You can sit there in your academic cubbyhole at MIT and rethink all you want; at the end of the day, you need something from halfway across the word that they don't make here, or not at the price you want or other requirements.
Is It Time to Rethink Globalized Supply Chains?
151–160 of 322 posts
Re: Is It Time to Rethink Globalized Supply Chains?
#152Definitely time to rethink globalized supply chains. The centralization inherent to this obsession with efficiency is simply not resilient to disruptions. We learned to build redundancy into our food production to handle disruptions like, centuries ago, which is (partly) why we pay farmers to produce more food than we technically need. We don't invest much to keep manufacturing of some other critical goods domestic.…
Farming is not a good comparison to manufacturing when it comes to overproduction. Food can be eaten or processed/preserved to be eaten later. Some foods have elastic demand but in general food doesn't since we all need to eat.
With a lot of manufactured items demand is far more elastic and any given manufactured item isn't necessarily a substitute for any other. If Intel or AMD overproduces higher power desktop CPUs but there's market demand for low power laptop CPUs or ARM SoCs...the oversupply isn't going to spur any demand. Even if the oversupply depresses prices on those chips and desktop systems, they're not portable or phones so there's no useful substitution.
Managing production volumes and forecasting demand is a huge aspect of modern manufacturing. Responding to demand quickly is one of the reasons manufacturing consolidates geographically. If a production line needs Component X at volume Y to keep moving, they can't wait weeks to get that supply. Too much surplus of components is also a problem because those all need to be stored until used. So the most economical configuration tends to be shipments of sub components feed almost directly into component manufacture lines that feed into packaging which feeds into shipment and distribution. That's difficult or impossible to accomplish if your supply chain is geographically dispersed.
Slower and less dynamic supply chains aren't necessarily better at responding to crises since the production schedule of whatever will have been set well before the onset of whatever crisis. Responding to the crises then takes longer since extant component supplies likely don't match the crisis production needs.
You can see this right now with industries the produce regulated/qualified products like medical supplies. A random factory can't just supply medical grade components. Without proper quality controls, sterilization, or batch tracking those items can end up more dangerous than not having them. Face masks that are ineffective due to manufacturing issues can get healthcare workers sick or spread disease to uninfected but at risk populations.
I'm not saying JIT manufacturing is a panacea or that it's a good thing China has such a lions share of commodity goods manufacturing. But the solution to supply chain issues is more complicated than just building factories. Many companies are also simply unwilling to take a profit hit by diversifying their supply chains or moving to longer production cycles.
Re: Is It Time to Rethink Globalized Supply Chains?
#153Earlier quoted context omitted.
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 themselv…
They have a complete idea, its just that the globalized option is cheaper, even fractions of pennies cheaper, and is directly measured in the profit margin, while the risk, if it shows up at all, is buried in the footnote of a 10-Q or annual report. Ideas like regionalization and flexible manufacturing are great ideas, in most cases, the capital machinery of factories are relatively easy to replicate and setup (harde…
They could introduce some new GAAP rules like...
Add 10% of the value of all inventory sourced outside North America as a "risk liability". Same for 10% of yearly labor that's outsourced.
Basically find ways to make short term thinking visible in their financial reports, since that's what's measured and rewarded.
Re: Is It Time to Rethink Globalized Supply Chains?
#154I 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 themselv…
> based around the idea of understanding supply chains end-to-end
if you know more companies / projects in this area, I would love to know. It's of course wiser and easier to do b2b in this space, but there's also the dual problem from the consumer side of getting to know the supply chain.
It would be so great to have a portal where I can scan a barcode and get to know the whole chain of production.
Re: Is It Time to Rethink Globalized Supply Chains?
#155I 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…
How do you build in redundancy, though? If China makes widgets for $0.13 a unit and the US makes widgets for $0.15 a unit, how do you incentivize people to buy some of them from China, and some of them from the US? It seems like the logic of free trade and specialization dictates it's mostly all-or-nothing. That's a genuine question, by the way. I'm curious.
The incentive has already been created by Covid-19 exposing the vulnerabilities and need for decentralization. Diversification will emerge such that the next time there is a shock companies that diversified will survive, while others fail. Some industries will not learn because they will be bailed out, others like consumer electronics have probably already learned their lessons.
Re: Is It Time to Rethink Globalized Supply Chains?
#156We in the manufacturing tech space have been thinking a lot about reconfigurability, beyond just 3D printing locally, but to how do you tool up (make molds, program machines, etc.) automatically akin to a deploy script, Docker container, etc. These analogies are no where in the current paradigm, but if we have them, we could quickly allocate work across the manufacturing space to get stuff made far quicker. The mater…
I looked through it but couldn't understand what the proposal is from the pictures. A blog post would be more helpful.
Re: Is It Time to Rethink Globalized Supply Chains?
#157Earlier quoted context omitted.
How do you build in redundancy, though? If China makes widgets for $0.13 a unit and the US makes widgets for $0.15 a unit, how do you incentivize people to buy some of them from China, and some of them from the US? It seems like the logic of free trade and specialization dictates it's mostly all-or-nothing. That's a genuine question, by the way. I'm curious.
The incentive has already been created by Covid-19 exposing the vulnerabilities and need for decentralization. Diversification will emerge such that the next time there is a shock companies that diversified will survive, while others fail. Some industries will not learn because they will be bailed out, others like consumer electronics have probably already learned their lessons.
How will diversified companies survive till before the shock, given consumer preference for lower prices.
Re: Is It Time to Rethink Globalized Supply Chains?
#158The 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…
How does one enforce this effectively? Are companies required to self-regulate (chuckle), or does this require massive supply chain transparency?
Re: Is It Time to Rethink Globalized Supply Chains?
#159Earlier quoted context omitted.
> And RFID would just have replaced bar codes, so no process changes necessary for a first implementation. There would have been changes necessary. RFID chips fall as electronics under RoHS and probably regional/national recycling regulation which means that their introduction into products would cause an enormous overhead. Additionally chips cost at least 10ct each in bulk which means for a lot of 1m units you would…
Yeah, especially price is a major obstacle. A barcode costs nothing and does the job.
Not only do barcodes do the job but better and cheaper image sensors and processors allow even 1D barcodes to be read at greater distances and from multiple angles. This was one of the promises of RFID, pallets could just stream off a truck and their ID could be read by some fixed reader on the loading dock. A robot could zip past shelves and take stock of everything.
Better barcode reading allows a lot of the same advantages for none of the marginal cost or dealing with extra regulation. Even handheld barcode scanners are starting to use cameras rather than lasers because they're more flexible.
Re: Is It Time to Rethink Globalized Supply Chains?
#160Earlier quoted context omitted.
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
Wow, published in 1909. Amazing how old (and wrong) this "economic mutually assured destruction" argument is. I think it's popular today as a distraction from the fact that the American Empire is really held together by military occupations in Europe, Asia, the Middle East, Latin America etc. and not economic ties. Obviously "we just want to make you rich" is much nicer sounding than "we will bomb you if you resist U…
There are a lot of unsettling parallels between the era before WW I and today:
A major rising power that feels it is being denied its "rightful place" in the world order by the existing power brokers (Germany vs the UK/ China vs the USA) lead by a hardline leader that isn't interested in compromise (Kaiser Wilhelm II/Xi Jinping)
A series of interlocking mutual defensive pacts that will automatically draw nations into war (The alliance of the UK, France and Russia vs Germany and the Austria-Hungary Empire/NATO vs China and Russia)
Regional fighting that is close to leading to direct confrontation between said power blocks (The Balkans/Turkey and Syria)
Rising Globalism and trade interdependance, along with rising nationalistic rhetoric and jingoism, and intense competition for influence in 3rd party states (The scramble for africa/Africa and south east asia and former CIS states).
The major powers slept walked into a horrible war because the rising tensions made it inevitable, and nobody took heroic steps to stop it, sadly it looks like it might be happening again.
Nobody wanted a ruinous war, and most people thought that there was no way a war could really occur or at the very least be sustained due to the need for trade. (Germany at the start of WWI was critically short on stuff like gasoline, fertilizer and the raw materials for gunpowder)
It Happened anyways.
Don't think for a second it can't happen again.