Joe Doakes from Como Park emails:
This is the first worthwhile analysis of supply chain disruptions I’ve found. It’s worthwhile because it doesn’t focus on one tree (ships in port) but on the whole forest of supply chain issues, particularly the consequences of the abrupt shift in consumption due to Covid regulations. It’s another example of Second Order thinking.
Remember last year when Cub had no toilet paper? That’s because toilet paper in the office restroom is single-ply industrial grade on a huge roll, but toilet paper at home is two-ply softer grade. Toilet paper manufacturers know the normal office-versus-at-home percentages but when everybody shifted from working at the office to working at home, manufacturers weren’t prepared to instantly shift percentages and weren’t thrilled at incurring the expense because nobody knew how long lockdowns would last so they couldn’t calculate whether the shift would be worth the cost. It took months for the industry to catch up.
Everything in the supply chain works that way, including food. The author claims that pre-pandemic, 60% of all food in the US was eaten outside the home, at school and restaurants. How much during the lockdowns? Consider the consequence of shifting tomato sauce from Costco sized cans into Cub sized jars, if you can even obtain that many Cub sized jars because they’re made in Mexico where workers are quarantined for their own government’s lockdowns and the few jars they do make are shipped on boats sitting in ports waiting to unload containers.
The people who thought they could lock down the economy without consequences are the same people who figure they can shut down electric generating plants without consequences. There will always be toilet paper on the shelves and the lights will always come on when you flip the switch, right? They never seriously ask, “What could go wrong?” because they are too busy signaling their virtue to engage in second order thinking.
Joe Doakes
In the “progressive“ world, everything but political science is, in a practical sense, hypothetical.
I just know that Trump is somehow to blame… 1, 2, 3…
Good comments and link, JD. Thanks.
That said, a whole of problems, not just in the supply chain, are due to the transfer of production to other cheaper countries. In effect, we all got cheaper TVs and tomatoes for allowing the sabotage of American industry. Due in no small part to (right-wing) propaganda about so-called free trade and lots and lots of money the leading Democrats and globalist Republicans got bought off and allowed passage and implementation. All the little Mr Burns persons running corporate America cackled greedily. Corporations are not national, they’re global.
What JDM says. It’s time to walk away from the big trade agreements done by both sides of the aisle and go to a simple revenue tariff of about 10%, accompanied by a huge reduction in both the income tax and spending. In my work as an engineer, one of the most regrettable things I’ve seen is that the “margin” companies used to have–stock in the warehouse, people in the office and the factory, tools for products not made often–has been relentlessly eliminated in the devotion to “efficiency.”
Unfortunately, the reality is that while that works well in normal times without disruptions, it does not when things are disrupted (which is almost all of the time), and then those who would manipulate and violate us realize “if we disrupt the supply of this commodity, we wreak havoc with our enemies.” We may be seeing it at this point with the supply of parts for automobiles, a great portion of those ICs coming from China.
Occasionally I run across a sci-fi story or movie, where, some weeks or months after the apocalypse, the lights finally go out or the water stops flowing from the taps.
Next time you drive past a power plant or fresh water treatment facility, look for the cars in the parking lot. If those guys don’t show up for work, it all comes to a halt very quickly. And as Joe Doakes notes, starting it all up again is not easy.
The pinheads in charge of the lockdowns thought they could start and stop the economy like turning a light switch on and off.
I just now came across a set of comments by Bill Glahn (it’s too bad he doesn’t know how to create Twitter thread so they can be linked to or rolled up… anyway…). Building on the comments above:
Destined to live amidst the ruins of the civilization [the Woke] destroyed, and cannot rebuild, or even comprehend.
I think a lot about Chesterton’s Fence. The principle of not tearing down a fence until you understand why it was built in the first place. It may turn out that the fence is still needed, after all.
The People in Charge are in the process of tearing down a civilization that doesn’t meet their new definition of what is just.
But the people in charge believe that they can continue to enjoy the fruits of that civilization after it’s gone. Like a Super Woke version of the old neutron bomb.
But like Chesterton’s Fence, they don’t understand that the civilization was both a necessary pre-condition to the accompanying wealth creation and technological development and an ongoing requirement.
It turns out that you can’t continue to enjoy modern life while removing the civilization that created and sustained it. With the original civilization gone, the wealth and technology will dry up and blow away.
Woke is a modern cargo cult. They want the cargo (advanced education, widely available technology, broadly shared wealth) but no ability to create any cargo themselves.
Woke triumphed in the revolution: they seized the universities and public schools, they seized the corporations and supply chains, they seized governments and police forces.
The result: universal illiteracy and miseducation, empty store shelves, runaway crime. They tore down the statues and thought that the cargo would flow forever. When the statues vanished, so did the cargo.
But now that Woke is in control, the cargo isn’t coming back (literally) and Woke doesn’t have the knowledge, expertise, or talent to bring it back. The people who do were cast aside.
Office toilet paper is just one more reason I am glad that I work from home.
My former employer asked the logistics division to look into outsourcing manufacturing. Logistics did analysis after analysis showing that outsourcing production to Asia or Mexico did not, in the end, represent enough of a saving to justify the move. The primary saving was (and is) of course the hourly labor rate. But labor only made up 5% of our total product cost. When you add back in the cost of transportation, the opportunity cost of long lead times (the single most critical component of the product was made in a factory in Korea with large minimum order quantity requirements, fixed 6 month lead times, and prepayment demands), and the risk of supply disruption, any labor savings are quickly eaten up.
Management didn’t care. They refused even to entertain a discussion of risk. They refused to accept the assumptions about lead time. In short, because their bonus was based on short term cost savings, they ignored the analysis and told logistics help make outsourcing happen. And now, 25 years later, everything the analysis said has been shown to be true. And a new generation of business leaders is being praised for “discovering” what the logistics knew long ago.
Supply chain is getting serious, as my daughter, an RN in Milwaukee, is now being told that she can only change sheets on hospital beds when things get “really gross.” Apparently they’re not able to keep people working in the hospital’s laundry service to meet the needs–or possibly keeping equipment going to keep the flow of cleaning going.
One would figure that hospital executives would think “you know, this is a pretty significant infection risk, so I’m going to sacrifice part of my annual bonus to avoid being put in jail for getting people hurt or killed so we can hire some people”, but apparently not.