This article comes from the WeChat public account: extraordinary fritters (ID: ffyoutiao) , the original title” Who is the real winner? “Author: hot and sour powder, title figure from: Vision China
Do I need to grow rice by myself to open a restaurant?
“Do I need to grow rice by myself to open a restaurant?” Anyone who asked this question before 2020, the answer must be no. But this year is different. If you ask me this question, I will hesitate for a few seconds and then reluctantly say no.
However, if you go to various multinational manufacturing companies, such as Volkswagen, BMW, and Toyota, they will nod like a sieve to answer.
Rising to the national level and let Americans answer this question, their answer may be that at least we can no longer let China grow rice for us.
Many countries do n’t talk about it, but they may do so behind the scenes.
As for China, fortunately, while opening the restaurant, I have always grown rice. Unfortunately, others are very sullen about the fact that we can grow rice.
The impact of New Coronavirus on human economic life is its biggest impact on the hosts. Whether it is the imminent massive famine, the bankruptcy of small and medium-sized enterprises that have already appeared, or the forced shutdown of large and medium-sized multinational companies are all related to one thing, that is, the rupture of the global supply chain.
From the perspective of the demand chain, that is, the final transaction network from the manufacturer to the customer, this outbreak has affected more than 65% of the global terminal demand, which no one had expected in the past.
In fact, systemic risks in the global supply chain have been predicted by scholars and business owners with foresight before this year.
In 2015, Paul Dietman, director of the Review of Supply Chain Management, pointed out that there are always three risks that plague executives of multinational companies:
1. How to deal with equipment damage in extreme environment?
2. How to deal with the loss of suppliers in extreme environments?
3. In the increasingly complex international supply chain, how to ensure the supply quality is excellent?
When faced with these problems, large and small companies can give answers to real situations, but few companies prepare for the latter two problems at the same time. Although the solution has been listed for a long time-increasing enough high-quality inventory, this item is rarely adopted by the executives of various companies, because it will not only increase labor costs, but also reduce cash flow, thereby reducing the value of shares .
In the face of supply risks, most CEOs and CFOs choose to exchange security for maximum benefit. Generally speaking, this choice is correct, but “if bad things are likely to happen, no matter how small this possibility is, it will always happen and cause the greatest possible loss.” Murphy’s law once again shows the power, the most Extreme bad things will happen, people have to think about what to do.
Take the Volkswagen Group as an example. World War II did not affect its birth, and the Cold War did not affect its growth. As a result, Volkswagen ’s supply chain was unstable due to the epidemic. This year, unprecedented cessation of automobile production on both sides of the Atlantic. In March, the world ’s largest automaker shut down at a cost of 2 billion euros per week, and barely started construction until April.
On May 4, Volkswagen stated that its spending on production will soar, because they have to choose this way in the face of the current form. In the future, they will increase their investment in the supply chain to ensure continuous inventory and production,But it can only be regarded as a remedy. Stephen Sommer, a member of Volkswagen’s board of directors, said that the traditional value chain of automobile manufacturing may also change, and ensuring high investment in the supply chain may become a long-term option.
Humans are likely to coexist with the new coronavirus. Sudden blockade may become the norm. Unstable political situations may also cause sudden damage to the supply chain. In this case, not only car companies, as long as multinational companies can choose, it is only to increase inventory, establish a diversified supply network, or simply make it yourself.
In the future, the supply chain of the world may go against the trend of globalization. Opening a restaurant and growing rice by yourself may become the norm.
China, an important part of the world ’s supply chain
In 1817, David Ricardo put forward the famous theory of comparative advantage in his book “Politics and Taxation Principles” (Law of Comparative Advantage ) , to put it simply, the basis of international trade is the relative difference in production technology, and the resulting relative cost difference. Each country should produce and export products with “comparative advantage” according to its own advantages. This idea has guided the industrial selection of many countries and the selection of locations across companies.
For the developing countries that come up later, it is the easiest way to get rich by concentrating on developing industries that you are good at. But this also created a problem: over-reliance on a certain economic field. The “resource curse” oil country is the most typical example: because the production of crude oil can solve the country’s livelihood, it has developed development inertia, and gave up research and development in other fields. Immediately affected, there is no buffer at all.
China’s industrial choice was born out of survival needs. The history of colonization and the Westernization Movement have laid a basic understanding of the importance of China in the development of heavy industry. The lack of production materials for a long time and the lessons brought about by the disintegration of the Soviet Union also made China realize that the so-called superiority of the system may be determined by the type and quantity of consumer products. Both light and heavy industries must be grasped, and both must be hard, which laid the foundation for China to play an important role in the global value chain in the future.
China used its initial comparative advantage, that is, the intensive labor force created an economic miracle,But as just said, Worries about survival have not stopped . What if I can’t get a job? What should I do if the population red is used up? What about knowledge-intensive competition? In the face of these problems, China has done a big thing: Everything is needed, everything is accounted for, and nothing is put away .
In 2010, China replaced the United States as the world ’s largest manufacturing country. In 2018, 28% of the world ’s exports were directly or indirectly linked to China. In 2019, the Sino-U.S. Trade war is not yet open, and everyone is still worried: What should China do in this situation in 2025? But in fact, last year, China has already done a big thing: it has become the only country in the world with all categories of industry.
It sounds pretty good, and the completion process is indeed very ambitious, but the trouble is that no matter who’s business, it has to pass the Chinese level . According to a study released by D & B in the United States, 163 of the top 1000 Fortune companies have primary suppliers in China, that is, directly-supplied contact merchants, and more than 900 other secondary suppliers in China. Suppliers.
In March, the suspension of production by Chinese midstream and downstream companies has made many multinational companies make backup plans. It is not enough to temporarily drop the chain. Apple has advanced the plan to move 15% -30% of its production capacity from China. Samsung has gradually Withdrew from China, Google and Microsoft also aimed at Vietnam. In any country, there are companies to save, and protecting domestic companies is also a big deal for China. The next round of smart phone competition is impossible to lean towards local brands. The instability of the supply chain and the possible shrinkage of the market have made it an option for some brands to move out.
And in this position, let alone the chain, even if the idea of ”what should China do if the chain breaks” prevails, many things will be complicated.
At present, things have become complicated.
Bring the supply chain back
Unfortunately, at this time of the 21st century, people are still using the international relations theory of the last century to understand contemporary great power relations, such as the “deterrence theory.” The original theory refers to the military thought of using force as a threat, causing the other party to fear unbearable retaliation and thus abandoning their original actions.
People call the deterrence theory “art” because it stops before the facts and is a soldier who surrenders without fighting. Since the beginning of the previous year, the “deterrence theory” has been frequently used among major powers in the economic field. The development of the matter no longer stops at the “if”, but directly adopts a method of retaliation. The tariffs are increased and the prohibitions are issued.
The biggest side effect is that this kind of thinking affects all aspects of political thinking. At present, people have used this thinking to think about the supply chain after the epidemic , especially those key departments that are related to life and death , Such as the pharmaceutical sector. And this will only cause more hatred and mistrust in the short term.
For pharmaceutical manufacturing, the supply chain is mainly divided into two processes: the first process is the production process of pharmaceutical active ingredients (APIs) , also The most important part of pharmaceutical production, the active ingredients are produced in this process. The second process is the formula production process, in which the parts and main components as auxiliary materials are mixed in proportion to make medicine.
Although the five largest pharmaceutical companies in the world are Pfizer, Merck in the United States, Novartis and Roche in Sweden, and GlaxoSmithKline in the United Kingdom, none of them is in China, but China accounts for all 40% of the world’s pharmaceutical active ingredient production, China and India directly account for 80% of the US pharmaceutical active ingredient production.
Janet Woodcock, a director of the U.S. Food and Drug Administration, told the U.S. Congress in 2019: Over the past decade, offshore U.S. drug production has become a trend, and China has become U.S. The main supplier of this trend is the final result of the cost reduction and environmental requirements of major drugs, but this is a hidden danger to the United States. The US Defense Health Agency has repeated this fact many times in the context of a trade war, because if the trade war continues to escalate, China may threaten US national security through a monopoly on US pharmaceuticals.
Even if it is not due to political considerations, once the supply of medicines is unexpectedly cut off, it is a huge challenge to national stability.
Look at India to know that the worries of other countries are not unreasonable. In February, India had suspended the export of many important antibiotics because of insufficient stocks, which made some immediate countries unable to eat. Although European countries did not clarify their worries about China and India, actions have already begun. For example, Sanofi in France proposed to accelerate the return of the pharmaceutical industry to Europe in February.
The relocation of the pharmaceutical supply chain is just one thing. On April 6, Japan invested US $ 2.2 billion to support Japanese companies to move out of China. Soon after, the White House Economic Committee of the United States provided comments. As long as American companies are willing to return to China, they will be reimbursed for plant, equipment, intellectual property, infrastructure, and renovation costs. .
Before the trade war, the goal of the United States was to bring some important manufacturing industries back to the country to solve the domestic employment problem. In the final analysis, it was an economic goal. However, due to the outbreak of the epidemic, the current US thinking has changed: this is the only way to protect national security and is closely related to the country ’s survival. Now the US is actively looking for ways to bring the supply chain of important sectors back from China. At present, they have promised tax relief to enterprises and issued enterprise subsidies, saying they will take more stimulus measures if necessary.
What ’s next?
Actually, deciding to move is not difficult, how to move is the real problem.
According to the statistics of the World Bank, from 1970 to 2018, the proportion of global exports of goods and services to the total economy has risen from 11.8% in 1960 to 30.1%, and we want to reshape the third of global GDP First, the production and transportation of goods have a greater impact on the economy than the short-term suspension of production caused by the epidemic. If extreme measures are taken and all countries really move their supply chains into the country, then humanity will act against the laws of the market.> , the original title “Who is the real winner? “Author: hot and sour powder