Balanced on the Edge

The opening ceremony for the 2008 Olympic Games in Beijing was one of the most visually stunning and massive choreographed movements of people I think I have ever witnessed. As a kid I used to think it was amazing that the Ohio State marching band could “spell” Ohio in cursive as it played during halftime. But Beijing was light years ahead in complexity of the movement of peoples from one place to another on the field. If only one person had turned the wrong way it is not hard to imagine the chaos that might have resulted. A few months ago I wrote about the same effect that plays out on the sidewalks of NYC or Tokyo during rush hour – it just takes one person to disrupt the entire flow. Peter Goodman and Keith Bradsher wrote about the same effect but concerning a scale far larger than the sidewalks of a single city. Their late August article on world wide shipping shortages was fascinating and earned a bookmark so that I could go back to read again. I recommend it for your reading, but I will mention some of the key points in what follows here.

Even previous to this article I heard a morning news report from a soy bean farmer in the Midwest whose major clients were in Indonesia. The harvest was ready but the shipping was problematic at several levels – both driven by higher profit transportation opportunities for the transportation sector. In the port of Los Angeles, shipping containers were being returned empty to ports in the Pacific Rim because it would take too long to load soy bean. It was more profitable to “dead head” the container back across the Pacific to load consumer goods in high demand in the United States. But it was also doubtful that transportation from the farm to the port of Los Angeles would be available or affordable.

Just one story, but an example of what is happening world wide as international shipping is balanced on the edge.

And it not as simple as a ship being stuck in the Suez Canal – that didn’t help, but it was not the first domino that cascaded inexorably world wide. Compared to the large supply chain disruptions, it was just another indication of a system that was so finely balanced it had no margin for disruption. Pre-pandemic air travel in the United States demonstrated the same phenomena of balance. Afternoon summer storms in Atlanta and Chicago would strand thousands upon thousands in airports and sent the whole system into frenzy and crowds rushing to the help desk or on the phones to re-book.

In the world of manufacturing, especially the large operations such as the car industry, the 1970s saw a move towards just-in-time supply chain management. The auto companies stopped their huge-warehouse operations and associated costs and converted to a Beijing like flow of the needed parts to arrive at the plant “just in time” to be used in manufacturing. And now the much-needed computer chips are not arriving in time. Last week Toyota, Ford and others announced the closure of many assembly lines, as much as 40% of new production because of the unavailability of needed parts.

But transportation is just one element of a larger dance in the supply chain. The pandemic also affected the mundane tasks of loading and unloading goods in ports and shipping hubs. A viral outbreak in Shenzhen China’s port (the header image) shut down operations for several weeks. An even larger container port in Ningbo suffered a similar fate. The same dynamic is in play in manufacturing from computer chips to Christmas ornaments – and everything in between. Manufacturers cannot receive materials, production delays ensue, and a kitchen supply store in Brookings SD can not obtain dining table place mats and worries about whether they will have their Christmas season orders fulfilled – at a price they can afford. A Miami-based board game developer saw shipping costs for a 40-ft container of his games rise from $7,000 to at least $26,000 with a looming bill of $35,000 if the trends continue.

I wonder if our pandemic response to toilet paper was a harbinger of another dynamic. As life’s location changed during the pandemic, we ordered more TVs, home office furniture, exercise equipment and gadgets – the latter of which was a great consumer of semiconductor chips. This was at the same time we hoarded toilet paper.

It is complex world in which we live – balanced on the edge, so it seems.

Photo Credit: Keith Bradsher, NY Times from Aug 30, 2021 article on Supply Chain Shortages

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