I understand how they got delayed initially, but what factors have prevented things from rebounding? For instance, I work in the medical field an am being told some product is “backordered” multiple times a week. Besides inventing a time machine, what concrete things are preventing a return to 2019 supplys?
In: 93
Supply chains don’t deal very easily to long disruptions.
It isn’t the Apple’s or Intel’s of the world that get into desperate problems. Companies like Foxconn, for example, have millions of employees and deals with hundreds of billions of dollars annually. They’ll suffer but they have pretty deep financial foundations.
It is the smaller, low volume production firms that have the most difficulty. Many companies simply didn’t survive the pandemic. They’re out of business. The problem is that there are many unique components that are made by SMEs (Small and Medium sized Enterprises) with a few tens to a few hundred employees. They are specialized and their products are hard to replicate or design out. So the supply chains that rely on these companies are very vulnerable.
When an SME goes out of business, the larger firms might not be able to or even willing to invest in developing replacement companies. And even if they did, it takes a lot of time to build up essentially brand new companies.
Supply chains don’t deal very easily to long disruptions.
It isn’t the Apple’s or Intel’s of the world that get into desperate problems. Companies like Foxconn, for example, have millions of employees and deals with hundreds of billions of dollars annually. They’ll suffer but they have pretty deep financial foundations.
It is the smaller, low volume production firms that have the most difficulty. Many companies simply didn’t survive the pandemic. They’re out of business. The problem is that there are many unique components that are made by SMEs (Small and Medium sized Enterprises) with a few tens to a few hundred employees. They are specialized and their products are hard to replicate or design out. So the supply chains that rely on these companies are very vulnerable.
When an SME goes out of business, the larger firms might not be able to or even willing to invest in developing replacement companies. And even if they did, it takes a lot of time to build up essentially brand new companies.
In addition to the logistics issues that have been mentioned, which impacted the ability to produce and transport goods around the world, there is also the “toilet paper effect”: which is the desire of people who were burned by shortages to attempt to stock up on years’ worth of components critical to their own products. e.g. imagine that your entire car production line was stopped because you couldn’t get a $1 LED. When things started moving again you’d probably order several years worth of those LEDs right? When everyone does that and hoards what they can find there is a shortage that continues even when the supply has returned to normal levels.
Supply chains are designed to be “just in time” and to be as close to capacity as is safe/smart (down time for preventative maintenance, etc, but that’s it). Utilising every last second of production and watt of energy is the way to maximise return on investment in equipment and not be sat on stores of raw materials you could be selling and cash moving.
Now, if you shut down the machine but still have the demand, a backlog builds. When you do restart production and the machines get running, they run at capacity.
Here is the problem, where is the spare capacity to deal with any pent-up backlog of demand on top of the steady state? Answer is it doesn’t exist.
There are some strategies which can be employed. For example, temporarily in the UK, you can now undertake building work on a Sunday. However addressing a 1 year shut down takes 6 years of Sundays even if your builders etc are willing to work 7 days a week especially without adding more builders. BUUUUT this calls on a greater output of raw materials which because of already mentioned reasons there may not be excess production capacity.
It’s all a delicate ballet of materials and resources, which is why operations and logistics roles can fetch a high salary at the moment.
In addition to the logistics issues that have been mentioned, which impacted the ability to produce and transport goods around the world, there is also the “toilet paper effect”: which is the desire of people who were burned by shortages to attempt to stock up on years’ worth of components critical to their own products. e.g. imagine that your entire car production line was stopped because you couldn’t get a $1 LED. When things started moving again you’d probably order several years worth of those LEDs right? When everyone does that and hoards what they can find there is a shortage that continues even when the supply has returned to normal levels.
In addition to the logistics issues that have been mentioned, which impacted the ability to produce and transport goods around the world, there is also the “toilet paper effect”: which is the desire of people who were burned by shortages to attempt to stock up on years’ worth of components critical to their own products. e.g. imagine that your entire car production line was stopped because you couldn’t get a $1 LED. When things started moving again you’d probably order several years worth of those LEDs right? When everyone does that and hoards what they can find there is a shortage that continues even when the supply has returned to normal levels.
Supply chains are designed to be “just in time” and to be as close to capacity as is safe/smart (down time for preventative maintenance, etc, but that’s it). Utilising every last second of production and watt of energy is the way to maximise return on investment in equipment and not be sat on stores of raw materials you could be selling and cash moving.
Now, if you shut down the machine but still have the demand, a backlog builds. When you do restart production and the machines get running, they run at capacity.
Here is the problem, where is the spare capacity to deal with any pent-up backlog of demand on top of the steady state? Answer is it doesn’t exist.
There are some strategies which can be employed. For example, temporarily in the UK, you can now undertake building work on a Sunday. However addressing a 1 year shut down takes 6 years of Sundays even if your builders etc are willing to work 7 days a week especially without adding more builders. BUUUUT this calls on a greater output of raw materials which because of already mentioned reasons there may not be excess production capacity.
It’s all a delicate ballet of materials and resources, which is why operations and logistics roles can fetch a high salary at the moment.
Supply chains are designed to be “just in time” and to be as close to capacity as is safe/smart (down time for preventative maintenance, etc, but that’s it). Utilising every last second of production and watt of energy is the way to maximise return on investment in equipment and not be sat on stores of raw materials you could be selling and cash moving.
Now, if you shut down the machine but still have the demand, a backlog builds. When you do restart production and the machines get running, they run at capacity.
Here is the problem, where is the spare capacity to deal with any pent-up backlog of demand on top of the steady state? Answer is it doesn’t exist.
There are some strategies which can be employed. For example, temporarily in the UK, you can now undertake building work on a Sunday. However addressing a 1 year shut down takes 6 years of Sundays even if your builders etc are willing to work 7 days a week especially without adding more builders. BUUUUT this calls on a greater output of raw materials which because of already mentioned reasons there may not be excess production capacity.
It’s all a delicate ballet of materials and resources, which is why operations and logistics roles can fetch a high salary at the moment.
In addition to the other issues people have pointed out theres a major amount of fuckery that has been happening in delivery/downstream transport and logistics, specifically the US trucking industry.
The truckers got caught in that all too familiar spot between governmental over regulation and absurd corporate greed… truckers being the small man in the equation wore the brunt of that burden, many are failing despite working harder than ever.
In addition to the other issues people have pointed out theres a major amount of fuckery that has been happening in delivery/downstream transport and logistics, specifically the US trucking industry.
The truckers got caught in that all too familiar spot between governmental over regulation and absurd corporate greed… truckers being the small man in the equation wore the brunt of that burden, many are failing despite working harder than ever.
Latest Answers