Date: 2024-09-27 Page is: DBtxt003.php txt00021988
SUPPLY CHAINS
EFFICIENT AND FRAGILE
Video: A WSJ Documentary: Why Global Supply Chains May Never Be the Same
EFFICIENT AND FRAGILE
Video: A WSJ Documentary: Why Global Supply Chains May Never Be the Same
Burgess COMMENTARY
The modern economy has been optimized for profit ... that is short term profit ... with an important underlying assumption which is that the patterns of product flow are quite stable.
Generally speaking, it has been assumed by business leaders that all of the business community is working in more less the same way ... to optimize for profit ... and the risk is therefore essentially that of competition, and not so much addressing changes and risks outside this limited view.
But this video suggests that it is not only business that is changing but people are changing. There are choices that are driven by the employees that do the work ... and that change seems to have come as something of a surprise to the employers. There are choices that consumers are making about how they spend their money ... and different cycles of demand than has been the historic norms.
Parts of the system are overcapacity ... physical overcapacity .. not enough space. Other parts of the system do not have enough workers. For some products, margins are razor thin and any change that increases distribution cost will mean substantial increase in price.
The bottom line conclusion is that a huge amount of cost-push inflation is coming and the pressure on wages to increase is going to be huge. I see this a bit like the cost-push inflation of the 1970s when energy costs went up and the only way to stay profitable was to increase prices ... to have inflation. Today it is going to be wages that will have to increase substantially in order to have the workers available to move the goods, and though this will increase inflation it will also help workers to pay for what they buy. This is not going to make investors and those who benefit most from profits, but they have had a good run for about forty years while workers have flatlined. Hopefully there will be enough politicians who understand what is really going on and they will able to counteract the politicians that simply spout riduclous political talking points.
Peter Burgess
1,109,009 views
Mar 23, 2022
Wall Street Journal ... 3.46M subscribers
Every day, millions of sailors, truck drivers, longshoremen, warehouse workers and delivery drivers keep mountains of goods moving into stores and homes to meet consumers’ increasing expectations of convenience. But this complex movement of goods underpinning the global economy is far more vulnerable than many imagined. Photo illustration: Adele Morgan
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