Most of us are local people, we live where we live and like it, as you are living in an area for a number of years you appreciate the surroundings more. Whether it is a hill or mountain in the area, a river or ocean to see water, and the list goes on. While we are personally local, the commerce around is global. Part of that is the design of supply systems, there is always another area where costs are lower or to maintain and grow margins, lower costs typically must be found. If a company can also raise prices, so much the better for the company’s revenues.

In an article by Paul Wiseman and Mae Anderson of the Associated Press, they show how global the economy actually is. The least expensive way to ship goods is by ship and with mega container ships carrying 10,000 containers, using water will always be the least expensive. The Red Sea connects to the Suez Canal which connects to Europe, it is trade route than has been used for thousands of years. On both sides of the waterway, various countries have undergone transformations of their economies and government. For a shipping company, going through the Red Sea saves the traffic around Africa. The path through the Red Sea means everyone receives their deliveries as quick as possible.

In the article, a company near Baltimore makes washable keyboards for hospitals and is named Man & Machine. The company imports parts from China and its normal route is to go to Europe and then the US. The issue is the normal passage takes about a month, with the Red Sea shut down, the secondary alternative is to through the Panama Canal, but the Canal has been affected by drought. If you think about the next alternative – truck or rail means extra costs. Will the customers wait and want to pay higher prices? Who eats the extra costs?

Tesla has a factory near Berlin, Germany, it was shutdown for 2 weeks because supplies were delayed.

Marks & Spencer is a British retail chain and has warned the new spring collection will be delayed as well as home-goods collection.

Roughly 20% of clothes imported into the US arrive via Europe going through the Suez Canal said Steve Lamar, CEO of the American Apparel and Footwear Association. The number climbs to over 40% in Europe.

A trip around Africa adds a week or 2 to the journey of the shipment and 25% of global shipping capacity was going around Africa. The cost of the container has risen from $1,500 to $5,500. The only good news, things could be worse at the height of the pandemic the cost was $15,000.

The good news is after the pandemic, global capacity rose as shippers brought more ships to the market. There is currently a state of overcapacity, which is the reason why prices have not jumped more.

In most of life, there are alternatives, it is possible to ship clothes by plane, but not furniture. The reason clothes go by plane is clothes are fashion sensitive.

Linking to dividend paying stocks, while most of our lives are local, the economy is global. The supply system is a moving part and we all depend on world peace. The good news is in business all great businesses have a plan B and plan C when something happens to the supply system. Very often they have used in the past and can tell good stories about it. In your research you might want to know how the companies uses its alternatives to maintain margins.

There are more questions than answers, till the next time – to raising questions.