The Grand Illusion
As a recent and continuing victim of supply chain woes, I not only have a personal interest in the problem, but a definitely professional one – because I don’t get paid the last of the advance on Isolate until the book is printed and published, and it appears likely that its publication date will be moved again (although this is not yet certain) because of the impact these issues are having on the printing industry. I’m far from the only author having these difficulties, which include some of the largest best-sellers in F&SF, and which will before long, if not already, affect a great number of authors who rely on the sales of actual printed books.
Too many people are blaming most if not all of the delays and problems on COVID, but while COVID may indeed be a contributing factor, what COVID also did was reveal the near-fatal [at least I hope they’re near-fatal, rather than fatal] flaws in the current U.S. and world economic structures.
Some time ago, I pointed out the fragility of an economy and an industrial structure based so heavily on “just-in-time” delivery systems and suggested that this could prove problematic and have wide-spread repercussions. When companies don’t have inventory of products and of components and parts, the smallest disruption can halt production, and many corporations are facing more than small disruptions. These repercussions also appear to be increasing rather than decreasing, and they’re being complicated by other problems.
A record number of employees quit their jobs in August. They weren’t furloughed, fired, or laid off. They quit, and they quit at a time when wages are increasing. A recent study by the consulting firm McKinsey & Company found that while corporations thought employees were most motivated by money, the leading complaints by workers were that they felt undervalued, overworked, and that corporations didn’t really care about them or listen to them.
Amazon may be raising wages, but it’s also raising the pressure to “produce” to the point that more than a few employees have stated that they don’t even have time for bathroom breaks.
The difficulty in finding sufficient retail and service industry employees will likely mean that consumers will turn more to Amazon and other online delivery platforms at a time when those delivery systems are already overloaded, and when there’s already a shortage of truck drivers.
It’s not just in business, either. School systems and higher education are facing more and more disgruntled employees, especially teachers and professors who feel that they’re pressured to compromise on standards, to coddle students who are unmotivated and undisciplined, and to turn out “numbers” rather than quality.
Shortages of trained medical professionals at all levels are increasing, both from deaths and disabilities and from burnout caused by continual overwork.
Add to these the growing demand for electronics/computerization in all fields and the fact that certain key resources are limited both by design and by physical scarcity and/or production difficulties.
Good systems that can endure hardships and shortages incorporate redundancies, back-up plans, contingency planning, and additional staff, but those cost money, and the emphasis on immediate results, maximum profits, and minimizing costs means that when disruptions occur, small problems escalate into larger ones, and larger ones can become catastrophes.
And that’s exactly where we’re heading. Even if we muddle through this time, the odds are that the lure of low costs and higher profits will drive business back into the same rut… with even worse results the next time… assuming there is a next time.
Going for low cost options is not new. I remember in the 90s getting a spec to design a system with 99.9% availability and this included maintenance. The customer would not afford the hot standby solution so paid for and got 99%.
That means 87 hours downtime a year.
You should have heard the howls when something went awry. Yet we were still well within contract.
The Just-in-time approach is Capitalism working as designed.
There’s no downside for the companies that have adopted this approach, because all the companies are using it.
Just in Time was invented by Toyota. You’ll notice that Toyota is not having supply issues. This is because they didn’t just cut every warehouse. They only cut those that were unnecessary.
It’s like a human body. You need fat, if a famine comes along. But you don’t need to be obese.
Idiot MBAs saw that Toyota made a profit by cutting warehouses, so they just cut everything to the bone, and got rewarded with bonuses. As the proverb goes, you shall reap what you sow.
The US is suffering from stupidity and corruption at the moment. I hope it recovers its wits soon.
I am not holding my breath though. The tide has been in too long, and many people seem to have forgotten how to wear bathing costumes. Now that the tide has gone out to sea, there are many confused naked people on the beach. The president is one of them, if he thinks that manning ports 24/7 will fix a problem caused by a shortfall of trucks. (The trucks aren’t coming because California introduced new emissions legislation to ban them.)
As to medical staff… Well I find it quite ridiculous that we must all take vaccines in order to reduce the pressure on hospitals, while those same hospitals are firing medical staff for not being vaccinated, even though vaccination only reduces transmission by 40-60% depending on the study, and the unvaccinated medical staff probably have recovered from COVID, which gives them a 27x better chance at fighting it off than vaccines do. But whatever.
So Toyota will thrive, and US car manufacturers will probably request yet another bailout.
Chinese kids will learn quite difficult Math, while American kids lose their “gifted” classes (classes that teach something). Instead they will learn how Mathematics are subjective and reinforce systems of patriarchal and racial oppression. And then we’re supposed to so very surprised that China is testing accurate hypersonic weapons.
It really is past time to start pulling our heads out of our behinds. Competence matters in the real world. We’ve been resting on our laurels far too long.
In a review of 351 container ports around the globe, Los Angeles was ranked 328, behind Tanzania’s Dar es Salaam and Alaska’s Dutch Harbor. The adjacent port of Long Beach came in even lower, at 333, behind Turkey’s Nemrut Bay and Kenya’s Mombasa, the groups said in their inaugural Container Port Performance Index published in May.
https://www.reuters.com/world/us/california-ports-key-us-supply-chain-among-worlds-least-efficient-2021-10-20/
As someone who works directly in the middle of the supply chain I have a rather up front view of what’s going on.
The Just In Time loads, of which I’ve hauled many, are not the root cause of the issue.
Lee touched upon it in his post when he referenced the worker shortage. Right now U.S. ports are suffering a massive backlog, ships are being held off of docks for a week or more waiting to be unloaded. The dock facilities are full, there are not enough truck drivers to haul all of that freight out of there. Last I checked, there were 16 cargo containers waiting for every one driver.
This is not limited to the ports, I’m running hard, just about maxing out my 70 hour clock in six or seven days, and there is always more freight waiting for me. There are just not enough people willing to drive trucks, I believe the industry is short some 68,000 drivers right now and companies are offering some of the highest pay in decades. Insane sign on bonus’ of up to ten thousand dollars.
There may indeed be a shortage of warehouse workers, however there is also a shortage of materials for them to manufacture their goods.
For me, this shortage is treating me quite well, as I stated earlier, I never stop rolling.
I get what you’re saying, that the worker shortage is the problem in unloading the cargo.
However, with Just In Time, any break in the supply chain, anywhere in the world, will cause backlogs.
In the Olden Days before JIT, there would be inventories of goods along the supply chain, making it more resilient when breaks occurred.
JIT is great, as long as every part of the supply chain is operating. But it’s so finely tuned, it’s vulnerable.
Ran across this link story today, which seems to mesh with John’s comment.
https://qz.com/2075044/us-ports-are-shifting-to-24-7-but-where-are-the-truckers/
First LEM – Happy Birthday!
I am almost as disapointed that I didn’t get a shiny new hardback today.
It isn’t an inherent difficulty in JIT. It is that the inventory levels were set too small. The lesson learned was not to tie up raw materials in inventory because workers were idle. Too often the issue is local optimization where I get more credit for making my area work better regardless of what it does to anyone else in the company.
The reason people quit is the stress everyone is under from the pandemic and anger in politics. It has even been in these blog comments. As a country and probably the world needs a little time off from the lunacy.
Just in Time is a good example of efficiency vs effectiveness. Ultimate JIT is very efficient, with the effectiveness problem LEM laid out. The opposite of JIT, large buffer stocks all throughout the value chain is very effective (at a cost), but very inefficient. There needs to be a balance of both.
However, I am not sure I can agree that JIT is the problem here – if it was, our supply chain woes would have shown up much sooner. We started breaking the manufacturing process well over a year ago and it took that long for shortages to appear in meaningful numbers. That delay is strong evidence of significant volumes of finished goods and work in progress inventory all along the supply chain. Some industries have done better than others.
Most often JIT is used just before the final assembly step whereby all the needed final components arrive just before they are needed. The further back in the value chain you go, the lower the value of the component, and the more likely you will see build to stock (inventory)in large batches than something built to order. Exceptions do of course exist.
The significant delay from the breakage to the consumer being impacted was masked by buffer inventory. But that inventory is now significantly used up in many industries and it is going to years to replenish. The fact that all industries are competing for the same resources will make it a wide spread concern.
Excellent point. Thank you for your insight.
The dilemma of efficiency versus effectiveness is that the market rewards efficiency and punishes effectiveness. The relentless focus on quarterly performance of corporations doesn’t reward planning for a “rainy day”.
I just read an article which points out another factor in shortages is the pent-up demand of American consumers. So stockpiles of buffer inventory would help, but not alleviate these shortages.
We are, along with everyone I know with kids, now frontloading Christmas shopping because of the supply chain headlines. So add to all of this a larger-scale version of the toilet paper crisis at the start of the pandemic, when many started buying extra toilet paper because of the perceived shortage.
My concern is the reason for the chaos: that is what I think this is. I can agree with the analysis of the elements with regard to the commercial supply chains but I wonder at the fact that all our national systems, no matter what the government belief is, are all in an uproar and behaving chaotically.
This article …
https://www.theguardian.com/business/2021/oct/02/how-the-supply-chain-crisis-is-affecting-six-big-economies
… seems to indicate that the least affected nations are Russia and perhaps India. India has no immediate benefit from worldwide chaos but Russia does and it has at least a blueprint for use of controlled chaos. Even if everything calms down, the NordStream (and other southern and western supply lines to the EU) will allow it to avoid the effectiveness of the business sanctions imposed upon Putin’s colleagues.
But, rest assured the supply line problem will disappear according to some of our overpaid and underachieving CEO’s. https://www.cnn.com/2021/10/12/business/global-supply-chain-nightmare/index.html
Most likely as will our inflation “hiccups”.
The paper shortage might explain your book publication delay, LEM.
https://www.marketplace.org/2021/10/04/theres-still-a-paper-shortage-you-know-what-that-means/
Just in time delivery and not made here supply chains being executed in the name of saving a buck are critical flaws in any country’s safety and security.
This was a white paper discussion centered around what a possible future world war with up and coming world powers would look like. With countries like China and India controlling so much of the manufacturing, if they choose to truly wage war against the US (or many other countries), they need not actually go to war.
Simply stopping the flow of goods would cause such vast upheavals within the country that it would not take long before collapse occurred in a modern society.
Also relevant:
https://nitter.eu/typesfast/status/1453753924960219145
Only founder led companies and family owned businesses can stand up to the immense pressure from the dogmas of modern finance. The proposed tax on unrealized capital gains will force founders to sell larger and larger pieces of their companies to pay the tax, until eventually they lose control of their businesses and turn them over to the Wall Street sharks to run their disastrous playbook.
I could be wrong, but I doubt that the proposed tax on unrealized capital gains will go anywhere, despite all the hoopla… and if it does, I suspect that the Supreme Court will strike it down.