Bain & Co: Trade barriers hold back billions in goods

12 February 2015 Consultancy.uk

Trade barriers are holding back effective trade and hence billions in goods, shows a new Bain & Company report. The firm shows that removing all barriers halfway to best practices could add $77 billion in economic value. According to the firm, while reform implementation is occurring, a focused approach may be better for increasing the streamlined movement of goods.

Trade facilitation agreements
The aim of trade facilitation agreements is to create a cross boarder agreement such that goods can move freely across borders with low administration burdens, high efficiency and in agreement with local and international regulation. In the course of history, a divergent set of rules and systems has been developed around the movement of goods, from administrative hurdles to limited market access, which has hobbled the free movement of goods. To overcome the slow movement of goods, in an often fast paced world, the international Trade Facilitation Agreement (TFA) was developed at the World Trade Organization Ministerial Conference in Bali in 2013.

In collaboration with Bain & Company and the International Trade Centre (ITC), the World Economic Forum (WEF) developed a report, titled ‘Enabling Trade: Increasing the Potential of Trade Reforms’, which considers a more focused method to implement trade reform. As it stands, the method of implementing reforms aims at improving the movement of goods, while the competitiveness of industries may not be being implemented efficiently.

Enabling Trade - Increasing the Potential of Trade Reforms

According to the consulting firm, the good news is that countries are already actively working to lower barriers to effective trade. Developing countries and least-developed countries already have an average implementation rate of 39% of Bali laid out facilitation agreements and measures. African countries have a lower rate of up-take, with 35% of agreements implemented. While advanced economies, like South Korea and Singapore, which already have well-functioning trade facilitations in place are now turning to making their boarders even more competitive.

The stakes, according to Bain & Company, are high, as implementing even a restricted set of supply chain improvements to half-way best practice could expand trade by 15% and increase global gross domestic product (GDP) by nearly 5%. Across various regions, the consultancy finds that by removing all barriers halfway to best practices in maritime trade, the economic value gained would total $77 billion, with the spin-off of in capital savings, trade and potential employment thus raising GDP levels to the dramatic levels mentioned.

Potential Cost Savings in Maritime Trade

Focused methodology
While the gains are potentially massive, the way to implement barrier lowering reforms are neither clear nor necessarily easy, the firm notes. Especially developing companies can be overwhelmed by large and “vertical” implementation, where “vertical” here means creating the conditions that serve a wide range of industries. The problem with a vertical approach is that it takes a considerable amount of energy and resources to implement broad reforms. The firm identifies that a “horizontal” approach to streamlining the cross boarder supply chain is the most effective in lowering barriers, where “horizontal” here means taking a systematic approach to potentially competitive industries and mapping out the value chain to identify barriers. By addressing the bottlenecks faced by high value industries, the country at issue is able to improve its key competitiveness in the short term, while continuing to develop broader reform to meet the Bali agreements.

Enabling trade four dimensions

However, as not all gains in the movement of goods are achieved by the Bali agreement, the consultancy finds that improvement to infrastructure and business environment have a key role to play in creative competitive markets. Thus besides issues with administration and market access, covered in the Bali agreement, the consultancy collaboration finds two other issues limiting the potential of export firms. The first is infrastructure that has a key role to play in the movement of goods. By creating key infrastructure improvements in key supply chains, the consultancy believes that competitiveness can be increased. A final issue is creating a conducive business environment, where erratic currency shocks, for instance, call deals into questions and slow the movement of goods.

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Maine Pointe: How 3D printing will impact the global supply chain

21 March 2019 Consultancy.uk

3D printing is touted as one of the most disruptive developments in manufacturing and beyond. UK-based Simon Knowles, Chief Marketing Officer at Maine Pointe, reflects on the impact the innovative technology can have on supply chain management. He outlines potential benefits of the technology and five ways it will impact the supply chain. 

Also known as additive manufacturing, 3D printing is a process which uses a three-dimensional digital model to create a physical object by adding many thin layers of material in succession, subsequently lowering cost by cutting out waste. This is radically different from current, subtractive production methods where up to 90% of the original block of material can be wasted. Although we tend to think of it as a new technology, the first 3D printer was introduced nearly 30 years ago. 

So far, issues such as durability, speed and protection of intellectual property rights have prevented 3D printing from entering mainstream manufacturing. However, the industry is making rapid advancements and it’s only a matter of time before we see it significantly impacting global supply chains and operations. According to the Global Supply Chain Institute (GSCI), "some supply chain professionals predict 3D printing will eventually rival the impact of Henry Ford’s assembly line.” This technology has the power to help companies significantly reduce costs, overcome geopolitical risks / tariffs, improve customer service, reduce their carbon footprint and drive innovation for competitive advantage.

How 3D printing will impact the global supply chain

Impacting the supply chain

Five ways 3D printing will have a massive impact on the supply chain and drive competitive advantage:

1. Decentralise production – The ‘portable’ nature of the technology will enable businesses to take production to local markets or customers faster. As a result, we will see a shift away from mass production in low-cost countries in favour of more local assembly hubs. Companies will have the capability to produce components closer to home rather than rely on imports. This is especially important during times of geopolitical tension, for example during a trade war, when the cost of purchasing components globally can increase rapidly.

2. Drive product customisation – As a tool-less process, 3D printing technology gives manufacturers unprecedented freedom to tailor offerings to clients’ specific requirements and enhance the customer experience. This will result in more agile supply chains which can rapidly adapt to changes in the market. Eventually, we could see design, production and distribution merge into one supply chain function with greater client involvement in the entire design and production process.

3. Reduce complexity and improve time-to-market – 3D printing technology consolidates the number of components and processes required for manufacturing. This will have a significant impact on global supply chains, decreasing complexities, saving on production costs, enhancing lead times and improving time-to-market.

4. Improve resource efficiency – 3D printing is a ‘greener,’ more energy-efficient and cost-efficient production method. It creates almost zero waste, lowers the risk of overproduction and excess inventory and reduces the carbon footprint. It takes ‘Just-in-Time’ manufacturing to a new level.

5. Rationalise inventory and logistics – As ‘on demand’ production becomes the norm, the need to transport physical goods across countries and continents will reduce. Combined with the lower number of SKUs required for production, this will have a major impact on warehousing and logistics and will have the potential to overcome tariffs. 

Tomorrow's technology, today

While 3D printing technology may sound like science fiction, it is actually science fact and it’s making its presence felt right now. Here are a few more real-world applications already a reality or just around the corner: 

Aerospace – It may surprise you to learn some non-critical 3D printed parts are already in use on aircraft. GE already have more than 300 3D printers and GE Aviation wants to produce 100,000 additive parts by 2020. The US Air Force has installed seventeen 3D printed parts on the C5 Super Galaxy, which could save tens of thousands of dollars. Other high-profile users of the technology include Airbus / EADS, Rolls-Royce and BAE Systems. Airbus is already talking about constructing entire airplanes with large scale 3D printers.

US Air Force has installed 17 3D printed parts on the C5 Super GalaxyMedical – The technology is already being applied to manufacture stock items, such as hip and knee implants, and bespoke patient-specific products, such as hearing aids, orthotic insoles for shoes, personalised prosthetics. Success stories include Open Bionics, a UK-based producer of 3D prosthetic arms which, in February 2019, secured a £4.6 million investment to take its business to the international market.

Automotive – Many automotive companies are already making use of 3D printing to help with prototyping. Ford has been using 3D printing technology since the 1980s. According to Ford's website, traditional methods would take four months and $500,000, but with 3D printing, the same process takes four days and $3,000. Future possibilities are almost limitless. In January 2019, 3D printer company BigRep unveiled the first 3D printed motorbike. The bike, which is not available on the market, took three days to print and cost just £2,000.

Construction – Although the technology is still in its infancy, significant advances have been made with the use of 3D printers in the construction industry as construction giants begin to see the potential of the technology. 3D concrete printing is developing rapidly, and the market is expected to reach $56.4M by 2021. More and more companies are starting up in the sector to create new, innovative projects. For example, Russian 3D printing manufacturer, Apis Cor printed an entire house in just 24 hours.§ 

Chemicals – There is an incredible opportunity for the chemical industry to innovate and drive new revenue streams using 3D printing technology. The industry could find itself at the heart of the manufacturing process as it works closely with 3D printer manufacturers to develop new materials specifically designed for additive manufacturing. Major chemical companies are already working directly with 3D printer manufacturers to invent new resins, polymers and powdered metals to take manufacturing into a new era. Chemical giant BASF is one of the companies leading the way with a dedicated 3D printing division and partnerships with a string of hardware OEMs, software vendors, and materials specialists.

Food – We could be seeing 3D printed food in restaurants or in our kitchen in the near future. Initiatives that mix 3D technologies and food are more and more numerous; this new manufacturing method would make it possible to create and mass produce food with more complex and original shapes and innovative recipes. It would also offer personalised meals to better adapt to the diversity of diets. Hershey's has already entered into partnership with 3D Systems to make a 3D printer for chocolate and other edible products though there is no word when the chocolate-making machine may be available.

Oil & Gas – Although adoption of additive manufacturing technology in the oil & gas industry is behind other industries, the technology has enormous potential in this industry. For example, 3D printing could allow organisations to access a bank of digital designs for on-site printing in the field. This will have a major impact on the speed and efficiency of equipment repairs and maintenance, reducing the necessity to either maintain physical inventories of spare parts on site or wait for them to be manufactured and transported to a facility. 

The market for additive manufacturing is predicted to reach $11,223 billion in 2019 and $41,587 billion by 2027. It’s an opportunity executives can’t afford to overlook.