Trump and the Supply Chain: Part 2

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Words of encouragement for nervous logistics pros in the Trump trade era

By Ron Atapattu

Editor’s note: To coincide with the inauguration, Supply Chain World is running a series of articles from industry experts about how they expect the policies of the Trump administration to impact the supply chain. Read Part 1,  Part 3,  Part 4 and Part 5.

As a rule, supply chain professionals are on constant hyper alert and nervous by nature, and few things make them more nervous than anticipating change. The onset of a new administration has many concerned that they will soon have to deal with, and adjust to, a new set of metrics on the horizon just as they’ve learned to deal with the status quo.

I understand how they feel.  I spent my career fighting uncertainties and made a business providing companies around the world third party logistics solutions. Supply chain professionals are generally the ones being most squeezed from top, while being expected to generate efficiencies for their organizations. The light of accountability tends to shine brightest on them, even as they’re expected to assume an outsized portion of their companies’ supply chain risks.

I understand the pressures, but I think in this case, they should look forward to the change; and prepare for it.  Even before trade agreements are dealt with, we can already see corporate decisions indicating a new attitude under the Trump Administration.

Carrier, General Motors, Ford and Fiat Chrysler have all decided to invest in new jobs and facilities in the United States when they had previously seemed inclined to invest in Mexico or elsewhere. Not all are willing to acknowledge Trump’s influence on these decisions, but it’s impossible to not notice the trend.

Whether he intends to do it by rhetoric or by renegotiating trade deals (and I think it will probably be a little of both), Trump seems focused on changing the balance of trade to favor U.S. export activity. Certainly this will be his “trump card” for adding more jobs. I think the Trans-Pacific Partnership is dead in its present form, but I wouldn’t be surprised if Trump renegotiates and gets it approved in a new form. The Asia-Pacific countries, which were the major benefactors of the TPP, are busy coming up with a substitute agreement with China. Time will tell if these countries can play the game effectively without U.S leadership and trading platform.  I think NAFTA will stay in place, but I expect Trump to negotiate new elements that seek to minimize U.S. job losses and encourage more domestic production.  And as we have seen, he is not afraid to use the bully pulpit of the presidency to persuade companies to keep their manufacturing activities at home.

What should supply chain professionals expect from all this?

First of all, when ships are bringing high volumes of cargo into the United States but don’t have enough going back out to China and elsewhere, major imbalances occur both in trade and logistics. Too few containers are in the right places at the right times and imbalances trickle down to all modes of transportation. Any effort to even out trade between the United States and China will help these imbalances, lessen the burden on shipping lines, service providers and help the global logistics scene. No one benefits when we’re compensating trade activity that generate empty backhauls or one way shipping.

This is only the start of how things could change for logistics professionals, who will have to be nimble in adjusting to the evolving dynamics of free trade or better knowns as political trade.

Trade flows will likely change, but it may not be as simple as more goods flowing from the United States to China and fewer coming back. Maybe we will import less from China. But maybe we’ll import more from Russia or Japan. Supply chain professionals need to be prepared for a more dynamic global field and shipping lines will have to readjust their port calls to optimize vessel usage.

Emphases in shipping operations may change too. Let’s say a company has relied heavily on a plant in China, but, in this new atmosphere, it decides to relocate all or part of that manufacturing activity to Alabama. Whether Trump had anything to do with it is beside the point. The needs of your customer will now be more focused on domestic shipping. Are you ready to make that adjustment? Logistics providers will be called to find solutions.

Trump makes people nervous because he seems impulsive, often bombastic, both in word and in deed. I have met Donald Trump, and have had the task of negotiating a deal with him. Behind closed doors, I found him to be quite different than what he portrays in public. He is a tough negotiator, but he is also calm, collected and thoughtful. I suspect he uses his public persona to his advantage. You can criticize, but it seems to be working for him.

Overall, I think it’s good news that the United States now has an administration that understands business and is more concerned with bottom-line results than with politically correct rhetoric. I believe this will result in more opportunities both in logistics and in the business community in general.

But you have to be ready. Change is coming, no matter how nervous it makes you. Logisticians will always pick up the pieces and bridge the gap.

Logistics veteran and Overseas Cargo Inc. (ShipOCI) Founder & President Ron Atapattu brings to the table over 30 years of experience handling supply chain management, distribution, transportation, inventory management and warehousing for some of the world’s most recognizable brands, including General Mills and PepsiCO.

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