China and Taiwan: What’s the Big Deal?

If you have been paying attention to the news lately, you have probably come across stories of increasing tension between China and the island state of Taiwan.  In fact, in recent years the Chinese government and military has become increasingly aggressive with respect to violating Taiwanese airspace, harassing Taiwanese shipping, and putting pressure on other nations not to allow Taiwan to join such international organization as the World Trade Organization (WTO), the World Health Organization (WHO), and the United Nations (UN).  What’s the nature of this conflict and how serious are the ramifications for the rest of the world?

China and Taiwan:  Roots of the conflict

The conflict between China and Taiwan has its roots in the 16^th century. Chinese settlers from the Guangdong and Fujian provinces sailed across the straits of Taiwan. Eventually, they settled the south west portion of the island in the vicinity of modern day Tainan. Although nominally under Chinse control, the Chinese who settled Taiwan did not pay much attention to the central government in Beijing. When the Qin dynasty, from time to time, did try to exert more administrative control, the settlers on Taiwan proved unusually rebellious. In the 18^th and 19^th century, there were numerous rebellions on the part of the Chinese residents of Taiwan against the Qin dynasty.

The problem of Taiwan for China became a moot point in the early 1890s, after the Chinese lost a war against the rapidly rising empire of Japan.  According to the terms of the treaty of Shimonoseki of 1895, China formally ceded Taiwan to Japan. The Japanese would rule Taiwan for the next 50 years, until their defeat in World War II would force the return of the island to China.

China and Taiwan Post WWII

The end of war in 1945 led the resumption of Civil War in China between the Nationalists forces under Chiang K’ai-shek and Communists forces under Mao Zedong. When the Communist triumphed in October 1949, the Nationalists forced retreated to the island of Taiwan, where they established the Republic of China which now competed with the Communist mainland named the People’s Republic of China.

During the 1950s and 1960s, both entities claimed to be the “real” China.  Communist China planned to invade Taiwan and complete the “revolution. However, the military support and economic aid provided to the government of Taiwan by the United States made this invasion problematic. When the United States officially recognized the People’s Republic of China in December 1978, it no longer officially recognized the Republic of China on Taiwan. At the same time, the United States pledged its support for Taiwan by providing defensive weapons to the island state in case of an invasion by the People’s Republic of China.

For forty years, the two parties have uneasily co-existed.  The Communists in China have become more impatient for unification. Meanwhile, on the island of Taiwan, many of the residents simply want to be independent of China. They argue that Taiwan is not really China, but another sovereign country.  The United States believes there is one China; however, it has also said that force may not be used by the Communist Chinese Part (CCP) to bring about re-unification.  If re-unification take place, it can only be the result of an agreement between the two sides.

Xi Jinping

Since Xi Jinping became the leader of China in 2013, the CCP has doubled-down on its determination to re-unite with Taiwan. Viewing Taiwan as a renegade, break-away province, President Xi, some say, is determined to force reunification, even by violent means.  Most Taiwanese reject forced re-unification.  My contacts on the island claim nearly 75% of the Taiwanese population view their country as sovereign. With the recent example of China’s governance of Hong Kong, few Taiwanese want to see their right to self-government diminished.

China’s determination to force this issue has led to increased harassment of Taiwanese shipping, regular violations of Taiwanese airspace, constant pressure on international organization to limit or exclude Taiwanese participation, and aggressive and threatening rhetoric.  If the new president of Taiwan, William Lai, were to make a formal declaration of independence, the result would undoubtedly be a declaration of war and invasion of Taiwan, something the People’s Liberation Army (PLA) has been planning for a number of years.

 

The Threat to Global Supply Chains

There are several threats to international commerce that will undoubtedly happen if China invades Taiwan.  First, international shipping will be cut off from the straits of Taiwan, the area between south China and Taiwan.  Shipping companies will have to find alternative routes, creating delays and extra costs.  Second, critical supplies from Taiwan will be cut off from Europe, Japan, and the United States.  These include steel, fasteners, various types of industrial equipment, and, perhaps most importantly, semi-conductors (microchips).  Third, other economic shortages will probably result from sanctions imposed on China by the United States, the EU, and other important international players, including Japan, South Korea, and Australia.  In other words, there will be hardships felt around the globe by many countries, people, and businesses.  Given the highly developed nature of Taiwan’s economy, there are many valuable industries and assets at stake.

Are we prepared?

While a very small island in terms of area, Taiwan is one of most sophisticated economies on the globe.  It has 23 million people, but it ranks 21^st internationally in terms of Gross Domestic Product.  Even with rigorous U. S. assistance, it would be no easy task to repel a Chinese invasion.  The results on international trade would be significant.  Many U. S. fastener distributors still import a significant portion of their product from Taiwan.  In addition, Taiwanese equipment in the fasteners industry still plays a significant role. For instance, they are a major manufacturer of cold headers, thread rollers, CNC grinders, and sorting equipment. Microchips and other sophisticated technologies would potentially be difficult to come by.

In order to prepare for conflict, what should companies that are dependent on Taiwanese products do?  Number one, develop alternative suppliers for products made exclusively in Taiwan.  Second, increase inventory of key components that are made in Taiwan—replacement parts for instance.  Third, carefully consider the risks of further sourcing to Southeast Asia until the geopolitical situation is more stable.

Ironically, the tension between China and Taiwan could be good for the domestic fastener industry as well as other industries. However, the cost could be high in terms of human lives and disruptions to the economies of many Southeastern Asian nations.

by Bruce Tap, President and CEO

New Wind & Solar Regulations

On Monday, May 13, the Federal Energy Regulatory Commission approved comprehensive changes to America’s electric grids. The changes will impact the planning and funding of grids.  The new rule represents the most substantial attempt in over a decade to upgrade and expand the electric grid. In the face of extreme weather from climate change and the push to the electrification of vehicles, our power grid urgently needs these changes.

Without action, the aging power grid will be more and more susceptible to blackouts, experts have warned. In addition, many renewable energy proposals have stalled throughout the country due to a lack of capacity in the grid.

With the new rule, grid operators will take a 20-year outlook at the country’s needs, rather than the reactionary, short-term viewpoint they’ve historically taken. Investment in and overhaul of the grid will be essential to combatting climate change and implementing such renewable energy sources as wind and solar.

Wind & Solar Regulations Impact on Manufacturers

The result will likely be a boon for wind and solar manufacturers. Short-term outlook for both industries is positive. Solar and wind will lead growth of US power generation over the next two years. Growth in these industries is tied to government investment and favorable tax credits, in large part from the Inflation Reduction Act of 2022.

Here at Fastco, we’ve seen a jump in our solar industry fasteners. From taking up less than .01% of our market share in 2022 to 3.5% in 2023, and climbing over 5% in 2024, solar industry fasteners have becoming a significant part of Fastco’s product mix. Therefore, we are excited for the continued growth of this industry.

Back in 2022, we put up a blog post on the International Automotive Task Force, or IATF, explaining what the task force is and why IATF 16969 certification is so essential to manufacturers. Well, it’s audit season again here at Fastco, which gives us a good reason to recap that post.

What is IATF 16949 and IATF Certification?

IATF 16949 is a global Quality Management System (QMS) Standard for the automotive industry. It incorporates the ISO 9001:2015 QMS standard with additional customer-specific requirements. In many ways, IATF is an extension of the ISO certification. In fact, to be IATF certified, a company must also implement the ISO 9001 standards. The two certifications work together to make sure that every company in the automotive supply chain is turning out quality parts for its customers and has a QMS in place.

IATF certification is a stamp of approval, certifying that our company is a quality supplier of fasteners. And that matters in every industry, not just automotive. Customers can rely on IATF-certified companies to provide high-quality parts, due to the robust quality standards they have in place.

How to Become IATF Certified?

Becoming IATF Certified is not a quick or easy process. It requires a robust quality system and continuous monitoring and improvement of that system.

Here are seven steps to becoming IATF certified:

1. Evaluate your current quality system
2. Add systems and processes to meet the requirements
3. Develop the “Documented Information” for the QMS and your processes
4. Implement and use the new quality system
5. Select a registrar for the certification audit
6. Obtain the certificate of registration
7. Celebrate!

After you’ve celebrated, you still have to work to maintain the certificate. Companies need to regularly audit their own systems, processes, and products to make sure that they still meet the requirements of the ISO and IATF standards.

 

Continual Improvement

IATF focuses on continual improvement. IATF-certified companies must consistently work to improve their processes through such things as waste reduction, decreased variation, defect prevention, and improved operations.

As an IATF 16949 certified company, Fastco is poised to provide your company with top-quality parts that meet rigorous, globally-recognized standards. Give us a call today or complete our RFQ form.

 

The UAW Strike: What will it mean for supply chains? And how can we weather the storm?

There is a general consensus among most economists that a short-lived United Autoworkers (UAW) Strike will probably have limited consequences for supply chains.

For one, these last few years have been wrought with supply chain shortages that could leave automakers reticent to cancel orders with their suppliers, at least initially.

Likewise, layoffs should be slow to occur as well. The tight labor market makes most companies rightly wary of laying off workers.

However, as the strike drags on—and it is already in its second week—we are likely to see order cancellations begin to bottleneck supply chains.

What can Tier 2 and Tier 3 suppliers do to mitigate some of these issues? To be certain, the biggest risk in the supply chains are these smaller companies with fewer resources and small bank accounts. But smaller companies also have the benefit of dexterity that many larger corporations do not.

 

Diversification

One key to resilience that Fastco has learned through the years and has made a strategic priority is diversification. Keeping all of your eggs in a basket like the automotive industry can be fatal for a company. Not only that, it is important to have a variety of customers even within a given industry. In automotive, this means diversifying outside of the Big Three to OEMs like Honda, Nissan, and Tesla.

 

Communication

But diversification is not something that a company can achieve overnight. As a result, it is imperative for companies that rely heavily on the automotive industry communicate with their customers in automotive and outside of automotive. Within the auto industry, we should be asking about upcoming demand and forecasting. Do the Tier 1 suppliers plan to use this time as an opportunity to build up a backlog? Or will they immediately be cancelling orders? Likely, there will be a combination of responses that will shift and change throughout the strike, if it is long-lasting.

Outside of the industry, we should be striving to expand our business. We should be asking for new opportunities and ways that our companies can add value for our customers. In short, we should be taking this time to seriously try and grow in industries outside of automotive.

Finally, we should be communicating internally with our team members and relying on their knowledge and expertise to help us figure out how to weather this storm.

Cooperation

At Fastco, we have many team members who have worked through strikes and economic downturns over the last 50+ years that we have been around. A company is as resilient as its workforce, and we are lucky to have a resilient one.

Companies that only rely on the decision making power of a CEO are missing a key component of what it will take to successfully ride out an extended strike: cooperation.

Innovation

All of these things require innovation. We need to be thinking outside of the norm because these are not normal times.

 

Strikes are the growing pains of a tight labor market and an expanding middle class. They are likely to become more frequent as American manufacturing continues its comeback. It is important to have mitigation strategies in place to not only survive a strike but to thrive in its aftermath.

Cooling Inflation and Improving Supply Chains:

Lessons from the Chaos

 

The latest inflation report from the Fed shows that inflation continues to cool. This year through May, overall U.S. consumer prices rose 4%, not including the volatile markets of food and energy (core CPI was 5.33%). This is the slowest rate of growth in more than two years. Still, it is twice the rate of what was considered normal growth before the pandemic. Steel prices, which matter acutely to companies in fastener industry and our supply chains, remain well above pre-pandemic levels.

But the good news is that inflation is trending in the right direction. And most economists predict that it will continue to moderate. Similar to cooling inflation, disruptions to supply chains, while still persistent in many sectors, are beginning, and should continue, to lessen. Given the cause-and-effect relationship between supply chain disruption and inflation, it makes sense that healthier supply chain would go hand-in-hand with inflation reduction.

Given these positive developments, it may be tempting to settle into a more complacent, less proactive mentality in terms of spending and supply chain management. While the Fed has not ruled out interest rate hikes and inflation is still a concern, we are looking toward a (hopefully) more stabilized economy. Here are some key lessons that we should take with us from this period of extreme disruption:

Quality Matters

To ensure a robust and healthy supply chain, you must have quality product. Sometimes, this means paying more money, but the return that you will get is worth it. The costs of poor quality are about more than just dollars; poor quality creates a timing disruption as well. It is important to have quality suppliers with meticulous control plans and fair labor practices, quality customers who are financially secure and share your values, and quality team members who care about the company and are engaged in the culture.

 

Diversity is Paramount

It goes without saying that companies should not rely on a single source for any product they bring in. Diversity also matters in terms of customer base. A company serving many industries is more likely to survive a range of economic downturns because most economic slumps are industry-specific.

 

Invest in your People

Inflation has caused wages to go up as well. The average salary bump is now about 5%, as opposed to 2 or 3% previously. For employers, this may feel like just another rising expense, but paying your people fair wages that meet the demands of the time is important. A well-compensated, well-appreciated worker is more likely to be an engaged and loyal worker.

Certainly, more lessons can be added to this list, but these are three that have mattered to Fastco, our supply chain, and our community. What lessons has your company learned post-pandemic?

 

 

It has been a rough couple years, especially for many of us in the fastener manufacturing business. Is there a hope on the horizon?

Supply Chain Woes Led to Slow Fastener Manufacturing Growth

In the last five years, the fastener manufacturing industry has only grown 0.1% on average per year. Obviously, the global COVID-19 pandemic was a large factor in this decrease. In addition, the global chip shortage has crippled supply chains, particularly in the automotive sector. For many fastener manufacturers, automotive makes up a substantial portion of business. For Fastco, we have historically seen automotive make up more than 95% of our business. Currently, automotive makes up around 80% of our business.

With auto industry continuing to limp along, it is no wonder that fastener manufacturing growth has been much slower than the rest of the US economy and even the manufacturing sector as a whole.

Fastener Manufacturing Growth for 2023 and Beyond

But we are beginning to see a shift in the forecast.  The latest report on the industrial fastener market from Spherical Insights & Consulting projects that the industry will grow from $86.62 billion in 2021 to $146.3 billion by 2030. This represents a compound annual growth rate (CAGR) of 6%.

While a 6% CAGR isn’t fantastic, it is definitely stable. And for a large and established industry as a whole, it’s nothing to scoff at. The growth of industrial fasteners as a whole exceeds the 5 year projected growth of the auto industry itself.

So what industries are stepping in to fill in the gaps and help grow fastener manufacturing?

Some obvious heavy hitters are solar (20.5% CAGR, growing to a $223.3 billion industry by 2026) and construction (7.3% CAGR from now through 2029).

Within the auto industry itself, we are also seeing a forecasted annual growth of 25.4% from 2021 – 2028 in the electric vehicle sub-sector.

Diversification in Industries Served

While one could argue that it is always a good time to be thinking about diversification, the argument is particularly poignant right now. Companies should work to diversify the industries they serve, the products/services they offer, and the subcontractors they utilize in their supply chains. Diversification leads to stability. Sure, it may not protect a company from a global recession, but it will certainly help them weather industry-specific crises.

At Fastco, 82% of the new business we have won in 2022 is for industries outside of the automotive sector, including solar, construction, agriculture, material handling, and industrial equipment. We have also been able to provide solutions to customers looking to shore-up supply chains or dual-source products.

As we look to the future and the industry growth projected, we are excited to see more growth on the horizon.

It’s a Great Time to Be an Employee

by Bruce Tap

Why is it a great time to be an employee?

 

Right now, there are rumors of a recession or a business slowdown. But unlike the Great Recession of 2008/2009, the unemployment and job outlook right now looks promising. In fact, most experts argue that the remainder of the 2020s will be an era of increased opportunities for employees. The importance of employee recruitment and retention in this era cannot be understated.  To give you a sense of the environment that most businesses are facing when it comes to attracting employees, let me give you a few statistics:

1. For every person looking for work right now, there are two positions available.
2. There are more than 11 million jobs available right now in the United States.
3. In a recent survey, 77% of corporate executives surveyed indicated that hiring and talent retention would be critical to their company’s growth in 2022 and beyond.
4. 10,000 Baby Boomers retire each day, seven days a week. This phenomenon will continue until 2029.  At this time, almost all Baby Boomers will have left the work arena.

Are there enough Millennials and Gen Zs in the pipeline to replace the Baby Boomers?  There are not. As a result, the rest of this decade will be challenging for those employers looking for talent.  In other words, there is going be a war for talent during the next several years.  Employers will undoubtedly have to pay more to attract talent, but there will also be a focus on building organizations and cultures that will attract and retain employees.  Hence, as the title suggests, it will be a good time to be an employee.

 

The Three “Shuns” 

Three concepts will be important in solving the employment crisis of the 2020s:  Automation, Immigration, and Appreciation.

Automation

Many companies try to implement automation when there are worker shortages.  Many employees are fearful of automation because it leads to job loss; however, when there are not enough workers, it makes sense to look at automating some of the simplest jobs as well as jobs that involve lifting and other ergonomic challenges.

 

Immigration

Immigration may also be a tool in the job shortage tool kit.  While this is a politically sensitive topic, many business leaders will probably make the case that relaxing immigration quotas will be a smart thing to do in the long run.  If there are both skilled and unskilled jobs that cannot be filled by U. S. citizens, it makes sense to make it possible to fill these positions with foreign workers.  This will also alleviate the imbalance that we have in some of our social service funding mechanisms.  Simply put, we need more workers to pay into social security and Medicare to take pressure off these programs.

 

Appreciation

Finally, there is appreciation.  Employees are going to stay with the organizations that treat them the best.  The best, however, will not be just wages, although they are important, but a whole gamut of benefits.  In addition to wages, these benefits will include health and other insurance, improved working conditions, paid time off, schedule flexibility, and a host of other privileges, perks, and incentives.  In a very real sense, there will be a war for talent and the companies that win this war will be the ones who appreciate their employees and show them that appreciation on a regular basis and through a variety of enhanced benefit packages.

As Fastco heads into this decade, we are ready to win the war for talent.  That is why we are trying to improve our health benefits.  That is why we are doing things like employee surveys.  That is why, finally, we are trying to increase our celebrations and recognitions of employee successes and contributions.  Employees are the key to our company’s success. And every day, we should let them know.

What Is IATF 16949?

If your company is not a part of the automotive supply chain (or even if they are), you may be asking this exact question.

The International Automotive Task Force, or IATF, is made up of a group of automotive manufacturers. According to Cheryl Simon, Fastco’s Lead Auditor, “This task force develops standards for  automotive industries worldwide so that every auto manufacturer works to the same standards.”

 

ISO vs. IATF

You may be wondering how this differs from other automotive standards, such as ISO 9001:2015. Cheryl explains that the “International Organization for Standardization [ISO] focuses on customer satisfaction whereas IATF focuses on customer-specific requirements.  To be IATF certified you must also implement the ISO 9001 standards.” Both are needed “to support the automotive Quality Management System (QMS).” In other words, “IATF is an extension of ISO 9001:2015.” The two certifications work “to make sure that every automotive company is turning out quality parts for its customers [and] has a quality system in place.” It also serves as a stamp of approval, certifying that our company is a quality supplier of fasteners.

 

Becoming IATF Certified

It is not an easy or quick process. Cheryl outlines seven steps to becoming IATF certified:

 

1. Evaluate your current quality system

2. Add systems and processes to meet the requirements

3. Develop the “Documented Information” for the QMS and your processes

4. Implement and use the new quality system

5. Select a registrar for the certification audit

6. Obtain the certificate of registration

7. Celebrate!

 

After you’ve celebrated, you still have to work to maintain the certificate. To do that, “the company needs to audit its own systems, processes, and products yearly to make sure that [they] still meet the requirements of the ISO and IATF standards.”

 

Continual Improvement

Another difference between ISO and IATF is their purpose. “ISO’s purpose is to facilitate international trade by providing a single set of standards that people everywhere will recognize and respect,” Cheryl states. IATF, on the other hand, “focuses on continual improvement.” IATF-certified companies always work to improve our processes through such things as “reduction of waste, decreasing variations, defect prevention, and improved operations.”

For companies in the automotive sector, having a rigorous quality standard and policy seems second nature. Since the 1980s, QMS has been a top priority as the industry works to keep up with competition abroad.

But what about those who supply other industries? You can argue that quality always matter. Cheryl says IATF 16949 certification “tells other companies that your QMS system is solid. You have good processes in place. Customers can rely on your company to give them good quality parts.”

As an IATF 16949 certified company, Fastco is poised to provide your company with top-quality parts that meet rigorous, globally-recognized standards. Give us a call today or complete our RFQ form.