Explain to me, please . . .

[Azrael]

the failure of the global supply chain.

 

[swingline]

Paging Ragu. Ragu to the white courtesy phone, please.

 

[Alma]

My amateur take

^COVID shut down or slowed goods/parts production plants in China, on which many nations now depends

^Consumers worldwide, limited in mobility, switched their discretionary funds from experiences (travel) to goods, increasing demand a great deal. People want to remake the spaces in which they live, for example.

^Fewer workers want to work to transport goods from one place to another

 

[goalmouth]

Covid.

A just-in-time system with no resiliency.

A port trucking economy built, like many giant economies, on slave labor.

 

[outofplace]

My amateur take

^COVID shut down or slowed goods/parts production plants in China, on which many nations now depends

^Consumers worldwide, limited in mobility, switched their discretionary funds from experiences (travel) to goods, increasing demand a great deal. People want to remake the spaces in which they live, for example.

^Fewer workers want to work to transport goods from one place to another

That lines up with a lot of what I've read. Part of it is lack of some supplies, but mostly it is a combination of suppliers losing workers and people simply buying more stuff.

 

[heyabbott]

Suppliers are artificially creating strategic short term shortages of certain items in order to raise prices and demand simultaneously across the entire economy. Shortages and the possibility of creating political tension between Biden and trump drives the media to cover and report rumors as news, driving the myth of shortages and helping manufacturers.

 

[Oggiedoggie]

Suppliers are artificially creating strategic short term shortages of certain items in order to raise prices and demand simultaneously across the entire economy. Shortages and the possibility of creating political tension between Biden and trump drives the media to cover and report rumors as news, driving the myth of shortages and helping manufacturers.

The groundwork for this marketing strategy was refined by the Coleco toy company in the early 1980s with the Cabbage Patch Kids “shortage.” If we knew then what this sort of thing would eventually become, we might have put up more of a fight.

 

[tea and ease]

This article from "The Atlantic" does a nice job explaining a host of reasons, threading them together, and concluding that the supply chain at its core is just people.

Americans Have No Idea What the Supply Chain Really Is

 

[BTExpress]

Every story contains the line, "China accounts for 85 percent of the world's supply of . . . "

That country was in a coma for 90 percent of the 20th century. Somehow we got stuff without them.

Some book publishers have had to delay new releases because the pulp used to manufacture paper has been gobbled up by online shopping’s endless appetite for cardboard.

Someone explain THAT to me. Shipping cartons and boxes?

I did receive a small bottle of pills for my cat in the mail the other day . . . in a box big enough for 20 bottles.

 

[swingline]

If they need pulp wood, better call up Marcel Ledbetter and his chainsaw.

 

[Inky_Wretch]

Every story contains the line, "China accounts for 85 percent of the world's supply of . . . "

That country was in a coma for 90 percent of the 20th century. Somehow we got stuff without them.




Someone explain THAT to me. Shipping cartons and boxes?

With fall merchandise arriving daily, we fill an 8-yard cardboard recycling bin every three days at my store. That's 6 feet x 6 feet x 7 feet.

So between that and the number of Amazon boxes I see when the UPS, FedEx and USPS drivers make their stops ... well, I wish I owned a cardboard box manufacting plant.

 

[qtlaw]

You just need to pull back your view and think long run,

where are the raw materials?
Where are they made?

When production is concentrated and there aren’t many alternatives, bottlenecks occur. That’s why some worker strikes work and others not so much.

 

[BitterYoungMatador2]

It’s almost like moving manufacturing abroad because god forbid workers make a buck was a bad idea.

 

[dixiehack]

If they need pulp wood, better call up Marcel Ledbetter and his chainsaw.

HAWWWWW! Shoot that thang!

 

[BTExpress]

"Abroad" might not be so bad if you had 50 places to get something instead of 150 countries all getting their stuff from one place.

 

[goalmouth]

Poor working conditions and record spot freight rates are causing draymen who haul containers from terminals to consolidation facilities to leave the intermodal industry in droves for regular trucking or better jobs in other fields. Overweight containers, chassis operability, other issues are pushed down to the drivers, who can't make a living on one turn, or haul, a day waiting in eight-hour lines at ports. There's also blame on shippers, where the time unloading and returning empty containers varies wildly.

At the same time, a concurrent shortage of container chassis have import containers piling up at U.S. ports. The International Trade Court last year slapped a 200% tariff on chassis coming out of China -- the largest maker -- exacerbating the problem. Domestic chassis makers can't keep pace; I talked to one company that is flying in labor from Puerto Rico, putting them up, and training them to assemble chassis.

I'll add that import demand is centered in the U.S., aggravating supply chain bottlenecks around the world.

 

[DanielSimpsonDay]

This article from "The Atlantic" does a nice job explaining a host of reasons, threading them together, and concluding that the supply chain at its core is just people.

Americans Have No Idea What the Supply Chain Really Is

 

[goalmouth]

More: AB 5, the California bill which reclassifies many independent contractors such as port truckers and ride-hail drivers as employees is headed to SCOTUS. Other states including Illinois and New Jersey are working on similar measures.

There has been a shortage of truck drivers as long as there have been trucks. If the industry wants to have people lining up to drive, they can pay them a living wage. But, truck maker International is expected to begin production on an autonomous long-haul semi rig in 2024. Robot rigs with have been testing between Texas and Oklahoma for some time with a human in the cab, and that will expand to Orlando next year. But AVs aren't suited to narrow streets in metro areas, so won't immediately help the port trucking or short-haul markets.

And to think, ten years ago I was writing about Terry Bradshaw's ex-wife.

 

[Driftwood]

A guy I know used to work as a recruiter for a trucking company. His office was responsible for signing 40 new drivers every week. I asked if that meant that 40 drivers quit every week. He said yes. That was years ago.

 

[The Big Ragu]

A few factors at play. ... but what does not get explained to people in the popular media is how much malinvestment there has been over the last several decades because of out-of-control central banks (led by our Federal Reserve) that destroyed our debt markets in the name of perma-"stimulus." By suppressing interest rates for so long and to such an extreme degree, it has robbed people of the safe yield that comes from saving and investment in a market that isn't being price fixed, the way they are now. And it pushed people looking for that yield they should get. ... into riskier and riskier ventures; many that are not viable, very few that actually contribute to any part of the supply chain. We have a lot of zombie companies that are highly valued in our runaway speculative markets, but which don't really do much of anything productive. Many lose money and live off of escalating amounts of debt that the Fed has enabled. It's a huge part of our "economy" now.

When the pandemic hit, the Fed doubled down on those schemes, again in the name of "stimulus," while our government started sprinkling way more of that debt-financed money that the Fed is monetizing for them all over the place. Everything from loans that don't have to be paid back to checks to the vast majority of people. That stimulated a lot of demand. Suddenly the typical U.S. household was more flush than it had been in a long time. And that stole demand from the future (that we are financing with debt) into the present. With a central bank monetizing it and taxing us along the way with inflation. ... which is a monetary phenonemon. The fact is, with the productivity and technological gains we have seen in my lifetime, we should have been in a glorious period of decreasing prices, in which standards of living should have been rising. Much like the golden era of this country in the 1800s, in which prices dropped and we became a world power. Instead, we have a central bank that robbed us of that to serve politicians who have taken over large swaths of our economy and robbed us of prosperity.

On the supply side, saving and investment is what creates the supply chain. ... in a healthy, market driven economy, companies and people invest their savings to meet natural demand. And the incentive is to build modes of shipping and transportation, build factories to meet demand for things and invest in all kinds of other ways that build a supply chain. We have spent the last several decades -- really since Alan Greenspan put us on this path, but it has not been limited to just the United States -- doing the opposite. Basically distorting our lending markets to pretend we are growing, but doing it on the back of mispriced debt being created by central banks intervening more and more in the debt markets to prop up the already-created debt, and keep the house of cards standing with more extreme interventions that create more debt -- you need more and more debt to keep it from falling part. That all has destroyed the supply-demand relatonship. Demand has been too strong on the back of what they have done, relative to what it would have been if people were left to their own devices. And we have not invested anything near what we needed to meet the surge in demand they created with all of the fiscal "stimulus" when the pandemic hit. We have spent decades -- particularly since the QE programs they have done since the financial crisis -- creating a survival of the unfittest environment. A lot of speculative, pie-in-the-sky companies valued at billions of dollars (even as the companies burn through all of the cash they borrow), and not enough of all of that debt going into producing real and hard assets. Companies like those were punished. Robbing people of yield pushes them into more and more insane, and more and more speculative things. And as long as that is being rewarded, it becomes a self fulfilling prophecy. This time, for a long time. And then you wake up one day and realize you don't have a lot of companies left producing raw materials, for example. That takes investment. ... that was DISCOURAGED by that artificially low-interest rate environment.

If you owned a business that actually earned anything, it made much more sense to buy back your own stock to feed the speculative frenzy being spurred on by artificially low interest rates. Or to pay a healthy dividend that would draw investors being robbed of their safe yield by the Fed. Not to invest in a raw materials plant or a mining operation. It has made zero sense to do most of the capital expenditures that create supply chains over time.

And now we are reaping what we sowed.

David Einhorn touched a bit on this during a lengthy interview yesterday

https://www.cnbc.com/video/2021/10/...lation-so-they-have-to-hope-it-goes-away.html