about 11 billion tons of screws, paints and plastic pipes sail the world’s seas every year. For example, they are made into toothbrushes, table boxes – or even a lot.
Earlier Ilkka Haapaniemen hadn’t just had to think about the whole thing, but a year ago, production chains suddenly collapsed into the consciousness of the CEO of Drop, which sells outdoor hot tubs.
They were broken.
Finns had retreated to their homes and ordered more outdoor hot tubs than ever before, but the company could not supply them because parts were not available.
“Earlier we had placed an order in Excel, and then the components mysteriously popped up at the Salo factory, from where the pools are transferred to the customer. All components had always been available, and there was no need to think about it, ”says Haapaniemi.
Consumer products is usually designed without unnecessary parts, which means that the absence of any component makes the product almost unusable. For example, outdoor hot tubs will be mere water baths without a control center or heating equipment, parts of which Haapaniemi especially missed last spring.
The components of the outdoor hot tub are brought to Salo, where the contract manufacturer Nordic Spa assembles the basin and performs surface treatments.
andemia made two things stand out in particular: how dependent the rest of the world is on China and how fragile production chains were designed in many companies.
China closed its plant as early as 2020, which was immediately reflected in the global component market and production chains.
One difficulties in obtaining the component hampered the production of the second plant, which in turn affected the production of the third plant. Eventually, for example, gray plastic sheets ran out of the world.
“We were waiting them probably a month. People often want their pool in a certain color that is suitable for their own yard, ”says Haapaniemi.
And not the situation is still not normalized, even though factories in China are already running. Sea containers, for example, remained unused last spring, and as demand recovered, competition for containers began.
Financial According to the Times, the price of one sea container shipped from China to Northern Europe was 1,600 euros in November, up from 7,500 euros in January.
Transportation the quadrupling of costs is reflected directly in companies and ultimately in customers ’wallets.
The Year of the Oron also revealed how dependent Finland is on world events, says Etla’s research director Jyrki Ali-Yrkkö.
Economics the doctor has been researching production chains for twenty years. There have been signs of a slowdown in globalization for five years now, but last spring came to a sudden halt.
Ali-Yrkkö jointly published the Doctor of Philosophy Tero Kuusen with Korona shock to the economy – To what extent is Finland dependent on foreign value chains? memorandum, in which they reminded that Finland is, above all, an importing country.
For example As much as 70–80 per cent of electronic components, motor vehicles, pharmaceuticals, textiles, chemicals and machinery and equipment are imported to Finland from abroad, when looking at each intermediate stage in the production chain.
Multi A Finnish entrepreneur can imagine that he or she manufactures or sells a 100% domestic product, but the truth is often different, Ali-Yrkkö says.
“Here they talk about the first layer, but they don’t have visibility at all stages of the production chains. In the spring, it came as a complete surprise to many how dependent they are on imports. ”
“It came as a complete surprise to many companies in the spring how dependent they are on imports.”
“On the SME side, for example, companies rely entirely on imports without engaging in import activities themselves. We buy goods from wholesalers and there is no transparency as to where the parts and raw materials come from. ”
S Vision asked Drop’s Ilkka Haapaniemi for a list of countries from which the various components of the outdoor hot tub come. It is difficult to make a complete list, but Haapaniemi can name the country of origin of the most important parts.
Result causes an “ohhoh” exclamation to himself as well. One tub has parts made in at least more than ten different countries.
“I knew the countries of origin of the individual components, but when they put it on the list, it makes us think about what might happen to us in a particular country. ”
Many experts who have studied the sudden collapse of production chains have encouraged companies to get to know their own products thoroughly. In the future, the company needs to know the country of origin of each screw, paint droplet and plastic part so that they can prepare for rapid changes.
In the future, the company needs to know the country of origin of each part of its product so that they can prepare for rapid change.
For example, a professor at Harvard Willy Shih wrote in the fall Harvard Business Review that the challenge for companies is to remain competitive and secure now that the vulnerabilities in global production chains have been revealed.
Finnish politicians have often hoped that production would be brought closer to companies – for example, to Finland.
Ali-Yrkön it is unrealistic in a market of 5.5 million people. He uses fighter procurement as an exemplary example.
“I trust Finnish engineers who would surely make a good fighter. However, it would not make sense for us to make fighters from the start, when the first EUR 100 billion would go to development costs. ”
Neither Haapaniemi does not believe that the production of components needed by Drop, for example, would move to Finland. There is no market to make them profitable.
According to Ilkka Haapaniemi, CEO of Drop, the company may start to raise capital for storage. In the picture below, Riku Paju gathers from the Vuolle outdoor hot tub. There is water in the pool already during installation.
In the world there are already well-established suppliers who can offer more than just a lower price: development and security.
“It would be it’s hard to explain the quality problems to the end customer, that yeah, we wanted to bring production closer, and now we’re practicing making components. ”
Haapaniemi sees that the interest rate crisis may force a company to raise more capital for storage. This would be a significant change in the lean strategy used by companies in recent years to keep inventory as empty as possible.
“The ordering process it can no longer be such that we are just waiting for the customer’s order, which we forward to the factory. ”
The interest rate crisis may force a company to tie up more capital for storage.
people should be prepared for in the future? And why?
Answers and the reasons are numerous.
Climate change little has yet been seen of the impact on the world economy. There is a rise in protectionism in the great powers Donald Trumpin even after that, a relevant threat to a small exporting country such as Finland, which could easily become a bystander of customs clearance.
The United States the current president Joe Biden will hardly change China policy enormously, even though the style has already changed. China will continue to be the enemy of the United States, which could hit waves all the way to Finland.
Ali-Yrkkö wonders that some companies may have to choose their side in U.S. and Chinese furnishing.
“For example The case of Huawei has already been seen when the United States has stated that it is not worth cooperating with the Chinese. “
Nordean chief economist Wind Birch considers that the slowdown in globalization due to protectionism has also been a policy. The number of jobs created by one factory is easy to calculate, but estimates of customs policy are more abstract.
A politician according to Koivu, it is “easier to smile” in different keepers that the factory investment was thanks to him, even though customs policy can achieve better results.
“In customs however, the number of jobs remaining in the home is difficult to calculate. “
Birch does not believe that smaller companies competing with narrow margins can influence their production chains.
“I am talked to companies since the beginning of the year. It has often been a question of who pays for it to make the supply chain more secure. ”
Dropin at the office, Haapaniemi nowadays looks much more closely at U.S. news, even if the SME had not previously believed that distant headlines touched his or her own business.
“Eyes have opened. We don’t even live in a birdhouse. I watched, for example, the United States, which has been thought of as a stable democracy, and all of a sudden there will be a congress house. “
“The eyes are open. We don’t even live in a birdhouse. ”
irus broke production chains, so states will retreat into their shells in the future, and goods will no longer move as smoothly as before. Is that what happens here?
Globalization this pandemic is unlikely to end, but the interest rate crisis has changed the world economy. Now, at least, it is clear to companies what the world of domino game production chains is like.
Ali-Yrkkö has spent much of his career on the subject and recalls that the current network of global production chains is still a fairly recent phenomenon.
“Yet twenty years ago the chains were quite regional. Maybe we’ll go back to that world. It could be a geographical or even a production chain based on an economic alliance with the European Union. “
Wind Birch, on the other hand, paints the future to be a struggle between China and the United States in which others must adapt to the situation.
“Still a more real threat is the possibility of a dichotomy in which China and the United States gather their allies around them and build technical solutions around different standards. ”
“This confrontation has forced a big change. For example, the United States has outright banned the construction of some products in China. ”
Wind Birch, on the other hand, painted already in the autumn that the future is a struggle between China and the United States, where others must mainly adapt to the situation.
“Still a more real threat is the possibility of a dichotomy in which China and the United States gather their allies around them and build technical solutions around different standards, possibly even in partially separate financial systems, ”Koivu wrote in his blog.
Eventually everything crystallizes in an outdoor hot tub where water circulates. Without the circulation system, the water stops and the pool becomes just a barrel.
It is born pollutants, the removal of which incurs new costs.
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