Brexit the economy and house prices part 6

Rinoa

Arklight wrote: »

Yes and many of them go into distribution centres or factories in the EU before being sent to the UK because the EU is a massively bigger market.

But that’s fine. Nissan and every other manufacturer are going to duplicate their supply chains in a Little England microscom because that’s what Rinoa and the Wednesday UKIP meeting wants.

There's no logic to that. First of all you argue the supply chains will collapse because car manufactures require parts delivered 'just in time'.

You then claim parts come in to the EU from all over the world for the EU car market.

How do they get them to the EU car factories 'just in time' if exporting to the EU is so difficult?

buglawton

Correct, JIT (along with a number of othe excellent industrial practices) was invented by the Japanese and has been adopted by most industrialised countries, most of which strangely enough are thriving outside of the EU.

Zero_Gravitas

buglawton wrote: »

Correct, JIT (along with a number of othe excellent industrial practices) was invented by the Japanese and has been adopted by most industrialised countries, most of which strangely enough are thriving outside of the EU.

However, if you’re going to implement JIT the one thing you really, really need is a stable and very predictable supply chain - which means that you cannot risk customs delays at borders.

An example from the ft:

https://www.ft.com/content/b56d0936-6ae0-11e7-bfeb-33fe0c5b7eaa

Interesting that the components they identify all come from within the Eu and consequently have that necessary reliability of supply.

If you don’t have that then you need to increase your stockholding at the factory to eliminate the risk of parts not being available at the right time - which increases costs.

Again from the ft:

https://www.ft.com/content/8f46b0d4-77b6-11e8-8e67-1e1a0846c475

“A warehouse capable of holding nine days’ worth of Honda stock would need to be roughly 300,000 sq m — one of the largest buildings on earth”... and Honda were only the 5th largest carmaker by number of vehicles in 2016 (https://www.motoringresearch.com/car-news/britains-biggest-car-makers-2016-ranked/), with about 134,000 vehicles...

buglawton

All the more amazing then that Japan, South Korea, USA et al all happily cooperate with JIT supply chains.

Zero_Gravitas

buglawton wrote: »

All the more amazing then that Japan, South Korea, USA et al all happily cooperate with JIT supply chains.

Please can you provide some actual, real examples of JIT supply chains operating across continents in the way that you describe, and how these examples have mitigated the risks involved?

Herzlos

You can't do JIT unless you have a very high confidence in delivery time. Less confidence means ordering earlier and storing stuff. Unpredictable customs is a nightmare.

That said; once our customs stabilize and stuff gets through consistently then all will be ok as costs will only go up a bit.

vivatifosi

Interesting day today as we are due to find out more about contingency planning for no deal. Still sounds a terrible idea to me, let's see if I can get through today and have my fears assuaged.

buglawton

Zero_Gravitas wrote: »

Please can you provide some actual, real examples of JIT supply chains operating across continents in the way that you describe, and how these examples have mitigated the risks involved?

I've yet to see any evidence of these mysterious 'risks' that are being mentioned yet.

gfplux

We have a lot of experts on JIT many who have never been involved in a supply chain except when they ordered something from Amazon.

Herzlos

buglawton wrote: »

I've yet to see any evidence of these mysterious 'risks' that are being mentioned yet.

The point of JIT is that you don't get delivery of the item you need until you need it (it arrives just in time). This saves you a fortune in warehousing costs because you don't need to warehouse it.


Slick operations for some parts at Nissan arrive 45 minutes before it's due to go on the car (giving time to book it in and get it to the correct part of the assembly line, with a bit of wiggle room).



If the part isn't there, you either have to stop the entire assembly line until it turns up (£100,000's an hour) or you need to have some way to reject that unit to complete it when the part does turn up, which involves a lot of logistics involving all of the downstream.


If you don't have a customs union/FTA, then you risk stuff being stuck at customs for anything up to about 6 weeks. If it's always a 6 week delay, you can order the stuff 6 weeks in advance and have it turn up on time, but if it's a random delay you then risk the stuff turning up early or late.

To avoid that, you can go back to the old approach of warehousing; store a buffer of 6 weeks worth of parts so that it's always available. Nissan imports 2 million items a day, so that 6 week buffer contains 84 million parts. Each of which needs to be booked in, stored safely and fetched when required. As the article points out, that would result in a warehouse 4 times bigger than Amazons current biggest. It'd also cost so much to build and run that Nissan would be better off just moving the factory back inside the customs union.


I'm sure that doesn't count as evidence, but you can understand the concern, sure?


Do you have any ideas how we avoid problems without CU/FTA access? Who's going to pay for manufacturers to build new warehouses? What happens if they aren't built on time?