Supply Chain and the New Silk Route

In these pandemic days 2 words went to the list of the most important words and you are going to hear a lot about them. The 2 words are Supply Chain.   When we talked about Supply Chain, this concept goes from manufacturing and logistic processes ranging from the sourcing of the raw material components until the delivery of the finished products to the customer.

After the event of globalization, lots of goods, spare parts, components and any kind of material started to be produced at China, South Corea, Japan, Vietnam, etc. As an example, a lot of our clothes are coming from the Southeast of Asia. We saw that much that was produced in the West migrated to the East, usually ocasioned by production and labor costs, intalled capacity, etc.  As the production migrated to the East, it turned vital to build routes to link those products to West.

Guarantee that raw components or finished products are reaching their buyers in the expected date is much important for those suppliers.  Nowadays we are seeing a lot of pressure to guarantee that medical supplies and equipments  made in Asia are reaching their customers in a timely and secure way. A lot of those transports are being done by air cargo, increasing their total cost. If the East could have more efficient and less costly alternatives, those items could be more atractive to the buyers.

Since 2015 China is doing a great effort, spending a lot of money to create a new Silk Route that spans from South China to Germany, passing by many countries not only using terrestrial routes but also using sea transportation with very large container ships passing by Pakhistan, Sri Lanka, Suez Channel, etc.  In the past, China had a similar terrestrial Silk Route that was kind of discovered by Marco Polo.  Other imperors like the Roman Imperor had some similar routes. The Romans had one route that linked Rome with Spain, French ( Galia ), etc passing by Nimes (Pont Du Gard), Narbonne, etc to reach the Mediterrean Sea.

According to the World Economic Forum this initiative could cost US$900 Bilions.
(https://www.weforum.org/agenda/2017/06/china-new-silk-road-explainer/)



 Using this new Silk Route, suppliers from the East will take a lot of benefits to reach and send their products to their Buyers in the West, saving time and money.   Accord to the WME, China has an industrial overcapcity and needs to find ways to boost their throughput in the direction of the West.

If you check at YouTube you can see at DW Channel, 2 intersting episodes about this new Silk Route.

We can say that this is a very ambition project that can change totally the game of the global relation power.

See you in the next post !!!
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Flávio Fonte

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