US & Global Economic Impact Analysis and Forecasts

Freedonia analysts and economists are sharing their insights on how major events are impacting different parts of the US and global economies.

Russian Aggression Toward Ukraine Threatens Metal Supply Chain Issues

As Russia continues to amass troops near its border with Ukraine, the rest of the world waits to see if there will be aggression or a step back. NATO powers have been united in their condemnation of the aggression (though not in the level of material support) and vow to implement crushing sanctions if Russia does follow through with the invasion. 

The economic impact of a renewed war between Russia and Ukraine would be profound, impacting everything from commodity prices and a global supply chain already fraught with issues. The manufacturing sector, for instance, could face serious repercussions from the conflict and “mother of all sanctions” that the US has promised would follow given Russia’s position as a prominent exporter of metals

As Russia is the leading global exporter of nickel and palladium (and is also a major supplier of aluminum, platinum, steel, and copper), these sanctions would have broad effects on a number of industries:

  • automobile production, as palladium is a key component of catalytic converters, copper is used in radiators and electric vehicle production, and aluminum is used in engines
  • electronics, as nickel, aluminum, and copper are used in medical equipment, power generation, mobile phones, kitchenware, and other consumer electronics, which have been in especially high demand following the pandemic
  • industrial equipment manufacturing, which uses platinum
  • others that are extensive users of aluminum, such as can and airplane manufacturers

This is not to mention the supply chain issues that would arise from price spikes related to energy and food, which would also follow an invasion of Ukraine. While NATO has refused Russia’s demand to stop expansion into Eastern countries, it is important to remember that it is not yet a certainty that there will be conflict. 

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including Industrial Components, Machinery & Equipment, Automotive & Transport, and Construction & Building Products. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

Automation & the Changing Workforce: Robots as Employees?

Automation efforts have long targeted simple repetitive tasks in a manufacturing process. Now, more sophisticated sensors and software, including artificial intelligence and analytics, are allowing automation to cover even more tasks, and capital-rich larger manufacturers are benefitting.

But what about smaller firms, many have been producing their components or products in much the same way for decades? Many smaller operators do not have the capital or cash on hand to pay for robotic equipment up front.

Solution: robots as a service.

Many other high tech products – most notably in the security area – have already made significant moves away from buying to leasing, renting, or otherwise paying for technology (equipment and software) on an ongoing rather than up-front basis. This business model allows the customer to leave programming, maintenance, and upgrades to the specialists. It will allow faster diffusion of automation into more businesses that either couldn’t afford to buy it outright or saw the technology as too intimidating or outside their own experience to handle themselves.

Formic is one company offering robots in this way. Customers “pay” the robot an hourly rate in exchange for having these robots in operation.

With the ongoing need to better deploy our resources and our workers for optimal efficiency, along with challenges from a pandemic to  that stress our workforce, the need for automation isn’t going away. The outstanding question is more about how best to do it and where to employ it…and how best to use the workers who shift out of those tasks.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly titles such as Global Off-Road Equipment Technology and Global Material Handling Equipment. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

Missing Something From Your List For This Holiday This Season?

If you’re having a hard time finding a traditional item or that perfect gift for your holiday celebrations, there are a lot of potential reasons behind that.

We’re all familiar with supply chain challenges, whether it’s misplaced shipping containers, high-priced air freight, or not enough truckers to get the products to retail shelves or your door. By now, this isn’t news. In fact, many shopped early to be sure they could get orders in time. Still, mail has been slow (personally, I saw a delivery take 2 weeks to go from Philadelphia to Cleveland), but last mile delivery drivers can still be seen out making deliveries after 10 PM and even in the overnight hours.

High demand…that’s also not new, although the products involved have continued to shift. Many of us have had the same ideas for how to spend our pandemic period, from home baking to gardens and home pools to camping and hiking to outdoor socializing in backyards and event spaces, or buying chicken (alive for eggs or prepared for eating). So a lot of things are in short supply mainly because so many of us want them. We have to be flexible and willing to wait – and possibly pay high prices – for these in-demand items.

But what about hackers? Yes, cyberattacks have been disruptive this year. Well-known production disruptions due to hackers included

Freedonia analysts continue to track changes in supply chains and other challenges to production that create both roadblocks and opportunities for market participants and potential entrants.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly our series of studies in the Consumer Goods and Packaging industry catalogs. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Food & Beverage      Industrial Components    

Is This the End for Lean Inventories & Just-in-Time Deliveries? Producers & Distributors Avoided Inventory Buildups During COVID-19 Shut Downs but Many Still Struggle to Catch Up

The just-in-time, or lean inventory, method that spread throughout the world over the past few decades met its match with the COVID-19 crisis. While lean inventory methods help factories, distributors, and retailers minimize costs, they place potential strain on the factories and logistics companies that must make and distribute the goods just-in-time. Avoiding excess inventory and/or carrying costs is one the main principles of JIT systems.

Producers, distributors, and retailers canceled orders amid production shut-downs and sharp shifts in consumer behavior with an uncertain outlook around March 2020. Then consumer shifts to cooking and working from home led to high demand for a wide variety of goods (e.g., items such as toilet paper and flour packaged for retail rather than foodservice, as well as electronics, lawn and garden products, and home improvement materials).

However, the modern global production and distribution system relies on predictability and isn’t built for surprise surges in orders or rapid shifts in demand – it’s more streamlined to deliver a steady level of orders via the “just-in-time” methods.

The fact that the JIT system can’t handle a huge crisis is one of the known drawbacks, but no one expected a large hit to multiple supply chains at once, and any system would face strains in such circumstances. Typical challenges for the JIT system usually involve natural disasters such as hurricanes that results in closed roads and factories for a few days.

However, this era has put unprecedented pressure on the system, after a global pandemic -- and the widespread understanding that this won’t be the last one – and the extended supply disruptions (e.g., hurricanes, polar vortex, floods, factory closures, and a container ship blocking the Suez Canal) and the downstream effects of port backups and trucking delays.

Is this the end of lean inventories? More companies – especially those burned by high profile issues such as computer chip shortages and volatile lumber pricing – are rethinking the process and reconsidering how their supply chains might look going forward. Maintaining larger stocks of inventories might cushion against supply shocks and pricing volatility, but requires investment in warehouse space and related operations and more focus on potential challenges (or a greater tolerance for risk of overbuying or waste).

If JIT required data to get the right supplies to arrive at the right time, so does maintaining enough stocks to hedge challenges without overshooting.

This shift is something that will play out throughout the economy. Freedonia analysts will continue monitoring the effects of adjustments made to supply chains and will continue to consider how future adaptations to logistical processes could work in various industries.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

Logistics: Logjams at Ports Continue & Supply Chain Challenges Persist

The global economy has been experiencing supply chain challenges since the start of the coronavirus pandemic. Troubles have cascaded from factory shutdowns to shifts in unexpected shifts in demand levels for products and materials to port shutdowns, which result backups and container ships stuck in the “wrong” places as well as challenges in staffing port workers, truck drivers, warehouse personnel, and others. All the way, things were complicated by hoarding, stockpiling, pricing volatility, and severe storms that closed ports or processors of plastic materials or various types of fuel. Whew.

Now, even previously unheard of measures – such as the Port of Long Beach going to 24/7 operations in September and companies (such as Home Depot and Walmart) hiring out their own container ships – are not making for sufficient solutions.

The functional implementation of 24/7 port operations has made the move at the Port of Long Beach not as quick a fix as some hoped. It will be tested further in the coming weeks and months as the Port of Los Angeles also begins 24/7 operations.

Prices to ship a container from Asia to the US remain at historically high levels – reportedly rising from a few thousand dollars per container in mid-2020 to the $20,000-$30,000 range. These costs pose a challenge for large shippers and are effectively impossible for smaller importers, and many guess that these challenges and high prices will extend well beyond the 2021 holiday season and through 2022.

So what’s to be done?

Some companies are rearranging their supply chains, if they can, by shifting needed production to areas that run through less crowded ports or to countries closer to their destination. Those that can do so more easily already have production facilities or relationships with suppliers in these places.

Some companies are ordering earlier and stocking up. Is this the end of just-in-time supply? At least for now, it is. Of course, this requires having the warehouse space available and the data needed to plan further in advance for stocks, parts, and material inputs.

Some are pivoting their business. Those that can backward integrate into parts production or materials supply are looking at ways to do that. Those that can operate in a related field or shift production to something that is needed locally and right away (e.g., personal protective equipment) are doing so.

Some companies are waiting it out. This requires longer waits for needed parts, materials, packaging, or products and often higher prices to customers. The kinks in the supply chain will eventually work themselves out… just not as quickly as many would prefer.

Freedonia analysts will continue monitoring the effects of the supply chain challenges and the pivots businesses are making to keep operations moving as smoothly as possible.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research. Freedonia Custom Research is also available for questions requiring tailored market intelligence.