Is It Time to Rethink Globalized Supply Chains? • Hacker News Board

Re: Is It Time to Rethink Globalized Supply Chains?

#61

Post by throwaway2048 » Thu, Mar 19, 2020, 4:01 PM UTC

rileymat2 wrote: post #54

toss1 wrote: post #46

Earlier quoted context omitted.

Exactly! I have always thought it was insane from a national security perspective to allow functionally all of key manufacturing capabilities (e.g., microprocessors) to go offshore. Nevermind the risks of inserted backdoors, etc, just the external sources of failure rapidly become too great. Yes, this would require subsidies & regulations, and be on a quarter-to-quarter and in most fiscal years "inefficient" use of c…

> I have always thought it was insane from a national security perspective to allow functionally all of key manufacturing capabilities (e.g., microprocessors) to go offshore. I am not sure, a completely dependent world may make us safer as wars will very hard to execute.

https://en.wikipedia.org/wiki/The_Great_Illusion

Interdependence, even to the point that war is utterly ruinous with no upside, is no guarantee war wont happen, don't make the mistake most people in Europe did before WWI

Re: Is It Time to Rethink Globalized Supply Chains?

#62

Post by cmrdporcupine » Thu, Mar 19, 2020, 4:01 PM UTC

Not sure about global shipping concerns, but I do think that 30 years of companies optimizing for Just In Time delivery in order to avoid the risks of excess inventory has made us prone to shortage crisis when 'excess' inventory is needed.

I'm in the situation of being able to buy whatever luxury goods I want, but getting staples like canned meat and bread and rice and toilet paper requires lining up, virtually or physically.

Re: Is It Time to Rethink Globalized Supply Chains?

#63

Post by nxc18 » Thu, Mar 19, 2020, 4:01 PM UTC

toss1 wrote: post #46

tvanantwerp wrote: post #36

I feel like the problem is less that supply chains are globalized, and more that they aren't redundant. By that I mean, there's too much reliance on China as the primary producer/exporter for countless industries and products. Having just one nation account for such a large share of manufacturing introduces single points of failure. It would be wise to have multiple sources for any given good, especially if it's esse…

Exactly! I have always thought it was insane from a national security perspective to allow functionally all of key manufacturing capabilities (e.g., microprocessors) to go offshore. Nevermind the risks of inserted backdoors, etc, just the external sources of failure rapidly become too great. Yes, this would require subsidies & regulations, and be on a quarter-to-quarter and in most fiscal years "inefficient" use of c…

Its pretty clear at this point that the shareholder value revolution has been a disaster for many people and the planet.

Today, a few generations of people are unfamiliar with the idea that a corporation could act in ways that are consistent with the good of the community, or optimize for long-term growth, value & sustainability.

https://review.chicagobooth.edu/economics/2017/article/it-s-...

Re: Is It Time to Rethink Globalized Supply Chains?

#64

Post by alexose » Thu, Mar 19, 2020, 4:02 PM UTC

tvanantwerp wrote: post #36

I feel like the problem is less that supply chains are globalized, and more that they aren't redundant. By that I mean, there's too much reliance on China as the primary producer/exporter for countless industries and products. Having just one nation account for such a large share of manufacturing introduces single points of failure. It would be wise to have multiple sources for any given good, especially if it's esse…

In my experience, it's not that companies are choosing any one strategy over another. It's more that companies have no idea what their supply chain actually looks like. Only that the widgets show up at their loading dock every week, and that the shipments have always been reliable in the past, so that there's no reason to look any further.

There are often strong disincentives, as well. Nike, for example, got themselves into trouble when parts of their supply chain became public. Many more companies regard their unique supply chain as a competitive advantage. So, even if you should take up the time, effort, and expense to research your own supply chain, there's a high likelihood that your upstream vendors will have no interest in sharing their suppliers with you.

There are exceptions to this. Reportedly Apple has excellent supply chain visibility, but they've achieved it at great effort.

(I'm by no means an expert, but I used to work for sourcemap.com, an MIT startup based around the idea of understanding supply chains end-to-end.)

Re: Is It Time to Rethink Globalized Supply Chains?

#65

Post by fnord123 » Thu, Mar 19, 2020, 4:03 PM UTC

toss1 wrote: post #46

tvanantwerp wrote: post #36

I feel like the problem is less that supply chains are globalized, and more that they aren't redundant. By that I mean, there's too much reliance on China as the primary producer/exporter for countless industries and products. Having just one nation account for such a large share of manufacturing introduces single points of failure. It would be wise to have multiple sources for any given good, especially if it's esse…

Exactly! I have always thought it was insane from a national security perspective to allow functionally all of key manufacturing capabilities (e.g., microprocessors) to go offshore. Nevermind the risks of inserted backdoors, etc, just the external sources of failure rapidly become too great. Yes, this would require subsidies & regulations, and be on a quarter-to-quarter and in most fiscal years "inefficient" use of c…

It is insane to think that every country must have their fully end to end supply chains. Italy doesn't need to manufacture microprocessors despite the backdoors that Intel tries to introduce.

Re: Is It Time to Rethink Globalized Supply Chains?

#66

Post by carapace » Thu, Mar 19, 2020, 4:04 PM UTC

In re: "Black Swans" the articles says:

> But over the past decade, we have had a number of black swan events.

which links to this: https://sloanreview.mit.edu/article/the-science-of-managing-...

> To a risk manager, “black swan” phenomena are highly unlikely events that have massive impacts on a business or society on the rare occasions they occur.

But the whole point of the "Black Swans" is that they are both unpredictable and we forget about or rationalize them away after the fact.

https://en.wikipedia.org/wiki/Black_swan_theory

Pandemics aren't unpredictable. This virus isn't a black swan it's just a large white swan.

If we manage to cope with it well enough to keep things more-or-less stable and then forget about it then it's a black swan.

- - - -

We could and should know better. You watch Star Trek and they're always beaming down to random planets in their shirt-sleeves, no space suits. Meanwhile, in the real world, we are expanding our "attack surface" (there are more of these viruses out there, as we invade more wild areas we will encounter more viruses) while weakening our systemic defenses (cheap international travel, extended supply chains).

Re: Is It Time to Rethink Globalized Supply Chains?

#67

Post by BoiledCabbage » Thu, Mar 19, 2020, 4:04 PM UTC

cs702 wrote: post #56

As others here have mentioned, during normal times, companies have strong economic and competitive incentives not to invest in expensive, redundant, inefficient infrastructure that is robust to rare events.[a] This is true of financial companies too. For example, banks that are run to survive rare events like global pandemic or world war cannot compete with banks that ignore the possibility of such events during norm…

> This is true of financial companies too. For example, banks that are run to survive rare events like global pandemic or world war cannot compete with banks that ignore the possibility of such events during normal times.

The opposite can't be allowed to continue. Spending heaps on stock buybacks to then months later be completely out of cash.

> Take McDonald’s. With $21.1 billion in revenue last year, it ended 2019 with only $898.5 million in cash on its balance sheet, a little more than two weeks’ worth of sales. Considering that the fast-food chain, which owns more than 2,600 stores, franchises 36,000 more and employs 205,000 people, generated $5.7 billion in free cash flow last year, it could have as much cash as it wants. Instead, McDonalds’ bought back $4.9 billion worth of stock in 2019 and paid another $3.6 billion for its dividend, almost exactly the $3.24 billion the company borrowed last year.

This is a joke. It borrowed 3.2 billion to pay a 3.6 billion dividend? And now it's CEO is meeting directly with the president to argue how enforcing paid sick time off due to coronavirus is a bad idea because it will hurt businesses too much. The system is so broken there are barely words.

https://www.cnbc.com/2020/03/17/crash-shows-major-corporatio...

Re: Is It Time to Rethink Globalized Supply Chains?

#68

Post by nxc18 » Thu, Mar 19, 2020, 4:04 PM UTC

hello_moto wrote: post #48

whatshisface wrote: post #37

Earlier quoted context omitted.

Another possibility: don't do any industrial bailouts and let high-risk investors take their medicine. Next time, risky businesses will find it more expensive to get capital, as investors realize some things they weren't thinking about before.

There are reasons why US prefers to bail Boeing. US is always concerned about espionage and dependencies on other countries with respect to national interest. An example would be the whole Huawei+5G debacle. What if Boeing goes bankrupt and the only reliable plane makers are PRC companies (usually state-backed, even if it's not explicit)?

Boeing needs to be broken up. Parts critical to national security can be federalized. The rest can be restructured to restore competition to the market and eliminate the 'single point of failure'.

Boeing's efforts to consolidate the entire US aerospace industry into one company have hurt our society.

https://en.wikipedia.org/wiki/Category:Boeing_mergers_and_ac...

Re: Is It Time to Rethink Globalized Supply Chains?

#69

Post by [deleted] » Thu, Mar 19, 2020, 4:04 PM UTC

admax88q wrote: post #57

whatshisface wrote: post #43

Earlier quoted context omitted.

If investors can comprehend the 30-year T-bill, then they can price in a bankruptcy expected 30 years in the future. If we can sit here and figure out on our own that a business that will fold if its revenue decreases by 10% for longer than a month is not worth as much as its P/E ratio would naively suggest, then surely other people can figure it out too.

If you can have 30 years of better returns and try to sell right before the next pandemic, you can bet most investors will go for that. People already invest on much shorter timelines than 30 years.

[deleted]

Re: Is It Time to Rethink Globalized Supply Chains?

#70

Post by wtdo » Thu, Mar 19, 2020, 4:05 PM UTC

rileymat2 wrote: post #54

toss1 wrote: post #46

Earlier quoted context omitted.

Exactly! I have always thought it was insane from a national security perspective to allow functionally all of key manufacturing capabilities (e.g., microprocessors) to go offshore. Nevermind the risks of inserted backdoors, etc, just the external sources of failure rapidly become too great. Yes, this would require subsidies & regulations, and be on a quarter-to-quarter and in most fiscal years "inefficient" use of c…

> I have always thought it was insane from a national security perspective to allow functionally all of key manufacturing capabilities (e.g., microprocessors) to go offshore. I am not sure, a completely dependent world may make us safer as wars will very hard to execute.

That's true so long as everyone is dependent on each other. If, everyone is dependent on one country, that doesn't hold

China has a near monopoly on a lot of production. Countries that depend on them certainly won't go to war with them, but that doesn't hinder China from starting a war with those countries, and even gives them an advantage. And it doesn't stop dependent countries from warring with each other and that could even be beneficial to China.

N.B. I use China as an example only. Replace China with any country that might have a near monopoly on production of some kind. The point I'm trying to make isn't "ahhh China scary", it's that interconnectedness may only prevent war if it's actually interconnected, and not a monopoly.