HS2, Covid-19 and complexity

The news is that the government has given the go-ahead for construction work on Highspeed 2 to start, even though much of the country is still in lockdown.  There are a lot of people quite vociferous that this is not a good time to start, and some arguing that this is a good time to drop the whole HS2 project.

Well there is an argument for HS2 that it will free up more space for rail freight, which is a good thing.  And I'm more of a fan of HS3 (which if it ever happens, will be at such a future date that it will do me personally no good).  But those are discussions for another day.

What I wanted to do is discuss is why one factor in this decision is rather unexpected, and an example of the interconnectedness and complexity of our economy.  Yes, starting work keeps some people in jobs and keeps some money flowing in the economy and it is probably better to get some building done for that money rather than pay people 80% to be furloughed.  And yes, it is a big project so might as well get started.  And yes, having started people will be reluctant to stop because of the sunk cost fallacy.  But I'm not thinking of any of those.

Not starting HS2 now might have an impact on the NHS and our fight against Covid-19.  How so?
Well, when we start the construction work we will need concrete - which means that the cement kilns need to be kept going when otherwise they might shut down because of low demand.  And if you know about cement kilns, they are not as quick and easy to shut down and start up as a gas fire.  But we need to look further down the supply chain.  Cement kilns use a lot of fuel.  Where do they get it from?  They use a variety of sources, but one of them is re-processed chemicals that where originally used in the pharmaceutical industry as solvents.  These can be reprocessed to some extent but they can also be blended up as fuel for cement kilns.  What do we do with them if they aren't sent there?  There are only 3 choices - storage, incineration, and shutting the pharmaceutical production.  Storage capacity is not huge, there isn't enough incineration capacity, and it has to go somewhere if you produce it.  So, you say - build more storage.  Why?  We don't need it when the virus is over.  Burn it - well we'd love to have more incinerators, because we are already at maximum capacity, but do you want one in your backyard?  And building incinerators is quick and easy compared to the process for getting permits.  So, if there is nowhere to dispose of the waste (short term), the option left is to close pharmaceutical production - which is obviously not ideal during a pandemic.

So, starting work on HS2 keeps the kilns fired up using fuel from the pharmaceutical industries, which helps the NHS.  A complex web... isn't it?

COVID-19 and the complexity of supply chains.

It is a rather unpopular point of view these days, but the world is rather complex.  Things seem very simple on the surface, but rather like a swimming swan, there is a lot going on under the water line.

Our supply chains - basically - just work.  It no longer seems miraculous to us that we have strawberries in January, and can order a coffee spoon from around the world for 90p  (I did.  It came from China via Guadalcanal).

The current lockdown has made us all more aware - many of us can barely remember shortages, let alone for multiple products at the same time (toilet paper, pasta, flour....)  Our supermarket supply chains are so optimised that a relatively small increase in demand (from both panic buying, and an increased demand now that more of us are eating 3 meals per day at home instead of only 2 or even 1) has meant empty shelves.  In classic Inventory Bullwhip fashion, this has lead to people increasing order quantities (as we supply chain folk like to call panic buying) and increased stockholding (aka hording) leading to even more shortages.

The supply chain IS reacting.  But having optimised for efficiency it is difficult to reformulate for effectiveness.  So we have people like the wholesale suppliers (no longer able to supply restaurants) being willing to supply the public - but only providing flour in 12kg sacks.  It will get there.  And may be people may be just a little bit more aware of what a miracle it is.

But a word of warning - you can hardly buy a webcam for love nor money.  And they mostly come from China, and are not likely to be the number one priority as things normalise there.  So, some shortages will continue for quite some time.  Sorry if you intended starting a podcast.

some links on Force Majeure

Force Majeure is a pretty common discussion point at the moment thanks to Covid19.
The folks over at Supply Management magazine, the magazine for CIPS members, has run a number of useful articles that may be helpful.  In particular they point out that the doctrine of frustration may apply if you don't have a Force Majeure clause - or don't have a clause in it that specifically applies to Pandemics.

https://www.cips.org/supply-management/analysis/2020/march/coronavirus-what-you-need-to-know-about-force-majeure/

https://www.cips.org/supply-management/analysis/2020/march/coronavirus-ending-contracts-without-force-majeure/

If in doubt, have a look at your contracts - then talk to your Procurement Manager and lawyer  (I'd suggest that way round - it might be cheaper).

online training updates

Well, to be honest update is a little bit optimistic.  What I can tell you is that I shall be running two new online courses - one for CIPS, and one for IChemE - if all goes well in the development.  What I cannot tell you yet is the titles and timings, though we are hoping to run the IChemE course in early June.

More details as things develop - stay in, and stay safe.

Force Majeure and Covid-19

One of the things that I say in my courses on contracts is that it is only when things we go wrong that we actually look at the fine print in the contract.  Well the Corvid 19 situation is definitely a time when people go and look up what their contract actually says, particularly the Force Majeure clause - if there is one.

Force Majeure is a well known phrase that means different things to different people.  In fact some legal commentators state that there is really no such thing as a Force Majeure clause, and that everything could be covered by the doctrine of frustration or other legal principles.

The general idea of Force Majeure is a clause to deal with events that are outside the control of the relevant party, were irresistible (an Act of God) and unforeseeable.  Now that seems easy to understand, until you start delving into it.  The recent floods were irresistible, but were they unforeseeable? If they were now, would they be unforeseeable if they happened in the same places next year?

In standard contracts we may have a Force Majeure clause (or may not) which states what is covered.  Surely the Covid 19 epidemic is the sort of event that is covered?  Well, I was recently comparing standard Force Majeure clauses from standard forms of contract from IChemE and LOGIC.  One explicitly identified pandemic as covered - the other didn't.  Which was which?  And what do your contracts say?  Well this is the point where I suggest you go and have a look for yourself and check.  Hopefully, before it is too late.


Lawyer and legal commentator David Allen Green had a useful analysis on his twitter feed, here.

Procurement webinars and on line training

With in person training off the agenda for the foreseeable future then I am looking at running some on-line webinars and training programmes.

Anyone interested please let me know what you are interested in, and what would best meet your needs.

Thanks.  Now I'll go back to looking at all the technology (simple) and hosting options (not so much)

Procurex - delayed

Looks like the excellent Procurex events are being delayed to the autumn because of the Coronavirus.

Long way to go, but hope to be there.