Some Passing Thoughts on Supply Chain Vulnerability

Shortages in the United Kingdom are providing plentiful ammunition for many critics with an axe to grind. Brexit opponents were quick to lay the blame directly upon Great Britain’s departure from the European Union. Anti-Globalization activists have pointed out the dangerous vulnerability of Just-In-Time supply chains. Then there is COVID-19 where we are seeing the anti-vax and pro-mandate camps slinging blame for the shortages at each other.

The fact of the matter is we’re in a perfect storm of conditions and circumstances at present. COVID restrictions and mandates, post-Brexit teething issues and supply chain disruptions in other parts of the world have combined and brought chaos to the United Kingdom and other nations. It will be some time before normal conditions return. Even though the UK is receiving the lion’s share of media attention for its fuel and food shortages it is not the only one dealing with shortages. In the United States, most major ports are dealing with extreme congestion. Dozens of merchant vessels sit at anchor off places like Long Beach, Elizabeth, and Dundalk, waiting for extended periods of time to enter and unload. This has resulted in a growing number of shortages across a wide range of sectors in the US. Panic buying has exacerbated the situation as well.

Under normal conditions, Just-In-Time supply chains work efficiently. In short, JIT is an inventory management strategy designed to guarantee fast order fulfillment. Production starts only when an order is placed, and inventory stock shipped out as needed. The onset of the pandemic changed the dynamic markedly. Restrictions, shutdowns, and a growing shortage of workers has plagued Asia where much of the manufacturing is done. This was Patient Zero for the current disruptions, for lack of a better term. 

Modern supply chains were neither designed or intended to weather a storm of conditions like the one we are seeing. Supply chains were not built for this.  Their vulnerabilities have now been made abundantly clear and systematic changes are most certainly on the horizon. Before that time arrives, though, the current storm needs to be handled.

Christmas Weekend Update: Brexit Deal & Iran

Merry Christmas! Well, a slightly belated Merry Christmas, but a sincere greeting nonetheless. 😊  I hope that all of you enjoyed the holiday. I know this has not been the most typical Holiday Season, but most of us are trying to do the best we can, given the present circumstances. The last week has been active on the international front. As we look forward to the final full week of 2020, some long running dramas are coming to a close while hints of what may loom on the horizon are starting to show.

Foremost is the Brexit finality. Negotiators from Great Britain and the European Union have agreed on a Brexit deal with less than a week remaining before the transition period ends. With a deal now in place the prospect of a messy, disruptive no-deal Brexit can now be laid to rest. The majority of outstanding issues between the UK and EU have been settled and compromises reached.

Now comes the point in time for all of the pundits and talking heads to find a new angle that satisfies their “Brexit is Bad” bylines. Some journalists have made a career out of predicting for the past four years how Brexit would never come about for a myriad of reasons. Instead of admitting the were wrong, eating crow and moving on to a new subject, they’re going to beat the dead Brexit horse for the time being. Oh well, no surprise there.

Iranian proxy groups in Iraq have been busy over the past ten days. Responsibility for the failed rocket attack on the US embassy in Baghdad was placed on Iranian shoulders by the Trump administration. Tehran has, naturally, denied playing a role in the attack. Despite its insistence, Iranian involvement is very likely. The Iranian government has been seeking a way to strike back at the US following a year in which Iran has not been able to respond effectively to US, Saudi, and Israeli actions in the region. There’s growing concern that the Iranians are preparing to conduct a fresh wave of attacks against US and Israeli targets. The one-year anniversary of Qassem Soleimani could be used as an occasion to begin these attacks.

Brexit’s Final Curtain Approaches

As 2020 draws to a close, the final curtain of the four and a half year long Brexit drama is now in sight. Great Britain will leave the European Union at 11:00 PM, 31 January, 2020. The largest unknown at the moment is whether or not the two sides complete a post-Brexit trade deal. Time is running out, as is patience as both sides struggle to get a deal in place before the end of the year. Deal or not, Britain is leaving the EU. With that said, it is in the interest of both parties to reach an agreement. Not doing so will bring the prospect of economic damage and border disruptions as a second wave of COVID-19 cases grips Europe.

Today, the European Parliament has set a Sunday deadline for negotiators to reach a post-Brexit trade deal. In light of the coming Christmas vacation, ratifying an agreement beyond Sunday will be difficult for the parliament. The chief EU Brexit negotiator Michel Barnier has said it will be “difficult but possible” to have a deal wrapped up by Friday. His view is certainly the minority opinion. Most other British and EU officials close to the negotiations, and were willing to speak off camera, believe a no-deal outcome is most probable.

Despite the cynicism of many diplomats and politicians, economic news has been largely positive today. European stocks and markets rose on hopes of a trade deal. The optimism was even found in currency markets where the pound and euro were trading strongly against the dollar. The solid economic performance is not likely to last for much longer unless a trade deal comes about. Should the year end without one, European markets will be the first to feel the pinch as yet another wave of uncertainty will arrive.

Brexit Becomes Official

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It took nearly four years to finally happen but Brexit is now reality. At 11:00 PM on 31 January (6 PM local time here in the eastern US) Great Britain formally left the European Union. Prime Minister Boris Johnson described the night as not an end, but a beginning. In Parliament Square, and across the British Isles Brexit supporters celebrated. Understandably, Pro-EU Britons were not in a celebratory mood. Vigils were held, as well as anti-Brexit demonstrations although the point of these is unclear since Brexit is now a done-deal.

Now Britain will contend with what comes next. The problem is, no one knows just what that will be. In the coming days and weeks Britons will not see any immediate changes. The transition period remains in effect until 31 December, 2020 keeping EU laws in force for the rest of the year. The next step for the British government will be to come to terms with the EU on a permanent trade agreement by then. That will not be an easy task as many European leaders have been warning.

The next year will undoubtedly be filled with the same sort of grim warnings from the continent about the difficulties Britain will face without the protection of the EU. Supporters of the European supranational body in the UK will likely be outspoken on the topic. However, the voters in Britain have spoken…multiple times, as the case has been, and the position of the majority is now etched in stone. There will be no going back now, or at any point in the future. For better or worse, Brexit has taken effect and the destiny of Great Britain now sits entirely in the hands of its citizens.

The Next Phase of the Brexit Saga Kicks Off

European Union and British Union Jack flag flying in front of Bi

The results of last week’s elections in United Kingdom proved to be decisive. The British government now has a clear majority, and Prime Minister Boris Johnson is set to guide the nation out of the European Union once and for all. Brexit, after years of false starts, and ceaseless bickering, appears to be inevitable. Finally.

The European Union’s part in the election results cannot be overlooked. Mistakes were made at the worst possible moments. Ruling out a Brexit extension will likely go down as the biggest error. Had Brussels been more flexible in this regard, the uncertainty and political chaos that ensued in London could’ve been avoided. Both sides likely would have come to an agreement each could live with and have moved on by now. The decision by some EU leaders to collude with Remain elements in British society, and politics was a gross miscalculation which only helped undermined the Tory and Labour reelection prospects. There was never a realistic chance of a second Brexit referendum happening, yet some EU leaders were not to be deterred and pushed for it. The results made obvious last week. The EU should have made every effort to help Theresa May get her withdrawal agreement through Parliament instead. May’s agreement was far from perfect, but it offered the likelihood of a prosperous, and amicable EU-UK coexistence in the post-Brexit era.

Now, the EU is left trying to figure out exactly what it wants from a new bilateral relationship with Great Britain. The uncertainty surrounding Brexit has not been healthy for the EU and unless the transition period is smooth, this will not change. The upcoming trade negotiations will tell a lot about the EU’s inflection and offer hints as to whether or not Brussels intends to be part of the problem, or the solution.