Coronavirus has disrupted supply chains for nearly 75% of U.S. companies
axios.com
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If this is doing anything (to me personally), it's making me reconsider shifting more of the supply-chain to the US. In many cases, the prices aren't really that different.
https://www.chinalawblog.com/2020/03/international-manufactu...
Well, this is the problem, right. Resiliency only pays off when there's a crisis, otherwise it's a net cost. So if you're outcompeted by the other non-resilient companies before that crisis happens, it doesn't help.
I feel like societal resiliency needs to be rewarded (in many contexts, utilities are obvious but also food supply, etc) but I don't know what a good way of doing this would be, except making it government run and making resiliency a primary objective. I don't see how a for-profit system that rewards short-term gains could ever be made to value resiliency.
And if you have to spend most of your income on stuff, you too proportionately pay more sales tax than someone with excess to invest.
resiliency mostly pays off when there's a crisis. You can reduce latency in systems by sourcing things closer to use, but having a fallback farther away.
It's a tradeoff though. If I have two suppliers, the odds that I have 'a supplier issue' are doubled. But the odds that I have no supply at all is lower.
I learned much later that the only way to get IBM and some other big vendors to do anything at all for you is to move your checkbook. That is, if the checkbook might be coming out of your pocket, they're interested. If you threaten to put it away, they are very interested. The rest of the time? Fuck you, we have other checkbooks to worry about.
Edit: Now I got the cluster thing. I meant cluster in the sense of risk, meaning you have a single point of failure and high degree of risk concentration. But your point is really interesting, I never thought about these aspects of cloud computing.
If the prices weren't really that different then why did those parts of the supply chain go to China in the first place?
As automation increases China's position weakens.
I beg to differ.
To be precise, for trade/production companies, even a 30% difference in price would be huge. But if you only buy souvenirs or gift wrappings etc, those might not matter that much, as they might just be less tha 1% in the final price of whatever you're selling. but for some companies or industries, it means 30% cheaper in terms of all their material and products, which would be insane increase for their profits.
What industry are you in? If you mean China isn't that different than [Vietnam/India/Mexico/etc] then I can see it. I used to work in Medical Devices for 5 years, and the cost of manufacturing something abroad (one company had several plans in Mexico) was astronomically lower than manufacturing in the USA.
China MFG was/is not a deal with the Chinese people. It's a deal with the CCP. Those of us who always understood this aren't surprised by any of this. We never expected China to be able to manage domestic risk well and we watched helplessly as they exported that risk abroad in the form of pollution, SARS, contaminated products and more. You may not be a citizen of China, but you're almost as impacted by their decisions. This is worth pondering.
The US has a crappy record on people who leak government data, but that's an entirely different thing.
I'm not saying China did a great job. But they seem to have gotten a handle on things at least, meanwhile we've yet to even really start preparing. And we have the advantage of hindsight, which they didn't have.
According to the Chinese communist party.
Right now, the USA response is somewhere between those two China approaches but it seems that it has been closer to the "early China" response than to the "late China" response.
Personally, I wouldn't want to sacrifice my liberties to a PRC-style quarantine, but to insinuate it wasn't an astoundingly effective way to control the spread is false.
"seem" being the operative word. You only know what the CCP wants you to know.
Well, they have seemingly largely recovered and move their way back to normalcy, as other countries started catching fire.
I think a lot of people's takeways will be different than yours: China's ability to control crisis like this scale is going to be valuable assets to global investors.
It's not time to start popping champagne bottles in China quite yet. They have a tiger by the tail. The country is shut down, and as they start rolling back travel restrictions it could easily blow up again. They still have well over a billion people who are vulnerable.
They just tried rolling back travel restrictions two days ago and immediately reversed course[1].
[1] https://www.reuters.com/article/us-health-coronavirus-china-...
Their ability to control the crisis is useful from a public health perspective, but they're doing it by shutting down production. Look at how the markets have responded. Are you claiming investors wouldn't have been better off if these companies had invested in a more diversified supply chain?
For that matter, having a more diversified supply chain makes it easier to implement these kinds of public health measures in general. Shutting down production is much less costly when there is another region capable of quickly picking up the slack. And making it less expensive to implement measures to contain a contagion makes it more likely they'll be properly implemented, which helps everybody, investors included.
Other countries will catch the virus at some point too.
Without stringent measures, it will take more time for other countries to come back from it. In other words, China becomes safer after this.
Having presence in multiple regions lets you keep going the whole time. Having presence in only one region doesn't.
It depends on a company's risk profile as to whether that is tolerable.
Manufacturing requires logistics, capability of water/electricity and skilled labour. Those are not easily scalable across the globe. And manufactures do concentrate, it is easy to source parts to make stuff from the same region.
So in a way, expanding physical manufacturing is very hard and expensive. And in case of COVID-19, it is not the answer even, since, the disruption is almost simultaneously happening globe wise, capacity planning and shifting can't be that agile to adjust, let alone the demand will be hampered too.
So, I think unless it is for megacorp that has that much of money to burn, diversification on globe scale is just a dream.
But for key industry, like medical supplies, I think that is where the state should come and play, to incentivize a domestic capacity that could chime in handily when disruption happens.
You don't need fully-distributed manufacturing where everything is literally made everywhere. Go ahead and cross off every place without water, electricity and skilled labor, you're still left with dozens of countries. Now pick one in Asia, one in Europe and one in America. You're now on three continents. There are three more available if you ever feel like expanding.
> And manufactures do concentrate, it is easy to source parts to make stuff from the same region.
Which is fine, so do that, somewhere on each continent. Not in only one place in the world. Obvious strong candidates are China, the US and Germany.
> And in case of COVID-19, it is not the answer even, since, the disruption is almost simultaneously happening globe wise, capacity planning and shifting can't be that agile to adjust, let alone the demand will be hampered too.
It isn't really happening everywhere at once, though. It's happening everywhere at different times. We may get to the point where some countries have to use the same measures as China, but by then China may have succeeded in containing it and be ready to reopen. Even if it hasn't, you've still reduced the period you've been offline by the several months in between, and in the meantime have had notice allowing you to run 24 hour shifts in every other facility to build up a surplus in preparation for what may come there soon.
There are also implications to the countermeasures. The US just suspended travel with Europe. If you had a factory in Germany and one in the US, you're still in business in both places, making products for US customers in the US factory and for European customers in the European factory.
> But for key industry, like medical supplies, I think that is where the state should come and play, to incentivize a domestic capacity that could chime in handily when disruption happens.
The problem is, nearly everything is in that category. Nobody cares about where toilet paper comes from until you can't get any for six months.
I can see how the Wall Street would respond, it's understandable, but whoever says that somehow makes it a bad governmental response has already missed the point about what's really the end goal for the development of our society.
However, such virus already exists in the wild, though the chances are there, it can jump to human anytime in the future regardless of national boundaries.
I've experienced living in a small, developing nation for years, and while they have the same dangerous mixture as China of live animals (and the associated excretions), dead animals, produce (unwashed, washed, and already skinned for consumption all available from the same table), fertilizer of human origins, farming supplies, pesticides, medical products, hygiene products, clothing, food transport, food storage, food preparation surfaces, cutlery, dish ware and dining surfaces all overlapping to alarming degrees (often sharing the same surfaces at different times), they don't have the potential global role, both based on their size, relative lack of population, lack of foreign travel and foreign entanglements, and so on.
Inadvertent power projection from a biological perspective is an interesting concept.
Edit to add: I can't judge the people working in these markets and offering products under horrendous conditions. They're trying to feed their families. But China needs to get serious about public health if it hopes to improve its reputation, which is roughly the same from Tehran to Toledo with some justification.
This particular pandemic was entirely avoidable in the first place. Food markets in developing nations frequently cause local health problems, and have all the ingredients to make a global one (as it seems to have in this case).
COVID-19 may be from China, but a pandemic can come from anywhere and will come again. You can taking chance on its virality/mortality.
The issue is whether governments will step in to provide sufficient unemployment / welfare benefits to bridge the gap.
Always look on the bright side of life!
It probably won't happen.
To me it sounds like a perfect reason to rethink the current economic model.
I'm just tired of hearing people around me going "I had my shots, I'm going to that party / going to that event" or "It's just a flu, nothing to worry about".
Hospitals will just reduce their prices, because it's preferable to do that than leave beds empty.
I have some bad news.
This strikes me as child-level naivete.
Maybe now is the time to buy a bidet add-on seat.
That may be true...but it may be just as likely they are minimizing their own inventory to keep their own costs down/cash on hand, which is not something they would freely tell their own employees or customers.
Alternate theory: I spoke to someone who works at a Cricket. They never keep higher end phones in stock, as they are frequent robbery targets (though I often see armed security at larger carrier stores).
I ordered an Apple watch on March 3rd and it won't arrive until March 24th.
I'm pretty sure they are having serious supply chain issues.
And cargo operations staff may be reluctant to fly to China.
Staff wouldn’t be permitted to stay on the aircraft until takeoff. And would likely violate hours of service anyway.
Maybe at some point we will realize that it's a terrible idea.
[0]: https://en.wikipedia.org/wiki/SIM_swap_scam
[1]: https://btcmanager.com/sim-swap-attacks-amplify-companies-re...
Not all industries need to be fully globalized, and it is better every country keep some share of production to itself to account for emergency situation like this virus.
Globalization had trade off robustness for efficiency, it is time to scale that back.
Globalization as how it operates, it means to assign the job to whichever country that is most cost-efficient for that part of the production.
Moving production to China? Globalization
Moving production back to the US? Globalization
...
Anti-globalization movement? Globalization
Or maybe my professor was just nuts, I feel crazy typing this out
(They explained domestic Australian-made salt is still available, but it is 30% more expensive than the Chinese import salt.)
This isn't a "China vs US" thing; i bear zero ill will towards China and their massive gain of industrial capacity, my ire is solely focused towards those in power (government and industry alike) who presided over the suicidal deindustrialization of the United States and Europe.
The net result is that it's China who's able to send medical aid (ventilators, masks, respirators, test kits, etc) to Italy, and not the US, if only because the US is incapable of meeting its own needs: https://twitter.com/VKJudit/status/1237448125800988675
They were created not by some mysterious force, but by individuals making rational choices about how they want to allocate their time, their energy and their resources.
The "suicidal deindustrialization" you refer to is the result of people making informed choices that you happen to disagree with. They didn't want a $400 locally knitted sweater, made from neighborhood sheep. They wanted a $40 sweater that was made as efficiently as possible, and $360 of change.
Please don't mistake your belief that you could design a better society for an actual analysis of reality.
OP's just arguing that in times of strife, we could potentially suffer because of a lack of self-reliance. He has a valid point, and should another even worse and longer lasting zoonotic(or any kind) disease spur up again, do you honestly think it's a good idea to make no steps towards developing emergency self-reliance systems in case of catastrophe? What about in times of war even, or other conflicts from upstream suppliers?
You're kinda putting words in OP's mouth and coming off as somewhat naive.
EDIT: Wow you really changed the tone and content of your comment. I'm glad you recognized the flaws in what you were saying and adjusted it, but I'm also semi concerned your original comment is your actual opinion on the matter.
Edit: it’s been pointed out to me that the above comment was thoroughly edited after posting, which puts this into better context. Sorry about the confusion
"Bring" is the wrong word here, because building up industrial capacity in US for critical sectors (including but not limited to pharmaceuticals and electronic components / semiconductors) doesnt mean destroying the capacity that exists abroad.
But yes, I do believe there should be sufficient manufacturing capacity in CONUS so that if on 1 January 2020 all the borders of the US had been closed to all goods/people indefinitely; life could continue as usual in the US: no medication shortages, no ventilator shortages, no mask/respirator shortages, and no iPhone shortages.
Right now we have China openly stating (https://twitter.com/YanzhongHuang/status/1235300037875335170) stuff like this:
> China's Xinhua News just posted a piece titled "Be bold: the world owes China a thank you", which says if China imposes restrictions on pharmaceutical exports, US will be "plunged into the mighty sea of coronavirus".
How does this make you feel?
In the end there's no substitute for having manufacturing capacity in your own country -- whether it means resiliency in the face of these sorts of events, or whether it means that second-hand/surplus/inactive tooling/consumables/equipment/experience can find its way to smaller-volume sectors and enable what'd otherwise be unprofitable. You can go to a machine shop in the US today and there's a nontrivial probability of seeing equipment that was made in the 1940s because it still works! This is the enduring power of a robust industrial base.
> How does this make you feel?
Amused. It's just saber rattling and propaganda. They've said similar things before. If they restricted exports it would hurt them too. (At one point they threatened to dump all their US treasury bonds, but that would also hurt them just as much as it hurts the US.)
Besides, plenty of other countries can make pharmaceuticals. It might cost more but we'd buy them.
If people around me can get decent jobs because of local manufacturing, if US can keep developing talents in mechanical engineering, chemical engineering, and material engineering, hell yeah, bring me the $400 sweater.
Local manufacturing is for rich people who can afford it.
If textile manufacturing became 100% local again, local wages would also rise by a similar amount. $400 wouldn't seem unaffordable for a sweater. Or the sweater would cost correspondingly less.
I understand that you think it best if the government force me to support my inefficient local textile manufacturer, my local cotton mill, and my local cotton grower. However I don't think that's best.
If we could have cheap manufactured goods and also pay living wages to the workers who produce them, we would not have outsourced.
You can produce cheap goods with cheap labor (or robots), or expensive goods with expensive labor.
Maybe sweaters will be $200 and wages will rise enough to be able to afford one every year. But we won't have $3 sweaters on Alibaba. From an environmental perspective, having more clothes than we need at dirt-cheap prices isn't all that great.
Some people may call this a reduced standard of living, and they are right from a reductive viewpoint where less stuff = lower standards. But isn't there more to quality of life than filling your closets with cheap shit you don't really need?
Note that owning fewer pieces of clothing overall doesn't significantly affect your yearly cost of clothing, it just affects your initial cost to fill out your wardrobe.
What drives up yearly costs is that most new low-cost clothing doesn't last for many wears - it either wears out quickly due to being of relatively low quality, or is eventually donated/thrown out after languishing in a closet for years.
The results are in: The overwhelming majority of consumers buy the cheapest things/services that fit their need, and they do not price in externality discounts on their own accord.
Really? In what kind of bubble are you living?
https://fred.stlouisfed.org/series/DSPIC96 (only goes back to ~1960, and the I think this is mean, not median, but also a huge enough trend that it is impossible to deny).
What does it mean that 2020 shows 15K average disposable income in the US? That the average person has 15K left once they pay absolutely necessary to subsist? I find it hard to believe.
I think most people using the word "disposable income" would use the term the way I stated. Also the post you reply to uses it in that sense, not as a relative value to taxes.
I believe this graph shows something different altogether, it simply shows wages - taxes. It has no bearing as to the purchasing power of that salary and what you could afford with it.
That's "discretionary income" you're thinking of.
However, the median American did not have more disposable income back then compared to now. In 2020, the median American has about $16763 in disposable income, whereas in 1959 (the furthest back data I could get in https://tradingeconomics.com/united-states/disposable-person...) had about $351, which inflation adjusted would be $3,120.14 in 2020 dollars (5X less).
So while globalization didn't necessarily drop the cost of sweaters, I think we can say that the median American is better off today than in the past with regards to disposable income.
If you look at the prices of ordinary things over time, I'd guess that the prices stayed relatively same. But consider the fact that while median purchasing power has 5X-ed since the 1950s, prices staying the same is a testament to the power of free trade.
Multiply this scenario across every buyer (i.e. everyone) in the domestic economy, the increased productivity has allowed for more consumption and economic growth.
Let's consider the scenario in reverse, if keeping $7.95 locally is the best policy, would you advocate someone in California to not buy goods made in Missouri? After all, labor is much cheaper in Missouri. How about someone in San Francisco not buying goods from someone in Central Valley?
An average person could build a house themselves and keep the money they would spend in their "domestic" wallet economy instead of paying some contractor. Why do we hire contractors who might live in a far away town then? It's because it's mutually beneficial. I get a house that's better constructed faster than I could ever build it, the contractor gets compensated for their money. The time and productivity I saved in that transaction far outweighs the cost paid to the contractor.
the average price of a house in 2020 is $270K for a disposable income of $16K (5.9%)
We have larger disposable income but the difference is not nearly as substantial as these other measures show. I do think that we earn more overall because we are more productive than back then.
Except that the difference was never that large and never had to be that local. What happened was that they didn't want a $42 sweater made on the same continent over a $40 sweater made on the other side of the world, because it gave back $2 in change. But monoculture and lack of supply chain diversification was never not worth $2 -- the bill just doesn't come due until it does.
And this didn't happen on its own either. This was conscious policy across the board. The first world was content to impose e.g. pollution and labor regulations locally but not impose the same requirements on the manufacture of imported goods, with foreseeable consequences to where things are manufactured.
Meanwhile China wanted to grow through exports, so they adopted policies like currency devaluation that not only made American and European manufacturing uncompetitive but even manufacturing in other countries with lower labor costs, so that many goods are now produced only in China.
It's one thing when something is produced in China but not the United States when it's also produced in Mexico, Brazil, India, Turkey, etc. It's something else entirely to make the whole world dependent on one country. And customers didn't choose this, government policies did.
American-made jeans are anywhere from $160-300. I can also buy some jeans at Levi's for $60-100.
It is not as small as you depict and also not as large as you are responding to, but it is still a very real gap.
Comparing almost boutique level jeans made in the U.S. with mass produced Levi's made elsewhere doesn't help us determine price differences in off-shoring vs. manufacturing in the U.S.
I think what we would need to know is how much would a pair of Levi's cost if all of them were produced in the United States.
tl;dr: What is, isn't necessarily what could be.
Here's a basic sweater for $3.19: https://www.alibaba.com/product-detail/women-s-autumn-clothi...
Find me one made in the US within a factor of 10 of that price.
Again, the factor of 10 thing.
https://www.amazon.com/Free-Live-Womens-Cardigan-Sweater/dp/...
You're also both times looking at sources direct from China, which are taking advantage of that Universal Postal Union treaty situation that makes it cheaper to ship from China to the US than to ship within the US. If they were paying market rates for shipping the shipping from China would itself be more than $2.90. Notice how similar sweaters on Amazon end up being closer to the price of the made in USA one (or more) even when they're made in China, because then they're being shipped from within the US. (This is also why comparing wholesale prices is more relevant; the "free shipping" that gets incorporated into the price is less of the total.)
And it's difficult to even find non-boutique apparel made in the US at this point, because most of the ones that try to compete on price rather than status then lose to China on price by a small percentage and go out of business. But the boutique prices don't represent what it actually costs to manufacture in the US, they're just the ones who can stay in business in the US.
In LA's fashion district I can find you a locally made cotton-polyester sweater for under $10, and the seamstress is making a living at that price and using quality cotton-polyester fibers rather than the scratchy cheap QA-rejects. I could probably even find an actual cashmere sweater for under $50, made out of cashmere wool.
Bare essential goods have never cost that multiple of minimum wage.
Capital wanted margins, that which they don't pass on to the consumer. How much does Apple make on earbuds, again?
Is this a good thing that our oh-so-rational society can’t even cope with such predictable problems?
I estimate truthiness of this statement at 10%
And they've delivered that by building a fragile system with too little safety margin or redundancy.
It's like building an application that can serve the absolute greatest number of requests for the absolute lowest price by having absolutely no redundancy. It looks great, until a disk fails.
> The "suicidal deindustrialization" you refer to is the result of people making informed choices that you happen to disagree with.
I wouldn't call those choices informed, it'd call them myopic. A smart, informed choice with a time horizon of 6 months can be an exceptionally stupid one with a time horizon of 30 years.
There is still lots of manufacturing of high quality here. However they're costly and smaller in scale versus overseas.
(Apologies for the nerdy analogy but this is Hacker News...)
Just like having redundant servers for your applications and backups for your data.
I'd argue that this is a feature. Economic codependence is a much safer and effective deterrent to war than mutually assured destruction.
One day there might be a pandemic which affects the West but not China, which would make outsourcing supply chains look pretty smart. You are drawing a general conclusion based on the circumstances of a single, rare event.
Besides, where is the suicide of the west here? The west has benefitted from this arrangement for decades. The west is better off with this arrangement than it would have been without it, and this pandemic would have happened anyway, and it would have disrupted supply chains anyway.
I have not yet seen any evidence that lack of western manufacturing capability has made this pandemic worse. However, there is a massive body of economic knowledge that tells us that exploiting comparative advantage increases wealth.
You can also harden your supply chain by having multiple suppliers in different countries, so a loss of any one isn't an issue. For something like Covid-19 it's near impossible to avoid disruption, but for less-global outbreaks it can be a winning strategy.
Recovery is key, so. And that is where we will see which companies did their jobs supply chain wise and which didn't.
Yeah but you'd also have all your eggs in one basket.
Ireland simply cannot make everything the way China can from scratch. It's not even an option on the table let alone some abstract trade off. Complex supply chains are the only way to achieve any meaningful economic growth.
This also affects how our economy works. We don't get the same "multiplier effect" that the US will get from a stimulus package.
I call BS. Complex supply chains are one of the ways to achieve questionably meaningful _GDP_ growth. Hopefully one of the outcomes of this crisis is that we start to question the "number go up" ethos of most conventional economists. It's true that Ireland can't make "everything" from scratch. But do they need to? Though, this becomes an almost circular philosophical discussion very quickly.
US Agriculture Exports to China = $25B US Agriculture Imports from China = $5B
Source: https://www.mda.state.mn.us/sites/default/files/inline-files...
A large quantity of imports will be used to make US domestic food as well.
The exported good is not the same as the imported one.
see: https://www.telegraph.co.uk/news/uknews/1534286/12000-mile-t...
The non-essential economy is looking at a kick in the face, but I'm not too worried about the essential economy. In the long run, I think we're going to individually remember this as an annoyance, not a catastrophe. There are some other social changes that may occur, but they're mostly going to be accounted as "social changes that were pretty much on track to happen anyhow, the Coronavirus just precipitated them a bit earlier and more suddenly".
Damn knows I'll happily stop coding and go work wherever I am told to help with this.