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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?

#291

Post by eru »

asdfman123 wrote: post #208
shas3 wrote: post #155

Earlier quoted context omitted.

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.

What I mean by incentive is the concrete, day-to-day purchasing decision incentives. I know why it might be a good idea, I just don't know how people could accomplish it.

Perhaps it is _not_ a good idea?

We don't generally make our roofs asteroid impact proof, either.

Re: Is It Time to Rethink Globalized Supply Chains?

#292

Post by eru »

dredmorbius wrote: post #281
eru wrote: post #279

Earlier quoted context omitted.

Or from reputation. A company with a reputation for quality can charge more, because you don't need observers and can just rely on them. And they want to deliver on the reputation, so that they can keep milking it.

The value of trust. JS Mill has some interesting observations going back a ways. Auditing is still recommended.

Definitely, auditing is one way to speed up the process.

Ignoring auditing for a moment:

The trustworthy reputation is quicker to build, if the quality of the product is easy to ascertain quickly.

But if you are a company in a sector where that's not possible, the reputation for quality becomes even more valuable.

And you can potentially ride it out for a long time in an exit scam. https://en.wikipedia.org/wiki/Exit_scam

Re: Is It Time to Rethink Globalized Supply Chains?

#293

Post by shalmanese »

This is what people were talking about in the beginning of the pandemic but, if anything, all this has taught us is we should invest even more deeply in global supply chains. If US made most of the masks that the US needed, then we would be shutting down all of our mask making factories right when we needed them. Because China makes our masks, China can buy global masks while they were locked down on a pandemic and now they can turn around and be the factory for the world while everyone else desperately needs masks.

What we should be wary about is Single Points of Failure but we should be worried about that regardless of what the supply chain looks like.

Re: Is It Time to Rethink Globalized Supply Chains?

#294

Post by dredmorbius »

eru wrote: post #284
dredmorbius wrote: post #269

Earlier quoted context omitted.

Base those premiums on verified actuarially based underwriting risk and you might be on to something.

Companies are free to add them to their accounting already. Mostly these kinds of risk factors are mentioned verbally in their reports at the moment.

Entities tend strongly to externalise risks unless compelled to do otherwise.

Insurance obligations -- auto, health, life, C&L, bonding, mortgage and title -- are generally required by or offered via third. parties. Sometimes governments, but often creditors, counterparties, employers, or other entities.

Re: Is It Time to Rethink Globalized Supply Chains?

#295

Post by fnord123 »

jaywalk wrote: post #79
fnord123 wrote: post #65

Earlier quoted context omitted.

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.

Absolutely. But toss1 was saying something else. Likely from an Imperial US perspective.

Re: Is It Time to Rethink Globalized Supply Chains?

#296

Post by TeMPOraL »

wolco wrote: post #194
vibrolax wrote: post #143

Earlier quoted context omitted.

The value of robust and redundant supply chains only becomes manifest when serious disruption actually occurs. In vast swaths of both the consumer and industrial economy, the supply chain bean counters have tolerated no argument for choosing anyone besides the low cost supplier. Cost optimizations were the only rewarded metrics.

Sure they can. If every 10/20 years we have an event like this source prices could be 5% higher.

Except they won't, because 10-20 years is way beyond the horizon for most companies and most investors.

Re: Is It Time to Rethink Globalized Supply Chains?

#297

Post by spaceknarf »

aembleton wrote: post #252
swsieber wrote: post #42

Earlier quoted context omitted.

There's a fourth option: close down all U.S. trade ports for a month once a year. No paperwork or other administrative headaches. "Just" a dry run once a year.

That'll just mean stockpiling before the month it gets closed.

Not if it's unknown _which_ month. Then you'll have to keep a stockpile year round, which is precisely the objective of grandparent.

Re: Is It Time to Rethink Globalized Supply Chains?

#298

Post by quanticle »

danans wrote: post #270
quanticle wrote: post #167

Earlier quoted context omitted.

It's fundamentally unable to protect itself against black swan events, because they're (by definition) outside of its optimization horizon. I agree with your conclusion, but I want to push back on the assertion that COVID19 was a "black swan". Pandemics (especially pandemics such as this one) are not black swans. Numerous experts saw predicted them. There were examples of similar events in the recent past (for exampl…

> Pandemics (especially pandemics such as this one) are not black swans. Numerous experts saw predicted them. Black swans aren't necessarily unpredicted. In fact they are usually predicted by a few people, but the predictions run so counter to the interests of established set of systems and models, that they are ignored. In the book, Taleb actually spins a story about an individual who spends his entire life predicti…

I guess we have different standards as to what counts as a "black swan". To me, a black swan is an event that is genuinely unpredictable, and which has catastrophic consequences. A large earthquake in California, for example, is not a black swan. Even though we may not know exactly when the earthquake will hit, we know that one is coming eventually, and therefore reasonable preparations should be taken in order to mitigate the damage.

An earthquake in Kansas, on the other hand, would be a black swan. Kansas is not in what we currently understand to be a seismically active region, and thus I don't think it's reasonable to expect Kansas to have the same level of earthquake preparation as California (and vice versa for tornadoes).

In this instance, I think the pandemic was a reasonable thing to anticipate (even if no one could have predicted the actual timing or cause). There were airborne viruses which had made the jump to humans from a wild reservoir in the past. While previous examples were more deadly and less transmissible, the current outbreak was not, as I understand it, far outside the confidence intervals that epidemiologists predicted.

An example of a black swan in this instance would have been an organism that was as contagious as SARS-NCOV-2, but as deadly as Ebola. That would have broken many of our models (which hold that transmissibility is inversely correlated with deadliness). It would have caused us to significantly reconsider our models of viral evolution and disease mechanisms. In contrast, the current outbreak hasn't really caused anyone to reconsider their models of epidemiology. It's played out largely as many epidemiologists warned.

For that reason, I don't think the current outbreak is a black swan, and I think that many of the people calling it a black swan are doing so as an excuse to dodge responsibility for failing to prepare. It's as if I failed to secure my shelves in California, and then when an earthquake hit, and all my crockery spilled to the floor, I claimed that it was a "black swan", because no one could have predicted the specific timing of this earthquake.

Re: Is It Time to Rethink Globalized Supply Chains?

#299

Post by quanticle »

invalidOrTaken wrote: post #261
robocat wrote: post #215

Earlier quoted context omitted.

I suspect robustness simply doesn’t work over periods of greater than a few years of competition by a vulnerable supplier. A few examples: 1. the US has built up it’s oil producing capability. If the Saudi’s keep prices low, then everything will be mothballed. So the ecosystem of businesses and skilled staff supporting the US oil industry will massively degrade quite quickly. It can’t be ramped up quickly later. 2. H…

I think it can work, just not by crowd-sourced, incentive-based decision-making. Steve Jobs can do what Apple shareholders cannot, etc.

The problem is that if Steve Jobs fails to demonstrate returns commensurate with his peers, Apple shareholders can and will oust him and replace him with another CEO who will "cut the fat" in order to boost Apple's profitability.

It's easy to look at Steve Jobs and Jeff Bezos and think that a sufficiently charismatic CEO can use his or her "reality distortion field" to hypnotize investors, but it doesn't work like that over the long run. The reason investors had such patience with Jobs and Bezos is because they were demonstrably increasing their companies' market share and profitability, respectively. Under Bezos, Amazon went from a niche seller of books to the largest e-commerce site and one of the largest retailers, online or off. Under Jobs, Apple went from a has-been computer company kept alive as a prop for Microsoft to wave at the DoJ to a leader in personal computing, consumer electronics and the most profitable corporation in history.

Do you think that shareholders would have kept Bezos and Jobs around if their strategies had not been delivering the tangible results, quarter after quarter, year after year? I think not. For proof, we can only look to Yahoo, which spent an enormous amount of time and money wooing Marissa Meyer from Google, only to ignominiously fire her 5 years later after she was unable to arrest Yahoo's declining profitability and relevance.

A CEO of a publicly traded corporation, especially a publicly traded corporation that is financial trouble, only has so long to demonstrate success, where "so long" is measured in months or, at most years, not decades. If the CEO cannot demonstrate tangible results within that time frame, he or she will be fired, no matter how powerful their "reality distortion field". CEOs cannot transcend the crowd-sourced incentive-based decision making of the market over the long term. What the can do is spin a good story that persuades the shareholders to leave them alone for a brief period of time as they attempt to make the necessary changes in order to improve or restore profitability. If they are unable to do so, they are summarily dismissed, and replaced with someone else who can tell a better story about how they're going to improve the profitability and efficiency of the firm.

No amount of Jeff Bezos or Steve Jobs charisma is going to be sufficient to persuade shareholders to accept a 10% penalty year after year in order to safeguard a little known, little understood part of the supply chain against an event that may or may not happen decades from now.

Re: Is It Time to Rethink Globalized Supply Chains?

#300

Post by implements »

jcims wrote: post #198
implements wrote: post #182

Earlier quoted context omitted.

Sterling Commerce - that’s a name I haven’t heard in a •long• time. Do you by any chance remember a company called “EDES” (Electronic Data Exchange Service)?

There's a tickle in a neuron but it could be self-induced. What was the relationship?

They bought EDES in 1998 - it was a company I’d done a bit of contract work for.

(Trivia) EDES was one of the few users of RPL (RapidGen Programming Language) - Decision Table based, and running on PDP11s and later MicroVaxs.

https://www.cbronline.com/news/sterling_commerce_buys_into_u...

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