Why Global Supply Chains May Never Be The Same
March 29, 2022 8:08 PM Subscribe
Follow a theoretical USB charger from creation to delivery and see, link by link, the steps in the supply chain that are invisible and probably out of mind. Also, learn a lot about how each step in the chain has links that are weak or corroding from conditions either systemic or situational It's an examination of Why Global Supply Chains May Never Be The Same [54m, YouTube], from WSJ. Mar 23 2022 but obviously produced pre-war.
This post was deleted for the following reason: Poster's Request -- Brandon Blatcher
I often wonder how the world would be different if MBAs were taught the difference between "inefficiencies" and "safety margins" using, say, climbing ropes and harnesses rather than Monte-Carlo exercises and Gantt charts. How you might model things differently knowing that streamlining that process and cutting that redundancy meant gambling your life against your bonus. What those cheap carabiners really cost, how picking the 7mm rope instead of the 10mm really feels when there's nothing but carabiners and rope between you, two hundred meters of fresh air and a hard stop.
posted by mhoye at 6:06 AM on March 30, 2022 [55 favorites]
posted by mhoye at 6:06 AM on March 30, 2022 [55 favorites]
My spouse sells industrial automation parts. She has taken to telling people "90 days is the new overnight. If I say I can get it for you in 90 days, that is as good as it gets. Be happy. That means the part already exists or all of the components to make it have been secured. Much of the time, it's more like 12-18 months. That means it hasn't been made yet, they don't have the materials, and they're only guessing on when they will."
posted by DirtyOldTown at 6:26 AM on March 30, 2022 [23 favorites]
posted by DirtyOldTown at 6:26 AM on March 30, 2022 [23 favorites]
I have been wondering, say in East Germany before the wall fell, how the situation around shortages and poor-quality items was portrayed. (I have vague, vague impressions of how it was in Dresden in the late 80s via my partner, whose family has relatives there) Whether there are similarities to be drawn. Where did the cause lie for a shortage? When could one hope for quality items to reappear in stores?
posted by the antecedent of that pronoun at 6:28 AM on March 30, 2022
posted by the antecedent of that pronoun at 6:28 AM on March 30, 2022
I just don't see much value in discussions like this - I mean did everyone just forget that early in the pandemic when gas dropped to $.99 a gallon with contract prices for a barrel of oil being negative and container ships full of oil just floating in the sea, no-one willing to take it -- does the flip side occur and say we are producing too much? We really need to cut back!
No they did not.
Does nobody do that after-Christmas shopping thing at Michaels/(for example) where you get like as many $200 retail-priced fake Christmas trees as you can carry for $5? (they call them grab bags). Do people not realize that literally everything is sold on the 'fashion' model now, like I just got an out of fashion kitchen faucet for $20 that was discounted 90%. It's made of metal, it's not perishable! And all these are recent, not pre-pandemic things.
Trucking hauling pricing is currently crashing.
Lumber has already crashed. Remember that? It's over.
Do you know how much warehousing and building new storage facilities cost for products people may or may not want to pay full price for? Michaels MBAs do, and old plastic Christmas trees don't pencil out.
Are you really willing to pay twice as much for every product so that you don't experience any delays? Liar!!!! You are not!! Gas in California is kind of expensive right now --> the government is sending drivers' rebates, and that's Democratic politicians- not environment hating Republicans. Biden considered it too, though I think it was shot down at the Federal level. Are they spending that money to upzone, or to increase public transit to reduce the amount of gas used? They are not.
Are we increasing the number of immigrants in the US, where unemployment is at pre-pandemic levels at 3.8%, the participation rate is back to pre-pandemic levels, and places are closing because they can't find enough people? No we are not. So who is going to staff all these extra warehouses that are filled with products just in case someone might have to wait to get their exact model.
I'm sorry, but the reality of this situation is way different than the angry-shopper short-term POV. It's very true that we are experiencing some product shortages, but they are far shorter-lived than people might imagine.
posted by The_Vegetables at 8:24 AM on March 30, 2022 [12 favorites]
No they did not.
Does nobody do that after-Christmas shopping thing at Michaels/(for example) where you get like as many $200 retail-priced fake Christmas trees as you can carry for $5? (they call them grab bags). Do people not realize that literally everything is sold on the 'fashion' model now, like I just got an out of fashion kitchen faucet for $20 that was discounted 90%. It's made of metal, it's not perishable! And all these are recent, not pre-pandemic things.
Trucking hauling pricing is currently crashing.
Lumber has already crashed. Remember that? It's over.
Do you know how much warehousing and building new storage facilities cost for products people may or may not want to pay full price for? Michaels MBAs do, and old plastic Christmas trees don't pencil out.
Are you really willing to pay twice as much for every product so that you don't experience any delays? Liar!!!! You are not!! Gas in California is kind of expensive right now --> the government is sending drivers' rebates, and that's Democratic politicians- not environment hating Republicans. Biden considered it too, though I think it was shot down at the Federal level. Are they spending that money to upzone, or to increase public transit to reduce the amount of gas used? They are not.
Are we increasing the number of immigrants in the US, where unemployment is at pre-pandemic levels at 3.8%, the participation rate is back to pre-pandemic levels, and places are closing because they can't find enough people? No we are not. So who is going to staff all these extra warehouses that are filled with products just in case someone might have to wait to get their exact model.
I'm sorry, but the reality of this situation is way different than the angry-shopper short-term POV. It's very true that we are experiencing some product shortages, but they are far shorter-lived than people might imagine.
posted by The_Vegetables at 8:24 AM on March 30, 2022 [12 favorites]
I just don't see much value in discussions like this - I mean did everyone just forget that early in the pandemic when gas dropped to $.99 a gallon with contract prices for a barrel of oil being negative and container ships full of oil just floating in the sea, no-one willing to take it
nobody remembers. nobody. no lessons were learned. no business process changed appreciably.
I spend most of my day dealing with re-designing products, or finding and qualifying substitute parts that work in existing designs. The rest of the day is working with our supply chain people to figure out ways to work around broken business process so we can still attempt to meet customer expectations. I no longer get to do any new design or do anything that I really enjoy in my job.
The people who make business decisions need to hear all of this over and over and over again. so that they will perhaps take some of the lessons to heart.
Are you really willing to pay twice as much for every product so that you don't experience any delays?
Our customers are in some case paying 500% markup on things just to get them AT ALL with ridiculous lead times to boot.
posted by Dr. Twist at 9:21 AM on March 30, 2022 [13 favorites]
nobody remembers. nobody. no lessons were learned. no business process changed appreciably.
I spend most of my day dealing with re-designing products, or finding and qualifying substitute parts that work in existing designs. The rest of the day is working with our supply chain people to figure out ways to work around broken business process so we can still attempt to meet customer expectations. I no longer get to do any new design or do anything that I really enjoy in my job.
The people who make business decisions need to hear all of this over and over and over again. so that they will perhaps take some of the lessons to heart.
Are you really willing to pay twice as much for every product so that you don't experience any delays?
Our customers are in some case paying 500% markup on things just to get them AT ALL with ridiculous lead times to boot.
posted by Dr. Twist at 9:21 AM on March 30, 2022 [13 favorites]
I think that a tangential issue related to both the "cheapest, most efficient" item philosophy, and the "keep consuming" philosophy is that almost every single production line in the US was converted to Just In Time Supply inventories around 1990s, and then no one learned the lessons of how that crippled the Japanese production economy in the 2000s when they started having supply issues (particularly acute after the 2011 Tohoku earthquake). JITS means there is no buffer between having what you need on hand and not being able to get it in a reasonable time frame. I don't see an easy way to retreat from the JITS model since no company will justify the cost of inventory sitting around unallocated.
posted by drossdragon at 11:10 AM on March 30, 2022 [10 favorites]
posted by drossdragon at 11:10 AM on March 30, 2022 [10 favorites]
I don't see an easy way to retreat from the JITS model since no company will justify the cost of inventory sitting around unallocated.
OMG this.
literally yesterday our product line manager had to provide written justification for why it was necessary to keep parts inventory (parts that are common to most stuff we make) that won't be consumed in the next 90 days, even though the lead time on those parts is 65 weeks right now.
posted by Dr. Twist at 11:24 AM on March 30, 2022 [14 favorites]
OMG this.
literally yesterday our product line manager had to provide written justification for why it was necessary to keep parts inventory (parts that are common to most stuff we make) that won't be consumed in the next 90 days, even though the lead time on those parts is 65 weeks right now.
posted by Dr. Twist at 11:24 AM on March 30, 2022 [14 favorites]
Yes, this tends to be a huge font of bullshit hot takes. Supply chains overall worked so well as to be nearly incomprehensible, until the hit of a now two year long pandemic. Who would have thought?!?!
The idea that every producer of goods needs to warehouse two years worth of raw materials to buffer against supply chain woes is absurd, even if they have the ability and desire to do so. Which almost nobody does. For absolutely sane and reasonable reasons. The question isn't how much are you willing to pay now, when you're desperate to get parts to make your widgets. It's how much are you willing to pay when there is no shortage of supplies or delays in delivery. The reason JITS isn't going to be abandoned is that JITS isn't the problem.
As far as the video goes, it's always... coming down to supply and demand. And it's largely supply and demand of labor. Many supply chain jobs have to deal with high rates of turnover, which is compounded by the pandemic. In addition to weaker labor participation in general, which I don't think is even all that well understood yet. Also, the examples at the beginning don't evoke a lot of sympathy for the gravity of our supply chain woes. The shortage of kettle bells and playstations sound like some seriously first world problems.
posted by 2N2222 at 12:38 PM on March 30, 2022 [5 favorites]
The idea that every producer of goods needs to warehouse two years worth of raw materials to buffer against supply chain woes is absurd, even if they have the ability and desire to do so. Which almost nobody does. For absolutely sane and reasonable reasons. The question isn't how much are you willing to pay now, when you're desperate to get parts to make your widgets. It's how much are you willing to pay when there is no shortage of supplies or delays in delivery. The reason JITS isn't going to be abandoned is that JITS isn't the problem.
As far as the video goes, it's always... coming down to supply and demand. And it's largely supply and demand of labor. Many supply chain jobs have to deal with high rates of turnover, which is compounded by the pandemic. In addition to weaker labor participation in general, which I don't think is even all that well understood yet. Also, the examples at the beginning don't evoke a lot of sympathy for the gravity of our supply chain woes. The shortage of kettle bells and playstations sound like some seriously first world problems.
posted by 2N2222 at 12:38 PM on March 30, 2022 [5 favorites]
The reason JITS isn't going to be abandoned is that JITS isn't the problem
despite my above ranting, JITS is a concept is fine, it's the implementation of it that gets hard and if you as a company can't or won't modulate your buffer stock based on market conditions ,you can't keep lines running.
posted by Dr. Twist at 1:58 PM on March 30, 2022 [3 favorites]
despite my above ranting, JITS is a concept is fine, it's the implementation of it that gets hard and if you as a company can't or won't modulate your buffer stock based on market conditions ,you can't keep lines running.
posted by Dr. Twist at 1:58 PM on March 30, 2022 [3 favorites]
Lumber has already crashed. Remember that? It's over.
I just told my husband I was going to give up hand-tool woodworking as a hobby because of lumber prices. I just checked - they are still at 2x pre-pandemic levels. What do you mean lumber has crashed?
posted by rebent at 3:17 PM on March 30, 2022 [4 favorites]
I just told my husband I was going to give up hand-tool woodworking as a hobby because of lumber prices. I just checked - they are still at 2x pre-pandemic levels. What do you mean lumber has crashed?
posted by rebent at 3:17 PM on March 30, 2022 [4 favorites]
What do you mean lumber has crashed?
Lumber futures
Down 30% in a month. Zoom out to 1 and 5 year charts to see how volatile it has become.
But anyway your local lumber yard is not quite the liquid market that the wall street futures market is, and it's a game of chicken with whoever their competitors are locally with respect to dropping prices.
I'm dialing it back too. Baltic Birch (the best plywood there is and very useful for cabinets) may simply become unavailable because basically all of it comes from Russia.
posted by MillMan at 3:41 PM on March 30, 2022 [1 favorite]
Lumber futures
Down 30% in a month. Zoom out to 1 and 5 year charts to see how volatile it has become.
But anyway your local lumber yard is not quite the liquid market that the wall street futures market is, and it's a game of chicken with whoever their competitors are locally with respect to dropping prices.
I'm dialing it back too. Baltic Birch (the best plywood there is and very useful for cabinets) may simply become unavailable because basically all of it comes from Russia.
posted by MillMan at 3:41 PM on March 30, 2022 [1 favorite]
Maybe I don't understand... that link says lumber is at 1000 right now, whereas in the before times it was around 500
posted by rebent at 5:04 PM on March 30, 2022
posted by rebent at 5:04 PM on March 30, 2022
Maybe I don't understand... that link says lumber is at 1000 right now, whereas in the before times it was around 500
Last year it hit 500 again. It's back up, for two reasons:
1. there's a war on, and guess who has the most forest, and was the largest lumber exporter in the world
2. the second biggest exporter announced years ago it was cutting supply to what it felt were sustainable levels. When Canada cuts off supply of course prices go up in the US
posted by pwnguin at 9:56 PM on March 30, 2022 [1 favorite]
Last year it hit 500 again. It's back up, for two reasons:
1. there's a war on, and guess who has the most forest, and was the largest lumber exporter in the world
2. the second biggest exporter announced years ago it was cutting supply to what it felt were sustainable levels. When Canada cuts off supply of course prices go up in the US
posted by pwnguin at 9:56 PM on March 30, 2022 [1 favorite]
Re: shortage in socialist economies.
János Kornai has a book about exactly this topic. It's called the The Economics of Shortage (review). It is a summary of the concept he coined: shortage economy. Based on its introduction it is about the phenomenon of shortage in economies, but the specifics in the book argue that shortage in eastern block contries is due to systemic problems, shortage in capitalist economies is alwas accidental and temporary.
When the pandemic started and we had a shortage of yeast I made a joke on facebook that went like: "Hey, anyone has any baking yeast, I'd like to buy some. Also, I'm looking for a copy of Kornai's shortage book, can anyone lend it?" -- only to have multiple people contact me offering yeast from their pantries.
Apparently capitalist economies also have systemic problems, but perhaps more subtle than their socialist counterparts. I wonder what Kornai would've said about the current situation -- he died in 2021.
posted by kmt at 10:22 PM on March 30, 2022 [2 favorites]
János Kornai has a book about exactly this topic. It's called the The Economics of Shortage (review). It is a summary of the concept he coined: shortage economy. Based on its introduction it is about the phenomenon of shortage in economies, but the specifics in the book argue that shortage in eastern block contries is due to systemic problems, shortage in capitalist economies is alwas accidental and temporary.
When the pandemic started and we had a shortage of yeast I made a joke on facebook that went like: "Hey, anyone has any baking yeast, I'd like to buy some. Also, I'm looking for a copy of Kornai's shortage book, can anyone lend it?" -- only to have multiple people contact me offering yeast from their pantries.
Apparently capitalist economies also have systemic problems, but perhaps more subtle than their socialist counterparts. I wonder what Kornai would've said about the current situation -- he died in 2021.
posted by kmt at 10:22 PM on March 30, 2022 [2 favorites]
I see people working more hours, but are we expanding actual port capacity anywhere in the US? Are we expanding commercial rail to take the load off of trucking, and bringing it deeper in to metro areas? These things were stressed/at capacity before the pandemic, so I don't know that there really is a hurdle to get past by working overtime so much as things got stuffed up and now the entire timeline has shifted.
I imagine two things could happen - technology disrupts trucking and makes the driver shortage less relevant, or consumers have to readjust their expectations and not everything comes in a day or two. The future is not inevitably faster and cheaper, but it could possible be more humane.
Side note, I did not realize the blue Amazon vans are "contractors." That shit needs to be challenged. They tell you what, when, how, but you're a contractor?
posted by jellywerker at 4:54 AM on March 31, 2022 [2 favorites]
I imagine two things could happen - technology disrupts trucking and makes the driver shortage less relevant, or consumers have to readjust their expectations and not everything comes in a day or two. The future is not inevitably faster and cheaper, but it could possible be more humane.
Side note, I did not realize the blue Amazon vans are "contractors." That shit needs to be challenged. They tell you what, when, how, but you're a contractor?
posted by jellywerker at 4:54 AM on March 31, 2022 [2 favorites]
Side note, I did not realize the blue Amazon vans are "contractors." That shit needs to be challenged. They tell you what, when, how, but you're a contractor?
Oh, it's more awful than you could imagine.
The Nightmare of Running a Delivery Company for Amazon
posted by wcfields at 9:01 AM on March 31, 2022 [1 favorite]
Oh, it's more awful than you could imagine.
The Nightmare of Running a Delivery Company for Amazon
posted by wcfields at 9:01 AM on March 31, 2022 [1 favorite]
The article version:
‘I Had Nothing to My Name’: Amazon Delivery Companies Are Being Crushed by Debt
posted by snuffleupagus at 9:52 AM on March 31, 2022
‘I Had Nothing to My Name’: Amazon Delivery Companies Are Being Crushed by Debt
posted by snuffleupagus at 9:52 AM on March 31, 2022
I'm starting to think some of the supply chain problems are actually a scam where manufactures are feeding goods directly to resellers to outrageously markup while keeping their official channels understocked. Either that or the manufactures are taking advantage of e-commerce's opacity to be the resellers themselves.
I can buy my cat's pre-pandemic wet cat food from ostensible resellers on Amazon for 400% of the normal price and they have always had the cat food available all pandemic long. I cannot buy it from the manufacturer or any local stores at any price.
posted by srboisvert at 9:58 AM on March 31, 2022 [1 favorite]
I can buy my cat's pre-pandemic wet cat food from ostensible resellers on Amazon for 400% of the normal price and they have always had the cat food available all pandemic long. I cannot buy it from the manufacturer or any local stores at any price.
posted by srboisvert at 9:58 AM on March 31, 2022 [1 favorite]
I get the impression some of the posters here did not actually watch the documentary.
The main thrust of the WSJ video is that the people who buy and operate logistics services have relentlessly squeezed workers until there is nothing left to squeeze, just blood from a stone, and this is gonna hurt you, the WSJ core audience, yes you, the man in the grey flannel suit.
It's pretty brutal, especially the contrast between talking to workers in pick/pack warehouses vs talking to their bosses. This is not the kind of content I associate with the WSJ, but also, this is probably the first time that non-specialists in the business world are being exposed to the fragility and cruelty built into American distribution networks.
In another passage, they point out that the USA has 10,000,000 people with full-bore CDLs, trained for over-the-road trucking, but only 300,000 truckers and a permanent state of shortage in the trucking industry. 40 years of permanent squeeze has turned a good job into a lousy one, turnover is over 100% per year, and the average age of truckers is marching upwards. In short, next year's shortages are bound to be worse than this year's shortages, but competitive logic and greed dictate that the cycle will continue.
Now that same process that has already reached a terminal state in trucking is being carried out everywhere else in the supply chain: the ships, the warehouses, the last mile. And it's not gonna be fun for anybody. It's gonna get a lot worse before it gets better.
I'm not an SCM expert but the documentary makes a very persuasive case.
posted by your postings may, in fact, be signed at 10:20 AM on March 31, 2022 [9 favorites]
The main thrust of the WSJ video is that the people who buy and operate logistics services have relentlessly squeezed workers until there is nothing left to squeeze, just blood from a stone, and this is gonna hurt you, the WSJ core audience, yes you, the man in the grey flannel suit.
It's pretty brutal, especially the contrast between talking to workers in pick/pack warehouses vs talking to their bosses. This is not the kind of content I associate with the WSJ, but also, this is probably the first time that non-specialists in the business world are being exposed to the fragility and cruelty built into American distribution networks.
In another passage, they point out that the USA has 10,000,000 people with full-bore CDLs, trained for over-the-road trucking, but only 300,000 truckers and a permanent state of shortage in the trucking industry. 40 years of permanent squeeze has turned a good job into a lousy one, turnover is over 100% per year, and the average age of truckers is marching upwards. In short, next year's shortages are bound to be worse than this year's shortages, but competitive logic and greed dictate that the cycle will continue.
Now that same process that has already reached a terminal state in trucking is being carried out everywhere else in the supply chain: the ships, the warehouses, the last mile. And it's not gonna be fun for anybody. It's gonna get a lot worse before it gets better.
I'm not an SCM expert but the documentary makes a very persuasive case.
posted by your postings may, in fact, be signed at 10:20 AM on March 31, 2022 [9 favorites]
I had to look up CDL, which in this case means Commercial Drivers License. So, 10 million people with CDLs, 300K currently working, and we supposedly have a shortage.
It's similar in the tech industry. Companies always screaming about a shortage of tech workers, when what they really mean is a shortage of inexperienced young workers who will let themselves be bullied around and worked to death for lower wages versus experienced ones who insist on being treated fairly.
posted by technodelic at 1:56 PM on April 1, 2022 [2 favorites]
It's similar in the tech industry. Companies always screaming about a shortage of tech workers, when what they really mean is a shortage of inexperienced young workers who will let themselves be bullied around and worked to death for lower wages versus experienced ones who insist on being treated fairly.
posted by technodelic at 1:56 PM on April 1, 2022 [2 favorites]
The thing that got me most in the documentary was when they were showing what a good job UPS was, but then explaining that of course, now that everyone wanted everything delivered, we could not be doing it with such well paid people... Like, WTF? Why not?
posted by Meatbomb at 11:02 PM on April 1, 2022 [1 favorite]
posted by Meatbomb at 11:02 PM on April 1, 2022 [1 favorite]
A) the because the expanded marketplace opens room for innovation (use cell phone routs instead of driver experience)
B) averaging out of user base and value of packages (fewer packages are those high price valuables sent to rich clients, more are random junk)
C) vertical integration - ups makes profit if they do shipping well, amazon makes profit if they reduce the cost of shipping.
It is possible that ups will grow and Amazon will eat the delivery market share. But ups already lost its Amazon contract... So I'm not sure if they're even competitors
posted by rebent at 5:24 AM on April 2, 2022 [1 favorite]
B) averaging out of user base and value of packages (fewer packages are those high price valuables sent to rich clients, more are random junk)
C) vertical integration - ups makes profit if they do shipping well, amazon makes profit if they reduce the cost of shipping.
It is possible that ups will grow and Amazon will eat the delivery market share. But ups already lost its Amazon contract... So I'm not sure if they're even competitors
posted by rebent at 5:24 AM on April 2, 2022 [1 favorite]
we could not be doing it with such well paid people... Like, WTF? Why not
Did you really think free 2 day shipping with Amazon prime was sustainable?
posted by pwnguin at 2:32 PM on April 2, 2022
Did you really think free 2 day shipping with Amazon prime was sustainable?
posted by pwnguin at 2:32 PM on April 2, 2022
So make it not free. Or let Bezos take he hit, not find people to do it for nothing.
posted by Meatbomb at 4:00 PM on April 4, 2022
posted by Meatbomb at 4:00 PM on April 4, 2022
ups makes profit if they do shipping well, amazon makes profit if they reduce the cost of shipping
mostly this one. thus the intentionally ruinous man with a van/microfief program that gets to masquerade as an arms-length transaction between equally sophisticated parties.
posted by snuffleupagus at 7:07 PM on April 4, 2022 [2 favorites]
mostly this one. thus the intentionally ruinous man with a van/microfief program that gets to masquerade as an arms-length transaction between equally sophisticated parties.
posted by snuffleupagus at 7:07 PM on April 4, 2022 [2 favorites]
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The sheer inhumanity involved in all this is breath taking - all Capital seems driven by off-setting, outsourcing and off-shoring; time, person and place is lost, while waste multiplies.
NZ perspective - so many things colliding now in a long thin country with very few roads, a broken rail network (much very near sea level), global freight container shortage, coastal shipping reduced to one ship (govt considering starting own shipping line as Covid meant internat. ships that used to moonlight on coastal freight) no longer stop here
And our ONLY oil refinery (govt. owned) closed last month (ill-considered climate policy - like nuclear in Germany) and an attitude of "we can always just buy oil" - yeah right! Finally much of our power is hydro, in era of ever longer droughts - and importing millions of tonnes of Indonesian coal (having closed many of our own mines) - go figure. Time to restart the Commission for the Future perhaps. Yep, sure enough people are talking about re-awakening it after Putin's threats.
posted by unearthed at 3:48 AM on March 30, 2022 [7 favorites]