Silicon Valley Bank collapsed: what does this mean for your supply chain tech start-up?
Good morning! Happy National Potato Chip Day! Today, we celebrate one of the most beloved snacks in the supply chain industry, but have you ever stopped to think about the intricate supply chain that brings this crispy goodness to your fingertips? It is quite a journey of the humble potato to make it into your favorite bag of chips.
Sit back and relax - let’s get into the latest! ☕️
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On March 10th, bank regulators shut Silicon Valley Bank (SVB) down, marking the second-largest bank failure in US history. Rivaled only by the 2008 banking crisis that spun the US into a recession shortly thereafter, SVB had a swift and very sudden collapse after announcing it was facing a “cash crunch” on Wednesday. With nearly half of US venture-backed tech banking at SVB, investors were spooked and began pulling their money from the bank… spinning the bank into collapse within hours.
While the federal government has said bank depositors would have access to their funds, some are wondering, "what could this mean for the tech sector?" The supply chain has been charging head-first into tech, forging new systems and technologies to improve the strained industry. Will this shockwave reach past the banking world and into transportation and logistics?
Check out today’s featured article from VOX to read about the worrying collapse of Silicon Valley Bank and what it could mean for many start-ups. Is this the first of a concerning domino effect?
Featured Article:
9 questions about Silicon Valley Bank’s collapse, answered | Vox
“Tech’s favorite bank just failed. What does that mean for you?”
Supply Chain & Retail 🛍️
Nordstrom’s top priority for 2023: Supply chain optimization
On a March 2023 earnings call, Nordstrom executives are making very clear that they are taking the retailer’s supply chain seriously. In a plan to improve its financial performance over the fiscal year, optimizing its supply chain has been highlighted at a top priority by President and Chief Brand Officer Pete Nordstrom. Nordstrom, like most retailers, is focused on optimizing its supply chain to improve efficiency, reduce costs, and enhance customer experience
By optimizing its supply chain, Nordstrom can ensure that it has the right products in the right stores at the right time, improving product availability for customers. An efficient supply chain can help Nordstrom to reduce the cost of sourcing, manufacturing, and distributing products. This can enable the company to offer more competitive prices to customers while maintaining profitability. By streamlining its supply chain, Nordstrom can improve its ability to respond to changing customer demands and market trends, allowing the company to quickly introduce new products or respond to shifts in consumer behavior. A well-optimized supply chain can help Nordstrom to deliver products more quickly and accurately, improving the overall customer experience and driving customer loyalty.
Labor Issues & Owner-Operators 🚛
Biden’s DOL chief pick faces opposition from 150k truckers in OOIDA
President Joe Biden has nominated Julie Su for the Department of Labor Secretary, but she is facing massive push-back from the Owner-Operator Independent Drivers Association (OOIDA), a group representing 150,000 truckers. The OOIDA is asking the Senate to block the nomination on the basis of Su’s previous role of California’s labor secretary, where she backed the controversial 2019 contract-worker law known commonly as AB5.
AB5, which went into effect on January 1, 2020, aims to classify more workers as employees rather than independent contractors. The law uses a three-part test to determine whether a worker is an employee or an independent contractor. The test requires that a worker be free from control and direction of the hiring entity, perform work outside of the usual course of the hiring entity's business, and be customarily engaged in an independently established trade, occupation, or business. However, the OOIDA argues that AB5 hurts independent owner-operators because it restricts their ability to work as independent contractors. Many owner-operators prefer to work as independent contractors because it allows them to have more control over their schedules, routes, and earnings. AB5 makes it more difficult for them to work as independent contractors by creating a stricter standard for classification.
Additionally, the OOIDA argues that AB5 could have negative consequences for the trucking industry as a whole. They argue that it could lead to a shortage of available drivers and an increase in shipping costs for businesses and consumers. The OOIDA supports legislation that would exempt owner-operators from AB5 and allow them to continue working as independent contractors.
Let’s Get Global 🌎
🇺🇸🇪🇺 U.S. - EU working on preliminary EV mineral agreement. In the race to fully transition to green energy, investments are rampant on both sides of the Atlantic Ocean to integrate electric vehicles and other sources of clean energy. The minerals used to manufacture electric batteries represent the new gold rush, and the US federal government has introduced massive legislation to reward domestically run and domestically-sourced products. The EU has been seeking concessions to the IRA legislation allowing the tax incentives, citing the concern that this law will pose a great threat to Europe’s competitiveness in the sector. Leaders representing both nations are in talks to come to an agreement on the issue.
🚢 Could a SVB bailout result in growth for global logistics and shipbuilding challenges? G Captain Founder and CEO Captain John Konrad is signaling the importance of changing how banks int he US operate when funding shipyards and naval security. China has the world's largest market for shipbuilding, with a high demand for both commercial and military ships. This provides a significant market opportunity for shipyards located in China. The Chinese government has been actively supporting the development of the shipbuilding industry in China, including through tax incentives, subsidies, and other policies. This support has helped to attract investment and encourage the growth of the industry.
🇲🇽 Phillips Industries is increasing its presence in Mexico. While pulling out of China, the U.S.-based products line are being funneled into the 500,000 square-foot manufacturing campus in Arteaga, Mexico. The leading manufacturer and supplier of electrical and air brake components for commercial vehicles, has several reasons for focusing on manufacturing in Mexico. Manufacturing in Mexico offers several benefits for Phillips Industries, including cost savings, proximity to customers, access to skilled labor, and government support. By manufacturing in Mexico, the company can improve its competitiveness and better serve its customers in the region.
🇮🇳 India is the number one replacement for manufacturers pulling out of China. The ongoing trade tensions between the US and China, as well as the border disputes between India and China, have led to a push for diversification of supply chains and a search for alternative manufacturing destinations. India has a large and growing consumer market, with a population of over 1.3 billion people. This presents an attractive market opportunity for companies looking to expand their business and increase sales. Additionally, India has a large pool of skilled workers, particularly in areas such as engineering, software development, and manufacturing. This can make it an attractive location for companies looking to set up manufacturing operations.
iLevel With You 🏡
More topics for the average American household to consider…
🫣 The Biden Administration scrambles to shield the economy after multiple bank crashes. The dismantlement of Silicon Valley Bank within 48 hours by regulators has the federal government rushing to stifle the bleeding of a resilient - but vulnerable - economy. Federal regulators have signaled that taxpayers will not bear the responsibility of bailing out the bank, unlike when massive banks were bailed out in 2008. Regardless of reassurances, concerns over the health of the finance sector are valid. It’s still unclear whether the federal government will be forced to take larger action as a result of bank failures - especially considering Signature Bank in New York followed suit over the weekend.
🔋 Amazon and Rivian are discussing the exclusivity clause of the retailer’s EV delivery vans. In February, Rivian delivered 10 million packages with their Amazon-exclusive EV-powered vans. In need of cash for expanding, the EV-maker is revisiting discussions of the terms of partnership with Amazon with hopes that the company will allow Rivian to begin courting other customers. With plans to raise $1.3 billion to fund R2 model development and launch, Rivian spokeswoman Marina Orville has stated the EV-maker wants to maintain a positive relationship with the retailer while navigating the challenging economic climate.
💰 “Supercore inflation” is the latest lingo out of the Federal Reserve. The central bank continues to battle escalating inflation with increasing interest rates, but is now pointing out “supercore inflation”: the consumer price index (CPI) and the price index for personal consumption expenditures (PCE). Supercore inflation is a measure of inflation that excludes the most volatile components of consumer prices, such as food and energy prices, and focuses on the underlying inflationary pressures in the economy. Supercore inflation has been shown to have better predictive power for future inflation trends than other measures of inflation, as it focuses on the underlying inflationary pressures in the economy. This can be useful for businesses and investors to make informed decisions about pricing and investment strategies.
🚂 Rep. Ocasio-Cortez refers to East Palestine train derailment as potential crime scene. Blasting House Republicans for a lack of a hearing on the derailment, the condemnation came in part during an Oversight panel investigation into the Office of Personnel Management. The panel is part of the GOP House majority promise to keep a keen eye out on the Biden Administration and their legislative decisions. Rep. Ocasio-Cortez did call out both parties for failing to address the needs to the people adequately in light of the disaster, referring to the response instead as a “political food fight”.
Get Smart 🧠
Ramp up that brain power for these advanced topics…
💉 To survive & thrive, Big Pharma needs to test its supply chain. Clinical trials of the supply chain allow Big Pharma to ensure that the raw materials and finished products used in their drug manufacturing process meet the highest standards of quality. This is important to ensure that patients receive safe and effective medications. Additionally, the pharmaceutical industry is highly regulated, and clinical trials of the supply chain help Big Pharma ensure that they comply with all relevant regulations and guidelines.
📆 US Foods adopts a flexible workweek model with tentative success. With plans to expand the initiative, US Foods announced employee retention has improved with flexible work schedules and seven-day delivery options for its customers. CFO Dirk Locascio stated in the reefer carrier’s February earnings call that volume improvement has continued over 2023 and shows no signs of slowing down. With operational efficiencies improving, it’s unlikely the company will do away with flexible work schedules anytime soon.
🚂 Trinity Industries acquires rail 3PL RSI Logistics for $70 million. In a move to expand terminal operations, intermodal transportation, and logistics services, Trinity is shelling out the cash for the Michigan-based company reviving around rail logistics. The combined firms will likely be able to offer stronger solutions for shippers with the bulk rail network growing alongside RSI’s technology. Valued at $2 billion in 2022, Dallas-based Trinity Industries boasts 6,000+ employees compared to RSI’s 100 employees.
🚢 Shipping Going Green: it has a long way to go. When it comes to the switch to green ship fuels, both investment and demand play important roles, but the exact order can vary depending on the specific context and circumstances. In general, there is a chicken-and-egg problem when it comes to transitioning to green ship fuels. On the one hand, demand for these fuels is driven by regulatory and market pressures to reduce emissions, and these pressures are likely to continue to grow over time. On the other hand, investment in the production and distribution of green ship fuels is needed to make them available to the market and to bring down their cost, which in turn can help to drive demand.
🌿 Commercial drivers face risks with CBD usage. While CBD is legal in most states in the US, it may contain trace amounts of tetrahydrocannabinol (THC), which can show up on drug tests. If a commercial driver tests positive for THC, they may face disciplinary action, including losing their commercial driver's license. Even though CBD is not psychoactive and does not produce a "high" like THC, it can still cause impairment. CBD can interact with other medications and cause drowsiness or impair driving ability, which can be dangerous for commercial drivers who operate large, heavy vehicles.
The Workday Dash is an aggregation of articles regarding the transportation logistics, trucking, and supply chain industries for November 28, 2024, from iLevel Logistics Inc.