It’s strange that this happened. Did COVID just cause everyone to stop investing for a bit, leading to all these downstream problems? Or was this gonna happen anyway?
On top of that, can the Banana grower even get all of the items needed to grow the same sized crop as last year? All of the fertilizers, etc.? Those companies have been shut down during this time too. Oh, you're not the only company who needs those exact same supplies and the Potato farmer down the road is trying to purchase it too? After you've grimaced that the price has risen due to short supply and you had to source the items from 3x as many suppliers as you used to, now, you're relieved that your Bananas are almost done growing. You call the trucking company to deliver them to the distributor, who you learn is short staffed and prices have risen in order to attract truckers who are now in short supply, and factor in the gas price increases. Every single segment of the economy that the Banana grower relied on is going through the same thing, at the same time.
Making chips is several orders of magnitude harder/more complex than growing Bananas. Think about how many different companies products must be purchased to make a wafer. How many different highly specialized chemicals are used in addition to solid materials? If any single one of them is having supply or labor issues...
On the flip side, rather than demand decreasing as auto manufacturers expected, it actually spiked, and automotive manufacturers demanded more chips and were willing to pay $$$ for it. So other industries that use chips and accurately forecasted their demand were now bidding against automotive manufacturers for that fab capacity.
Supply chains in general are in shambles. We had mass COVID outbreaks at the ports that shut down unloading, as well as outbreaks at see. Truck drivers are quitting because it ain't worth their while anymore. Countries closed their borders. Patterns of consumer demand changed, so all the containers got stuck in North America.
Chips are the most obvious manifestation of this because the supply chains for them are long and complex, but we're going to see it in many other products as well once inventory buffers run out.
In the UK, the situation is even worse: because there is an acute shortage of truckers to truck pigs from farms to slaughterhouses and a lack of butchers, 100k pigs are set to be killed and burned - they simply grow each day, and butchers have limits on how big/heavy the pigs may be: https://www.dailymail.co.uk/news/article-9958663/Farms-set-k...
Turns out, no one but immigrants wanting to send or set aside money for their home country wants to do the job for the wage the companies are paying. And companies can't pay better wages because customers are conditioned on cheap meat. And politicians haven't done anything to curb that because tolerating rising food prices is one of the fastest ways of not getting reelected.
Brexit really hit at the worst possible time, and now innocent pigs have to suffer for society's failures. What a damn tragic waste.
They were going to be killed no matter what. I don't think it matters much to the pig what happens after it's dead.
When you abuse animals for nothing then you are basically killing for sport.
But since humans don't need to eat animals, I don't see much difference ethnically between killing them because they taste good vs for no reason. If anything, that seems to be more about welfare of the human psyche than welfare of the animals.
Are customers conditioned to cheap meat, or no meat? These customers surely live in a market economy, and understand that no matter how much they may bitch on Facebook, prices... Fluctuate..?
The reason nobody wants to raise wages during a labour shortage isn't because they are afraid of hiking prices. Prices hike up all the time. It's because they are afraid of being stuck with high wages after the labour shortage ends. Wages are stickier than prices, and are much more difficult to lower.
To cheap and always available meat. Throughout history, a rise in wealth has been closely correlated with a rise in meat consumption (as seen e.g. in China, https://www.theguardian.com/environment/2008/may/30/food.chi...).
> These customers surely live in a market economy, and understand that no matter how much they may bitch on Facebook, prices... Fluctuate..?
And politicians are highly afraid of the public bitching on food prices. Revolutions have often begun with a public pissed off about food prices!
> It's because they are afraid of being stuck with high wages after the labour shortage ends.
The never ending history of "corporate whining": http://leftycartoons.com/2009/09/04/a-brief-history-of-corpo...
-- But chip manufacturers didn't shut down. That's even close to the immediate cause, which was that the anticipation of changed future demand on the part of other manufacturers lead to them decreasing and change future orders. If you're going to ELI5("explain this to me like a five year old"), at least give some reasonably analogous situation, jeesh.
I mean, I think people understand that supply takes some time to catch up with demand when you have a complex, interdependent economy. But the adjustment to this shock has taken longer than seems reasonable or seems like happened in the past so more data than X has to adjust for Y which has to adjust for Z is appropriate.
https://www.taipeitimes.com/News/biz/archives/2021/03/30/200...
https://www.statesman.com/story/business/2021/04/30/austin-f...
[1] The examples you cited suffer from confirmation bias - a plant shutting down due to a fire when there isn't already a chip shortage, would not really make the news. And if it did, you wouldn't be actively looking for it!
It hit me that the problem is the whole global system is now just one big Just-In-Time (JIT) system built from smaller JIT units of industry which is a collection of yet more JIT factories.
It's JIT all the way down!
And JIT doesn't work well when the spice isn't continuously flowing.
One car example, you should ensure you have 4 times as many tires available as you do cars, because an imbalance there becomes either a constraint (too few tires) or a waste (too many tires). But it's not JUST making those numbers match, you have to forecast, how many cars and I going to build, are my supplies for the cars ok, look at normal fluctuations, and then also look at potential supply chain FAILURES and plan for them. Maybe it's easy to get brake pads but the lead time on tires is 4 months. Well then, I don't need to stock as many brake pads in case of a disruption, but I should definitely have enough tires to carry me through a potential disruption (maybe not 4 months worth, maybe I stock 2 and slow down car production, or something).
All these companies kept their shelves bare, and when some companies slowed orders, they didn't stop to think that the manufacturers they bought from would look for other customers to take up capacity. They acted like TSMC would sit there by the phone waiting for some customer to come back. No, they're in the business of selling chips, not in the business of servicing DumbCorp. No one planned for what might happen if they stopped ordering parts, they just expected the capacity to be there.
I'm bringing 6 new sites online this year, and a 7th early in the new year. I just bought a bunch of network equipment for not just our existing sites, but the 7 to come. I looked at supply chain issues, and said to my CFO, this inventory is going to sit here for 6 months, but we get a larger quantity discount, and we'll get the new sites online faster and not worry about getting this equipment if we buy now. We COULD have saved that money now, but the advantages of having it when we need it is greater than having that money in the bank for 6 more months.
JIT means planning ahead, not just micromanaging inventory. Too many MBAs don't get that.
Maybe we all have something to learn from Doomsday preppers.
A little, but really just implementing the Toyota Production System properly. You'll never be perfectly prepared for everything, but a lot of the mess over the past 18 months of supply chain problems could have been avoided. In my personal life, I am NOT a prepper, but the way I stock my house, I had no issues with toilet paper, meat, or other weird shortages. I look at what I have no, what I'll need adn when, and how things are going. I didn't look for TP when I was out, I looked for it a week or two ahead of time.
But as with most such systems, others only implemented it partially and thus in a way that in the end creates problems.
One immediate cause was that some manufacturers reduced their chip orders month in advance since they expected less demand but then the demand didn't decrease and they had to scramble, increasing general demand. Another immediate cause was that Covid has made some production lines shutdown or become unreliable.
But the reason that now a year or more on, we have problems, seems require more explaining. Larger causes I've heard; The chip supply chain is extremely long, long enough so you get a whipsaw effect or anti-whipsaw effect. A whipsaw effect means by the time demand catches up with supply, it goes beyond it and manufacturers lose money. But what seems to be happening is an anti-whipsaw effect - suppliers are avoiding any panic measures to catch up with demand and so lose money but this means the catching up is a long process.
This is something of a product of a highly capital intensive economy pushing manufacturers to only produce, invest and consume in a narrow range. Limiting investment in capital equipment is a way to make the investment you make is 100% utilized. Limiting consumption to the lowest priced items is a way to make sure all of your production is profitable. It seems like a new phenomena. Instead of a "deflationary spiral" these factors pushed to their extreme could result in a "decreasing production spiral" where physical continually declines despite demand. We're not there yet, of course but it seems like an interesting economic phenomena.
Then COVID triggered a collapse of nearly all JIT supply chains (not just medical). Try getting ANY industrial or consumer product - the supply chains are all broken right now. Some of this is China intentionally fxcking us. Some of it is over dependence on outsourcing. Most is due to inherent instability of JIT as a fundamental flaw that's long been ignored.
Many supply chains have both short and long feedback loops to themselves. For example ALL the equipment required to increase semiconductor capacity always require the very same semiconductor supply chain capacity (chip making requires chips being made).
IMHO a strong mitigation strategy includes (1) have control of your designs (be responsive to your business environment) (2) minimize vendor-specific components (replace sexy ICs with stock-components where possible) (3) keep tested alternatives on the books for major components (redundant supply chain) (4) cache parts where necessary
The guy who runs my local bike shop is saying they still won't have enough bikes next year.