Supply chain-chain-chain… chain of fools

The supply-chain mess didn’t really hit me when a businessman friend mentioned he couldn’t get white cardboard boxes, or even when the bicycle I ordered was delayed for months. Then, standing in line at a coffee shop, I saw a sign: “We prefer payments by credit card or exact change because of the national coin shortage.”

Wait. What?

I felt as if I’d suffered a mini-stroke – actually, a decent parallel for shortages.

The global economy relies on a network of cargo ships and planes, trucks and trains – and the workers who load, unload and deliver goods. It’s a central nervous system, constantly working. When a clot clogs the system, it’s a distribution stroke.

THERE IS A SUPPLY-CHAIN SNAFU; it has several causes, it’s triggering inflation; and there are solutions. While somewhat comparable to shortages of housing in the 1920s, food in the 1940s, and fuel in the 1970s, this may be less a fiasco than a farce because of bad business decisions or incompetence, price gouging or the lack of a national industrial policy.

Meanwhile, stock shortages range from toilet paper and paper towels to chemicals needed for plastic pellets and PVC, plus computer chips, appliances, dry goods and even some food.

It’s still autumn, but anxious shoppers are scrambling for Christmas gift ideas because stores have warned of expected delays. (A Christmas tree trade group said people should buy soon and plan to pay more.)

FACTORS IN THE COMMERCIAL BOTTLENECKS include not just pandemic disruptions but lousy planning and exploiting COVID as an excuse to hike prices.

Pandemic closures meant drops in production. Also, shopping went online, warehouse operations were inadequate, hiring workers reluctant to work in low-wage and/or unsafe conditions became difficult.

Stalled container ships waiting at ports was foreshadowed in March when the ship “Ever Given” ran aground in the Suez Canal and blocked shipping there for six days.

Worldwide, weather disasters contributed, as have shortages of dockworkers, warehouse workers, and truckers.

The United States has become overly dependent on overseas suppliers, and the country can’t improve U.S. distribution for what’s not made here.

“How could such a shortage [of semiconductors] not have been anticipated by Intel and other major companies?” asked economist Dean Baker. “The pandemic undoubtedly skewed buying patterns to some extent, but it is difficult to see how it could have led to a two-year shortage.

“The problem was the failure of major manufacturers to anticipate demand growth for some reason,” Baker continued. “And there is no reason to believe that this failure would be affected by whether their chips were produced in South Korea, China, or Texas.”

One major aspect stems from work in the early 20^th century by Frederick Winslow Taylor, the efficiency guru of “scientific management” and “time-and-motion” studies. A variation, the “Just in time” approach to manufacturing and inventory, was proposed by Toyota engineer Taiichi Ohno in the 1950s to reduce “wasteful” production. The approach resulted in more “skinny inventories” at factories such as Caterpillar, where assembly-line workers referred to “Just in Time” as “Junk in Transit.”

The concept was that factories could quickly build and deliver goods as they were ordered, supposedly boosting profits by cutting costs – meaning workers.

“JUST IN TIME DELIVERY thus contributed to the growth of low-wage, often more precarious jobs, with workers recruited only when they would be needed,” said “U.S. Labor in Trouble and Transition” author Kim Moody. “This constant squeezing of workers has fueled our 24/7 work culture and the mental health problems that go with it, while attempts to cut the price of labor have added to the growth of economic inequality, regardless of who sits in government.

“Decades of deregulation, privatization and market worship have left society vulnerable to the unbidden force of ‘just-in-time’ supply chains,” he continued.

(Ironically, the Just in Time practice showed its vulnerability in September when one COVID case at an auto-supply manufacturer in Vietnam forced Toyota to cut its September output by 40%.)

PRICES RISE. The Federal Reserve in October said companies are displaying a “greater ability to pass along cost increases to customers.”

Inflation became volatile, with tight supplies and higher demands. The Bureau of Labor Statistics’ Consumer Price Index last month reported inflation at 5.4% from a year ago. Shippers who’d provided containers for about 35,000 books for $2,500 started demanding $25,000 for the same load. The price of lumber shot up more than 300% earlier this year, but since May dropped almost 70%.

“The risks are clearly now to longer and more persistent bottlenecks and thus to higher inflation,” said Fed Chair Jerome Powell. “Well into next year.”

Pandemic-related shutdowns did hamper some (not all) businesses, and when the economy started to open up, pent-up demand occurred. However, there’s been a personal-consumption slowdown in recent months, the Commerce Department reported Oct. 28: just 1.6% in the third quarter, compared to 12% in the previous period.

SOLUTIONS, NOT INACTION. Some conservatives hope the “invisible hand” of the market economy will right the ship. Others think greater government involvement is needed. Conservatives have blamed the supply-chain problem on too much government regulation; liberals cite an absence of an industrial policy to effectively coordinate the economy.

“The remedy is more government intervention in the economy, the opposite of Republican policies,” said Brandeis University professor Robert Kuttner. “We need more management of our supply chains.

According to the General Accounting Office, there are 58 separate federal programs involved with manufacturing in several agencies that don’t talk to each other, and no single White House official in charge,” he continued. “Rep. Marcy Kaptur (D-Ohio) and Sen. Amy Klobuchar (D-Minn.), with Republican co-sponsors, introduced legislation to create a high-level office of Manufacturing and Industrial Innovation at the White House.

“The White House released a comprehensive report on supply chains” in June, he added.

An industrial policy is needed, whether the planning and goals are restoring domestic production to make semiconductors or shipping containers in the U.S., or reestablish the needed network of trucks, etc.

The Biden administration launched a task force addressing the challenges, pressing for increased domestic production of items from medicine to batteries, and calling for a “90-day sprint” to relieve trade blockages.

Business needs to drop the Just in Time approach, and management needs to manage.

LABOR HAS A VITAL ROLE, too, as Teamsters President Jim Hoffa and AFL-CIO Transportation Trades Department President Greg Regan told the White House. Unionizing truckers who drive unloaded ship cargoes out of Los Angeles ports would attract drivers by offering good jobs and security, and that will help alleviate the jam.

“Make sure they’re properly classified with decent wages and benefits,” Hoffa added.

Regan added that the bottlenecks and shortages are due to corporate greed. Even before the pandemic, the nation’s Class I freight railroads had cut its work force by 22% over the prior four years.

Labor leaders also met with U.S. Secretary of Transportation Pete Buttigieg in October to talk about President Joe Biden’s Build Back Better and infrastructure initiatives. The House on Nov. 5 passed and sent to the Oval Office a $1 trillion measure to repair, replace and upgrade the country’s substandard infrastructure. Supply-chain woes eventually will benefit from improvements to 123,000 miles of roads and 45,000 bridges.

That’s a good step, but a long-term answer. Now, Americans:

* might shop local whenever possible,

* reward businesses that operate responsibly and punish price-gouging, job-killing companies, and

* demand representatives in government govern more than constantly campaign for reelection.