the pandemic and previous challenges in supply chain should’ve taught us something. Maybe we forget quickly, or are lazy to adapt. I am no expert in supply chain, but I am one of many who were affected by this unreliable supply arrangement. So in retrospect, I have couple of suggestion to consider.

What did we learn from Covid-19’s lessons? How can we capitalise on the lessons learned, and avoid future misfortunes? Natural, or manufactured interruptions, are unavoidable. Global crises effect everyone: countries, companies, and individuals. Gigafactories are not the solution. Cheap manufacturing and shortcuts are not the answer. Protectionism is a disease. Larger ships aimed at more containers have proven to be potentially disastrous.

With all of our new advances in automation, additive manufacturing, smart contracts, and other new solutions, I am pretty sure things could improve. Perhaps some have, but we need to do more. WTO director Ngozi Okonjo-Iweal remarked during an Africa Summit discussing shipping challenges on vaccines that, “We have the technology to save lives and yet we can’t seem to get it to where it’s needed.”

Instead of having unipolar, or bipolar supply chain hubs, I propose a Multi Micro Polar MMP supply chain hub. These locations could be in any country that have the right infrastructure to support regional economies, and have proven themselves resilient. We might take Covid-19 as a reference and find new manufacturing centers where corporations should position their next MMP supply chain.

Recommendations to be considered: Having isolated gigafactories means that when things go wrong, everyone is stuck. Microfactories are a great concept. These strategically geographically distributed micro platforms will be more resilient to disruption. We might consider ARRIVAL as an example. Digital smart contracts could solve some IP concerns.

Additive manufacturing is an excellent example of build-as-needed production, and restrict wasteful manufacturing. Lean agile manufacturing might see one factory could building multiple products. We have seen many large factories go out of business because they were too big when demand for their products dropped sharply at that particular time. Shipyards might be considered an example as in the past several years a number of shipyards have gone bankrupt. Jobs were lost, and economies were affected because of inefficiency and bad long term planning. Long term strategic partnerships between private sector and governments could form the foundation of these competitive hubs.

In conclusion, enterprise management and product manufacturing ought to be a long term strategy, and companies should look for flexible methodologies to support supply chain from a holistic approach. To present it more delicately, and not to pick on a particular nation, it is imperative for humanity to work together to build more sustainable, local manufacturing, with less polluted oceans due to shipping, and with more resilient global economies. The question remains: will we celebrate Multi Micro Polar MMP supply chain hubs, or debate the effect of unipolar supply chain in the next misfortune?

Mohammad Al Remeithi is an entrepreneur, with a background in Science and has interests in organisational transformation, digitisation, agile manufacturing, and microfactories. Views expressed are his own and do not reflect the newspaper’s policy.

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