Keeping Supply Chains Open

As thousands of exhibitors and buyers converged in Hong Kong for the HKTDC Spring Electronics Fair earlier this month, the impact of last month’s devastating earthquake in Japan continued to reverberate within the industry. Japan is a major supplier of electronics parts and components, accounting for about 20 per cent of the global supply semiconductors. 

"We are not affected at the moment, but there will be some indirect impact from the earthquake,” said Eddie Ng, President of Speed Digital Ltd. The Hong Kong-based multimedia, audio-visual manufacturer sources some material in Japan for their products. 

"For example, we've seen prices surge for some internal memory storage camera components in the first week after the earthquake. But since then, prices have been declining because everybody knows there are other places to go," Mr Ng said, noting that his company has identified places such as Taiwan and South Korea as places to source for material.    

Korean electronics giant Samsung, likewise, believes there will be no adverse impact on its business. “We have very strong supplementary management and all key division and core technology are located in our headquarters in South Korea,” said Alex Chung, Chief Operating Officer of Samsung Electronics Hong Kong. “A lot of our manufacturing is dispersed in the United States, Europe, China and Southeast Asia, so I believe the impact for us is limited.” 

Global Supply Chain


For Japan, though, economists expect the country’s economic growth could fall between two to three per cent, with the full effects of the disaster to be felt in the second quarter. The impact of rolling power shortages and damaged factories, as well as crippled domestic supply chains, are forecast to cut Japan’s industrial production for March by at least 10 per cent. 

In its initial assessment of the impact of Japan’s earthquake to the global supply chain, a Hong Kong Trade Development Council study forecasts that a protracted economic disruption would overshadow global economic growth and international trade, especially in light of Japan’s significant role in the global supply chain. 

A major supplier of electronics parts and components, Japan produces about 20 per cent of the global supply of semiconductors, more than 40 per cent of the worldwide NAND flash memory used in many laptops, smartphones and iPad. NAND supplier Toshiba alone produces about one-third of the global supply. While production has been affected by power shortages and other factors, many of the production facilities are not located in the most severely damaged areas. The overall supply, therefore, is expected to be affected only modestly once the situation returns to normal.


Hong Kong companies, as well as manufacturers in neighboring economies including South Korea, Taiwan and the Chinese mainland, depend on Japanese supplies such as LCD glass, chip equipment, silicon wafers and other items, which are used to produce semiconductors and panel displays. The impact on those companies will become acute once their inventories run out. Other affected items include optical films, laser diodes, and lithium-ion rechargeable batteries. The watch and clock industry stands to be affected as well as Japan is a key supplier of watch movements.


Based on feedback from Hong Kong companies in various industries, parts and components supply for high-end electronics, as well as toys and watches requiring electronic input, will be affected in varying degrees. Although it may not be easy to find identical supplies from other sources, some commonly used parts and components alternatives may be found, but will require more time and money.

Shift from Consumer to Capital Goods

Business as usual: Christopher Fellner, Filter Products Group, Mitsubishi Paper Mills Ltd, which was among several Japanese companies that  exhibited at the HKTDC Hong Kong Electronics Fair earlier this month

With reconstruction estimated by the Japanese government to cost no less than US$300 billion over the next few years, Japan’s demand composition will likely shift in favour of capital goods, which will come at the expense of consumer goods.


Hong Kong companies expect Japanese importers to slash the size of buying orders and to delay procurement as they assess the quake’s effect on domestic demand. Demand for imported capital goods and raw materials may also be cut due to disruptions on business and manufacturing activities, but will increase once massive reconstruction gets underway.

Production disruptions in Japan will negatively affect Hong Kong’s re-export business over the next few months, given the uncertainty over electricity supply and interruptions to the supply chain, in particular parts and components. This means that many factories may not be able to quickly resume production to their normal capacity. Hong Kong's exports of consumer goods to the market would be most affected, followed by imports of electronic parts and components from Japan for re-exports.  

Still, Japanese suppliers are intent on keeping the supply chains open. At least half a dozen Japanese exhibitors participated in this month’s Electronics Fair, including Mitsubishi Paper Mills Ltd. The paper manufacturer sustained minor damage in three of its factories in Japan. The worst hit, in Aomori Prefecture, is expected to be back in operation as early as the end of this month. 

“We’re going back to full production step by step,” said Christopher Fellner, who’s with Mitsubishi’s paper filter products division. “It’s pretty much business as usual. Our filter papers are manufactured in our factory in Shenzhen. For other paper products, Mr Fellner said there’s still plenty of stock, “so we don’t expect any shortage.” 

Mr Fellner pointed out that despite the tragedy, it was important to carry on with operations. “We’re not that hard affected by the earthquake, so we need to assure our stakeholders, our customers that everything is business as usual and we’re happy to be in Hong Kong.” 

For more details on the impact of Japan’s earthquake on Hong Kong industry, please see the HKTDC research report “Assessment of Japan’s Earthquake on Hong Kong’s External Trade.”

Financial Pros Cautiously Optimistic About the Economy!

A new survey of 841 financial professionals by SmartBrief and the international polling and market research firm Ipsos has found that most (67%) think that stock prices will rise in the next 12 months and the country’s economic output will increase (65%), and 59% said they expect unemployment to decrease slightly in the next 12 months.

The new SmartBrief/Ipsos Leadership Index found, however, that even such modest optimism among financial professionals is tempered by expectations of rising health care costs (88%); higher fuel prices (85%); rising prices for durable goods such as appliances, automobiles and consumer electronics (72%); and slightly higher interest rates (59%).

Overall, 44% of the respondents said they “think that things in this country heading in the right direction,” compared to 31% of Americans at large, and 56% said they are “going in the wrong direction.”

“Financial professionals are cautiously optimistic about economic prospects in the near term; indeed, they think that the overall scenario will improve, and they’re making business decisions on that basis, such as increased investment and hiring,” said Ipsos Managing Director Cliff Young. “That being said, there are still concerns in the short to medium term about the increased costs of inputs such as fuel and durable goods.”

In addition, 43% of the 841 respondents said they expect home prices to continue declining, while only 21% said they expect them to rebound, and 34% said they expect no change. By a margin of 70%-30%, they were opposed to allowing states to declare bankruptcy, and while 77% said they expect the nuclear disaster in Japan to drive greater investment and funding into renewable energy, they were evenly divided on whether it will funnel more money into development of fossil fuels.

New App Solves Payment Issues!

Businesses that accept plastic have an easier time getting customers to pay up -- and pay on time. But many small businesses don't have the infrastructure to take credit cards, which usually require signing up for a merchant account and paying monthly minimums.

 

Square, from entrepreneur Jack Dorsey, better known as the inventor of Twitter, allows anyone with an iPhone, iPad, or Android smartphone to accept credit card payments on the spot.

Users sign up and Square mails out a free dongle -- that's simply a small device -- which plugs into your iPhone's headphone jack.
 
Then customers can swipe their cards, sign the phone's touchscreen, and head out. Square charges 2.75% per transaction, lower than most merchant accounts.  Dorsey designed the product after his friend, a glass artist, lost out on a $2,000 sale, because the buyer didn't have enough cash on hand.
 
But Square's simplicity means it can be used by anyone from the babysitter to the family having a yard sale to Girl Scouts hawking cookies. Now that's easy! 

The TSA has changed the rules for air cargo shipping beginning early next week in light of the discovery of two packages containing explosives shipped from Yemen to the United States.

These changes will impose additional requirements on carriers and forwarders who handle cargo coming into the USA by both passenger and all cargo carriers. The changes have the potential to delay cargo in transit or prohibit the cargo from moving altogether.

Intelligence is still being developed on these two bombs. The latest news is that the package found in the UK was allegedly timed to explode over the eastern United States. Importers who are moving cargo by air should anticipate potential delays and check with their forwarders on the impacts to their specific supply chains.

Nurtured Employees Lead to Better Bottom Line!

For a lot of small business CEOs, the top goal over the last couple of years was survival. But not for Christine Barney. Over the last six months, Barney picked up strength in the public relations field by gobbling up competitors Pac Man style, this week adding the 21-year old Coral Gables firm, Thorp & Company.

The acquisition adds expertise in new areas and puts Barney's Miami firm, rbb Public Relations, in position to emerge stronger than before the economy soured. But ask Barney about the single most important factor in her firm's success and her answer isn't the ability to land big accounts; it is nurturing her employees.

As an employee, it's easy to see how creating a great place to work would make a huge difference in the success of a business. Make me feel valued, so the thinking goes, and I will work hard for you -- make sure your customers are happy. But for some reason, I see too many business owners who don't acknowledge the correlation. Instead, their employees feel used and trapped in their jobs. And, as a result, they're reluctant to help the organization succeed.

In fact, a recent study by Hewitt Associates, conducted in late June, saw employee engagement drop to the lowest levels Hewitt has seen in 15 years. Further, the Hewitt study found organizations with high levels of engagement (65 percent or greater) outperformed the total stock market index and posted total shareholder returns 19 percent higher than the average in 2009. On the other hand, companies with low engagement (40 percent or less) had a total shareholder return that was 44 percent lower than the average.

The study underscored what may be the big lesson of the recession: high employee engagement, customer satisfaction and financial performance are closely linked. The companies expanding, taking over competitors, and shaping their industries are those with happy workers, smart CEOs and good fiscal management.

Those companies who have had massive layoffs or haven't really invested in their employees are not really poised for a rebound when things get better,'' Florida State University mangement professor Bill Anthony. But Barney figured that out years ago.

Public relations is a 24/7 business, and rbb's employees must respond to client needs at all hours. That's not exactly the best recipe for work life balance. But even while the firm has high expectations of its staff, it has spent the last few years creating an employee-driven workplace. Elements include an open, cheery workspace to promote creativity and teamwork, and flexible work schedules and the tools -- including laptops and cellphones -- that allow employees to work from anywhere.

The strategy works, says Susan Gilden, a seven-year employee at rbb. ``We work hard, not because we're in fear for our jobs but because we feel as if we have ownership. Clients sense that and that's what got the firm through in a difficult economy.'' It also has helped rbb become recognized by several publications as one of the Best Companies to Work For.

Barney says her employee culture also has attracted one-time competitors eager to join forces. The acquisition of Thorp & Company is rbb's second this year; last spring, rbb integrated its operations with that of Haber & Quinn of Fort Lauderdale. The combined operations brings rbb to a total 36 employees, adds expertise in financial services and issues management -- and positions it as a strong regional player poised for growth.

Folding in new staff has gone smoothly. ``Our culture is well defined. It's not squishy. People understand what's expected, and how to treat each other.''
Career Xchange, a survivor in the hard hit staffing industry, also has pressed its advantages during the recession. The South Florida firm had acquired three smaller companies before the economy soured. This year, it aligned itself with a West Palm Beach staffing company, and it currently has another acquisition in the works.

Meanwhile, it decided not to purchase of a medical staffing company, turned off after discovering that firms employees were working 13-hour days.
Sue Romanos, CareerXchange president and CEO, says her company, while financially conservative, views employees as partners that are key to survival. ``We're close to our employees,'' she says. ``It is what has pulled us through hard times.''

Romanos says business owners typically spend time focusing on finances when things get tough. ``It's just as important to keep in mind you have employees and they are your business,'' she says. ``The most important asset is human capital. Financially strong companies know that.''
Indeed, they do, says Trudy Evans, a strategic business consultant and president of The Raven Group in Fort Lauderdale. Evans says successful companies, both during the recession and in healthier economic times, are run by CEOs who acknowledge the contributions of rivals and inspire their workers to outperform competition.

Look for a place that has happy employees and it will be a challenge to find poor results,'' she says.

By: Cindy Krischer Goodman, Miami Herald

New Dynamics Reshaping Freight Industry

According to Fleet owner magazine, increasing freight volumes have exceeded existing capacity in many cases, which in turn is convincing many transportation companies that better days lie ahead.

FedEx Corp., for one, expects earnings for its fiscal first quarter (which ends August 31 this year) to be in the range of $1.05 to $1.25 per diluted, up 81% to 116% from the 58 cents per diluted share it earned during the same period in its previous fiscal year and up from 85 cents to $1.05 per diluted share predicted during the company’s further fiscal quarter, which ended June 16.

“Our revenue and earnings growth are exceeding original expectations, primarily due to better-than-expected growth in FedEx Express and FedEx Ground volumes,” said Alan Graf Jr., FedEx executive vp & CFO.

“Our package volume growth rates in our first quarter are continuing at a pace similar to our fourth [fiscal] quarter,” he added. “Resumed growth in industrial production and global trade is increasing demand for our transportation services.”

For the full year, FedEx expects earnings per diluted share to range between $4.60 and $5.20, up from $4.40 to $5.00, which reflects the current market outlook for fuel prices and a continued moderate recovery in the global economy.

Others, however, are more cautious. “We’re at another interesting inflection point in our outlook. While we don’t think we’ll see a double-dip recession, we do project the overall economy growing slower than we previously forecast. That means the downside risks are increasing,” said Eric Starks, president & senior consultant with FTR Associates, during the firm’s “The State of Freight” webinar last week.

On the plus side, Noel Perry, principal of research firm Transport Fundamentals as well as managing director & senior consultant with FTR Associates, said freight volumes are definitely on the upswing, with a growing capacity crunch helping truckers boost rates and margins.
After watching truck freight pricing plummet by 11% last year, excluding fuel surcharges, Perry said prices should recover roughly 10% this year and next because freight demand is exceeding current capacity so strongly.

However, the overall economic picture that is causing some concern. Based on its analysis, FTR is scaling back its U.S. gross domestic product (GDP) forecast to the 3%-3.5% range – a full percentage point lower than its previous estimate. The firm also thinks growth will remain “choppy” and not just in the near-term; this will become the nominal state of economic behavior.

“We’re entering an era of ‘slow’ economic recovery, one characterized by several quarters of slow uneven growth,” Perry said. “Economies just don’t recover in consistent ways – they jump around a lot more and while this is painful, it will be normal.”

He thinks that will also be strongly reflected in trucking industry financials from here on out. “The long term volatility of the economy is going to be six times that of the 1980s and 1990s,” Perry said. “And transportation demand is going to be five times more volatile, with extremes in capacity doubling.”

As a result, trucking earnings will be far more volatile as well -- and not necessarily match the economic picture. “Carriers have tried to maintain steady earnings and just can’t. That’s going to be the challenge in the future here,” Perry said.

Truckload carrier Werner Enterprises also sees similar dynamic forces at work in the freight market. “We continue to believe that more of the improvement in the freight market over the last six months can be attributed to a decreasing supply of truck capacity rather than rising demand, however both factors are helping the freight market improve,” the company noted in its second-quarter earnings report.

Werner benefited handsomely from those factors in the second quarter, as its operating revenues increased 15% to $463.5 million compared the same period in 2009. And its pure trucking revenues, net of fuel surcharges, jumped 5% to $326.5 million compared to the second quarter last year. Finally, Werner’s earnings also went up a healthy 63% to 29 cents per diluted share compared to 18 cents per diluted share in second quarter of 2009.

“Inventory restocking also appeared to improve demand in recent months, particularly with many of our large retail customers,” the carrier added. “Our brokerage data suggests that carrier failures have begun to slow in recent weeks due to an improving freight market. However, we believe that many carriers are aging their fleets due to the rising cost of new trucks and inadequate rates. In addition, we believe the challenges of complying with increased government regulations and a lack of available equipment financing are proving difficult for smaller, private carriers.”

How to be Accountable and Hold Others Accountable

This is a story of four people named Everybody, Somebody, Anybody, and Nobody. There was an important job to be done and Everybody was asked to do it. Everybody was sure Somebody would do it.

Anybody could have done it, but Nobody did it. Somebody got angry about that because it was Everybodyʹs job. Everybody thought Anybody could do it, but Nobody realized that Everybody wouldnʹt do it. It ended that Everybody blamed Somebody when Nobody did what Anybody could have done. - Unknown

Does this sound familiar? What kind of workplace situations does this remind you of? The topic of accountability has been such a hot topic for the last decade, it’s almost turned into just another corporate buzzword. However, for some reason, the word still seems to be a lightning rod when it comes to leadership development.

It’s a word with a lot of arms and legs. It’s often used to describe:- a personal value (someone who is accountable)- something you do to others (hold them accountable)- and something that an organizational entity should be or isn’t (e.g., there’s no accountability in government).For leaders, accountability starts with looking in the mirror.

Being accountable is our ticket to earning the right to hold others accountable.When someone else screws up, we tend to blame it on their personal characteristics. However, when we screw up, we tend to blame it on external circumstances. It’s a cognitive bias social psychologists call “fundamental attribution”.

Neither serve us or others well as leaders.What does it mean to be accountable as a leader? Let’s just say I know it when I hear it. It sounds something like this:- “I made a mistake”- “I screwed up”- “That’s on me, and no one else”- “No excuses” - “I’ll do it – it’s mine”- “I got it”- “I’m already on it, it’ll get taken care of”- “I’ll make sure everyone gets regular status reports”I also know what it doesn’t sound like… it doesn’t sound like:- Whining- Finger pointing- Blaming- “I’ll try”, “maybe”, “I’ll do my best”- Excuses, excuses, and more excuses- A victim-

Insincere, rehearsed, b.s. apologies Leaders can start creating a culture of accountability by being accountable. However, being a role model isn’t always enough to help someone else be accountable. As leaders, we often need to hold others accountable. In order to do this, we need to:1. Establish expectationsWithout expectations, managers and employees both end up frustrated and disappointed.

It’s important to clearly describe what “good” performance looks like, and what it does not look like. Gain Commitment...Without commitment, we get compliance – or even resistance. Don’t assume you have someone’s commitment just because you’ve discussed it with them. Watch out for those phases like “I’ll try”, or “I’ll do my best”.

Ask for and listen to people’s concerns. Help them overcome their obstacles, explain the benefits, and help them figure out what they need to achieve the goal. Ask: “Do I have your commitment?”, and “What needs to happen in order for you to commit to this?” Inspect what you expect“Inspection” sounds like a dirty word, indicating a lack of trust or micromanaging. It’s really not – following up shows that it’s important, you care, and you’re there to help remove obstacles.

Inspecting also provides an opportunity to give praise for progress towards a goal. In time, hopefully, your employees will learn how to proactively provide progress reports. Let’s face it, these days, we all have all kinds of competing priorities. Even with good intentions, it’s easy for things to slip. Inspection and follow-up make sure the really important things don’t fall through the cracks.

Provide feedback and consequences.Feedback lets someone know how they’re doing. If expectations are not being met, then they need to know about it, as well as how to get back on track.If expectations are being met or exceeded, then they need to hear about that as well. If performance consistently is below expectations, then there needs to be consequences. Without consequences, there is no accountability.

If you follow this process consistently as a leader, and role model accountable behavior yourself, you’ll create a culture of accountability and “no excuses” within your team or organization. From Dan McCarthy at Great Leadership.