HN Theater @HNTheaterMonth

I wouldn't be so confident on pinning US COVID policy as the root of supply shortage issues consider supply shortages and soaring costs are currently worldwide problems; Other causes have been cited more commonly by economists & institutions.

https://m.youtube.com/watch?v=b1JlYZQG3lI

The demand became a lot more lopsided for several reasons:

* consumers were shifting spending from experiences that would've been COVID impacted (holiday travel, entertainment venues, restaurants) to online shopping

* industrial supply chains in Asia were the least impacted by COVID due to the relative lack of explosion in cases there compared to the rest of the world, so we are legitimately shipping more from there and exporting less

* a good chunk of the medical equipment that has been necessitated by COVID (e.g. masks) is made in Asia and that has made demand even more lopsided

* there was a ship backlog because COVID impacted how ships were getting unloaded, and at one point they weren't sending back ships with empty containers to reduce turnaround times, and now there are not enough containers in China and too many in the US.

Wendover Productions video: https://www.youtube.com/watch?v=b1JlYZQG3lI

⬐ codezero

Thanks a bunch, I think others have said it was the increased demand and I didn’t quite get it, or the scale of the lopsidedness it caused, until the way you described it!

⬐ phkahler

Another poster said ships that would normally take empty containers back to China are now just unloading and leaving empty. If that's the case, it seems like it's trading short term gain for a longer term problem. Make them take the empties?

⬐ native_samples

Nobody has to "make" anyone do anything in that situation. It's a classic supply/demand imbalance. Governments can't do anything here - even just getting them to pay attention to their own zoning rules required some random CEO in a boat talking to local workers then posting on Twitter. They aren't in a position to do anything better than the workers themselves can do.

Wendover has a good video on this. Give it a watch (entire channel is highly recommended)

https://youtu.be/b1JlYZQG3lI

I don't think that's exactly true and actually may be a common misconception - see https://www.youtube.com/watch?v=b1JlYZQG3lI for a much better explanation than I could provide.

I’ve heard recently (in a video that I don’t know how to find again) that that’s exactly what happened with the automotive industry’s chip shortage: Toyota was the only one that built a stock of chips in advance, and now are the only ones that can keep producing cars without being limited by the shortage.

Edit: found the video: https://www.youtube.com/watch?v=b1JlYZQG3lI&t=804s

At 13 min. 24 seconds:

> Just in time is such a simple principle, but the pursuit of the elimination of waste is now the central mission of any major manufacturer.

> However, most did it wrong. Manufacturers globally saw the headline “elimination of inventory leads to massive efficiency gains” and jumped on that without actually determining what made it work for Toyota.

> They ignored that Japan's small physical size made for short domestic supply chains, less vulnerable to things going wrong.

> They ignored the company's production leveling: finding the average daily demand and producing that regardless of short-term changes and demands.

> They ignored the fact that eliminating excess inventory is different from eliminating all inventory.

> They ignored the principle of growing strong teams of cross-functional workers predicated on respecting people.

> They ignored the culture of stopping and fixing problems to get things right the first time.

> They ignored huge swaths of the Toyota Way and created a system that’s less effective and less resilient but can impress shareholders through short-term savings.

> How Toyota has effectively implemented this system fills books but many are just reading the covers.

> Even Toyota though is not perfect.

> In 2011 japan was rocked by a 9.0 magnitude earthquake the fourth strongest ever recorded anywhere. Not only did this cause immense destruction to life and property but it also led Toyota to recognize a flaw in its own system.

> As japan recovered some supply chains were quick to as well. For example, securing plastic resin for door panel production is not difficult: there are plenty of manufacturers globally creating easily substitutable alternatives.

> That’s not the case with, say, semiconductors: the hugely expensive facilities that create these chips require years to construct and after the 2011 earthquake it took many months to mend them back to operating status.

> This surfaced a truth that had never been fully considered: not all supply chains are made equal. Plastic resin can handle supply chain disruption, semiconductors cannot. Therefore Toyota made changes: all along, their mission was not to eliminate inventory full stop; it was to eliminate excess inventory.

> Supply chain disruption is inevitable. It's inevitable in the same way that Titanic's flawed design would eventually encounter an iceberg, or the structural economic vulnerabilities of 2008 would eventually collide with a market panic. Therefore semiconductor inventory is not excess because inevitably, due to the inevitability of disruption, excess semiconductor inventory will eventually become necessary.

> Recognizing this, Toyota in recent years has started to build up a stockpile of two to six months worth of chips and that's why the company is the only major vehicle manufacturer that is unfazed by the semiconductor shortage.

> Toyota followed its own principles. It did not stray from them, and it did not reinvent them. It’s no surprise that Toyota excels at implementing its own system, but it is a surprise that the entire manufacturing world has so wholeheartedly embraced flawed implementation of the system.

⬐ hvidgaard

What is amazing about this is that it is a super simple game of "what if?". What if our current supply of chips are disrupted? It would mean production halts, there is a non negligible risk and we cannot source new chips in less than 6 months, so stockpile that to keep uninterrupted service. That conclusion probably take quite a while to get to, but the kick off question is really simple.

⬐ kqr

It's not that simple, though. "What if our supply chain of X is disrupted?" always leads to a problem where one of the most obvious solutions is "Stockpile huge inventories of X!"

That's what manufacturers had done ever since Ford tried to scale up his initial (very Toyota-esque) operation, and scaled it incorrectly but managed to inspire hordes of other manufacturers to repeat his mistakes.

The novelty of Toyota et al. was not that they asked the what if question, but that they answered it unconventionally: they worked on making the supply chains more reliable instead of adding buffers.

That's what makes this next move counter-intuitive to so many people: when Toyota encountered a supply chain that couldn't be made more reliable, they chose the previously-conventional response, apparently in defiance of their whole thing. Except it wasn't.

You're right in that it is simple, but in trying to show that you're making it too simple.

⬐ hvidgaard

I think that is the easy way to answer that question. Obviously the first "What if .." should be try to source from somewhere else, or perhaps have multiple supply chains. For instance cloth is a commodity, and if they know they can get the quality they need from multiple vendors on all 7 continents - they don't need to do much except perhaps validate the supply chain of some selected to ensure they don't source from the same place. But if they are using a particular mineral that is only available from one location, something else must obviously be done.

Just stockpiling is not really an answer as much as it's trying to just do the least amount of problem solving and thinking.

⬐ bellyfullofbac

I thought I'd rather watch the video than read your long transcript, I clicked it, it's Wendover with his weird speech pattern (some syllables loud, some syllables he runs through, but some vowels he drawls on...).

> Just IN tiime, is such a SIMple principlee, but the purSUIT of the ELIMination of waste...

Tab closed, thanks for the transcript.

⬐ ant6n

Did the speaker on wendover change like 1~2 years ago? I feel like the voice used to be more, uh, geeky sounding.

⬐ bellyfullofbac

He probably got some sort of speech coaching because he didn't like the way he sounded. A bad one, I would say. I looked up a video from 2017, he sounded ok, I could hear some long syllables but they weren't as long as they are now. It also sounds like he got a different mic.