The CEO of Freightwaves (supply chain site) says that the Global supply chain problems will take years to overcome.
The global supply chain infrastructure that exists simply can’t handle the volume of products flowing through the economy. The root cause can be blamed on the extraordinary government stimulus that has stimulated demand.
The United States and other countries race through trillions of dollars of inventory while domestic and global production was shut down.
There were months of global lockdowns and trillions in demand stimulus. The global lockdowns hit production hard. Supply has to catch up where demand has months of headstart and where demand has had trillions in stimulus. The stimulus also has disincentivized labor. Workers could stay home and get stimulus check instead of working at the factory, driving a truck or working at ports and warehouses.
The policies of government appear to serve politics and were bad plans for economy and supply chain.
The supply and demand imbalance is still causing shortages and high prices in energy, steel, materials, components and products.
The manufacturing sector has a huge and unprecedented backlog of orders.
The container ships, ports, labor, trucks, warehouse capacity, and rail infrastructure all have significant supply chain challenges in handling the surge of cargo.
More government stimulus just makes problems worse.
This could go on for a few years and break the typical three-year boom-and-bust cycle.
Bottom line- the governments and pandemic response broke things badly for 12-18 months and it will take years to get things fixed. It will take longer to get into balance if unbalanced and crude money dumping stimulus is used again.
SOURCES – Freightwaves and Brian Wang analysis
Written by Brian Wang, Nextbigfuture.com
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
Known for identifying cutting edge technologies, he is currently a Co-Founder of a startup and fundraiser for high potential early-stage companies. He is the Head of Research for Allocations for deep technology investments and an Angel Investor at Space Angels.
A frequent speaker at corporations, he has been a TEDx speaker, a Singularity University speaker and guest at numerous interviews for radio and podcasts. He is open to public speaking and advising engagements.
16 thoughts on “Global Supply Chain Mess Predicted to Last for a Few Years”
That's called communism. "everybody is equal" What incentive do you have to do better, if you are not rewarded for your efforts? Why innovate, when the guy next to you just doesn't work.
America tried collectivism back in the 1600's, IT FAILED and they almost starved to death (hince the Indians/thankgiving etc).
I work in the automotive supply chain. We colloquially refer to it as "just too late", thanks to bad experiences with it. But try telling a bean counter that it's a really bad idea to wring that last percent out of expenses by having everybody up and down the chain not maintain inventories.
A lot of what is going on now is the lack of resiliency such thinking has produced finally being exposed. And yet it's still spreading.
It's a vicious cycle also on the other end. Under normal conditions customers buy less if the prices rise, but that's not always true. Price increases + FOMO, can cause people to buy now in fear of missing out or paying even more later, creating a shortage and/or price increase, which causes more FOMO.
A key enabling ingredient is just-in-time; because any empty shelves immediately become visible, causing people to hoard in fear of a shortage.
That's how you get the great toilet paper/pasta/canned food shortage of 2020, the current gas hoarding panic in Britain, the lumber bubble and so on.
That's not fair. They're being automatically registered to vote; Just because their job only takes a half hour every two years doesn't mean they don't have one.
It's a reasonable number to have arrived at after removing everything that's inflating from the market basket, and replacing beef with chicken, and all the other changes they made to arrive at 5% instead of 10 or 15%.
Yes, it's a problem.. Can the average voter understand that the "free" money is causing inflation and labor shortages, i.e. make his life poorer in the long term? Especially given that no mainstream media is inclined to report anything that would jeopardize the re-election of the "good" government that is currently in power?
Apparently, the US inflation is about 5% for 2021 . Is this a reasonable number, given the trillions of stimulus money being pumped out?
Yes, particularly point 1 is interesting. All of these efforts start out with the intent of being "universal" and then end up having an income cap, this necessitating a bureaucracy to handle these cases.. so we are not getting rid of government, it just expands both in terms of power and personnel…
Think about EV-incentives.. They are tied to income which means that it's really a tax on high income earners… And the same is true for student loans… Write off of debts..
But don't you think that even poor people should work for the money they receive? Let me rephrase the question.. Would it be fair to just take money from working people and give to poor people and expect nothing in return? So the full time worker should give part of his money – condensed labor – to the poor, but the poor would be expected to spend *no* time and *no* effort to earn this money?
As usual Brian, you are right. Thanks for covering this.
Most of these types of problems are self-correcting, in that humans will adapt to reality at some point. Unfortunately, nobody knows 'when' reality will rear its ugly head. Everybody was anxious about bogus mortgages in 2005, but it didn't really hit the markets until 2007/2008.
I have no idea 'when' the next recession will hit. History suggests we are past due for one (if you believe in market cycles).
I am fairly certain that when it hits, it will be severe. There is a perfect storm coming that will involve a devalued dollar, inability to pay debt, and a workforce that has never been forced to 'do without'. Things tend to get ugly when irrational expectations about how easy life should be are crashed against events that trigger mass panic and fear.
Toilet paper shortages revealed our human flaws. Imagine what true hardship will do…
One commentator suggested that the ports with the biggest problems (Long Beach, LA) could fix a lot of their problem by adding another shift of workers, but they're unable to hire enough. OTOH, it might be that they don't expect that longer term they'll need those extra workers.
Same commentator mentioned that shipping containers average only about 65% full, so maybe there'll be a bit of 'flex' there, as shippers sell their extra space at a premium and pay more to expedite handling their higher-value containers. It might add extra steps to break up shipments away from the ports, but that could be worthwhile.
UBI? Didn't we thrash this out years ago?
Every attempt to make the maths work out either
Paying people to do nothing except consume and copulate and covering their medical costs regardless of personal decisions and behavior. Yeah, no long-term downside there at all.
Yes. "Market failure" is their favorite scapegoat.
This seems to be repeating the "make the poors work" ideology by saying no stimulus though. Pandemic would have been a great chance to push through UBI/universal healthcare, but that was a leap too far for politicians. Now you get rhetoric similar to the old welfare mother spiel instead.
Unfortunately, it's a vicious cycle: The more they mess things up, the more inclined they are to resort to "unbalanced and crude money dumping stimulus" in an effort to survive the next election. So I expect we have to anticipate destructive economic policies at least through next fall.
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