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Is It Time to Rethink Globalized Supply Chains?

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Re: Is It Time to Rethink Globalized Supply Chains?

#71

Post by whatshisface »

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.

They can't sell right before the next pandemic. Do you remember the attitude right before this pandemic?

Re: Is It Time to Rethink Globalized Supply Chains?

#72

Post by bkeyes »

mschuster91 wrote: post #53
bkeyes wrote: post #44

Earlier quoted context omitted.

Never heard of them. Their company setup is pretty impressive. However to say 'relies on absolutely no one else for its supply chain' is an extreme exaggeration and frankly impossible. They don't make the computers, fiber optics, switches, exchanges, or software that their web site requires to run. They don't own the fleet of trucks, boats, and planes required to get their product to their customers - or their raw ma…

> They don't make the computers, fiber optics, switches, exchanges, or software that their web site requires to run. Because they don't need to. The quality of their network setup has no, utterly no, relationship to the quality of the final product - the machines and materials however do have such a relationship and therefore it's done in-house. Additionally this vertical integration removes the incentive for a suppl…

Vertical integration can certainly be a great approach and can have many advantages. It can also limit your risk of exposure to outside events.

However, my point is and was that controlling your whole supply chain is impossible.

Computers are critical to everyone's supply chain, including YKKs. If they aren't and YKK can fall back to pen, pencil, and paper then they are dependent on those manufacturers and industries.

Again every business and every one is DEEPLY dependent on hundreds if not thousands of others.

Re: Is It Time to Rethink Globalized Supply Chains?

#73

Post by VikingCoder »

I highly recommend the Daniel Suarez novels Daemon and Freedom. They start with a (computer) virus taking over the world, and end up asking all kinds of interesting questions about long supply chains and how much we should trust in government and big business.

Re: Is It Time to Rethink Globalized Supply Chains?

#74

Post by wongarsu »

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…

We had the same problem back in 2011 when floods in Thailand wiped out almost all of the world's hard drive manufacturing capacity across all manufacturers. It took almost two years for prices per GB to fall back to pre-flood levels.

Relying on only one country seemed as foolish then as it seems now, but we haven't learned the lesson yet.

Re: Is It Time to Rethink Globalized Supply Chains?

#76

Post by _jal »

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.

You might be right over the long term, we don't know yet. Related observations have been made - people used to talk about how countries with MacDonald's franchises never went to war.

But it does open up avenues for conflict less intense than invasion. The term 'weaponized interdependence' has recently been coined for this. An exploration:

http://henryfarrell.net/wp/wp-content/uploads/2018/05/Weapon...

Re: Is It Time to Rethink Globalized Supply Chains?

#77

Post by kepano »

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…

It depends on the type of product you're sourcing. I run Lumi.com which offers high redundancy to our customers, but we are a marketplace for packaging/collateral which are highly commoditized products. For manufacturing techniques that are more specialized doing this at scale can be much more challenging, because vetting, implementing training, QC, etc, has a high upfront cost.

https://www.lumi.com/features/source

Re: Is It Time to Rethink Globalized Supply Chains?

#78

Post by thaway757383884 »

If we are making changes solely on the basis of COVID-19, then isn’t the lesson that whatever you do, make sure you’re manufacturing and hiring people in China? (Or South Korea).

I mean, China was the first one affected by this, and after a few weeks of covering up (something western countries like the US also engaged in despite having already witnesses the negative effects of COVID in other countries), China took swift and drastic action (the kind which other countries may not even be able to do legally) and got the situation under control.

The US, on the other hand, is gonna be shut for months, and if the global supply chain was dependent on the US we would likely have been even more screwed.

Re: Is It Time to Rethink Globalized Supply Chains?

#79

Post by jaywalk »

fnord123 wrote: post #65
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…

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.

No, Italy doesn't need to manufacture microprocessors. But Italy should be able to source microprocessors from more than one country.

Re: Is It Time to Rethink Globalized Supply Chains?

#80

Post by riversflow »

AnthonyMouse wrote: post #31
fennecfoxen wrote: post #15

The problem is that almost no one buys products based on the stability of the supply chain, so irresponsibly-global supply chains will beat out responsibly-global ones on price. The problem is our tools to addressing this are either (a) some sort of tariff arrangement, which will almost certainly be political footballs far more than they will address any real problem, or (b) some regulatory/compliance arrangement, wh…

There is a third option. Apply the same regulations to the manufacture of all products sold in your country. You want to manufacture in China and sell in the US, that's fine -- but you have to do it in accordance with US environmental rules. That does two things. One, no more cost advantage to global manufacturing in whatever place has the least respect for the environment, which lets others compete better and remove…

I've been advocating this strategy for years having direct experience in a highly regulated manufacturing sector business. I like to put it this way: The US has the responsibility to protect the world from the (externalities of competing in the) largest consumer market to ever exist. We currently do a pretty good job at protecting ourselves from that market, not just with environmental laws as you mention, but with safety and worker's compensation laws as well, but it is frankly a travesty to think that our current strategy is "good" by any definition but an entirely economic one, and as we are seeing now with this pandemic, even that is dubious. There is still an enormous toll on the environment and on our shared humanity when we allow business to off-shore their dirty practices, not to mention the loss of domestic security. Climate change and the Holocene extinction show that the externalities of business are everyone's problem, and we should start acting like it.
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