June 13, 2022
Foreword by James Grundvig, American Media Periscope
Our ongoing series of articles about the decimation of the U.S. trucking logistics and supply chain issues is critical to how ‘We the People’ survive the attacks on our food supply, fertilizer distribution, and now pipeline explosion and fire north of Flagstaff, Arizona. Today, the pipeline fire is burning out of control across Northern Arizona.
AMP News has covered many of these subjects from the deliberate destruction by the Biden regime of the solar panel market–aimed at stifling the self-reliant power generation of off-grid builders–to the scorched earth arson attacks on food processing plants, egg farms, and a lot more.
On Friday, June 10, 2022, Smithfield announced in a press release it will close its food processing plant in Vernon, CA.
The press release opens with:
“Smithfield Foods, Inc. today announced that it will cease all harvest and processing operations in Vernon, California in early 2023 and, at the same time, align its hog production system by reducing its sow herd in its Western region. The company will decrease its sow herd in Utah and is exploring strategic options to exit its farms in Arizona and California. Smithfield harvests only company-owned hogs in Vernon. Smithfield will service customers in California with its Farmer John brand and other brands and products from existing facilities in the Midwest.” [Emphasis ours.]
DHL warns that global supply chains will not “recover to pre-COVID-19 levels in 2023,” according to Bloomberg News.
How much more low-grade, scorched earth attacks can America withstand? If people think the lack to baby formula is a problem–and it is–wait until the feel the pinch in proteins and shortages of other items across the board.
This will be an especially acute problem that could turn dire in California. It’s as if the California puppet government, controlled by the CCP and “shadow government,” has a death wish.
In times of crisis, however, there are opportunities. The following article, “Rethinking Supply Chains,” written by Diane Coyle, Professor of Public Policy at the University of Cambridge.
~ James Grundvig, Editor-in-Chief
Rethinking Supply Chains
Jun 10, 2022
Today’s supply-chain policy challenges are a consequence of forgetting that other considerations besides economic efficiency matter, and that hands-on craft knowledge cannot be transmitted online.
Unfortunately, problems that have been four decades in the making cannot be solved overnight.
CAMBRIDGE – Starting in the 1980s, transnational production enabled the expansion of global trade and low prices for goods, contributing significantly to economic growth. But the shocks caused by the COVID-19 pandemic and the Ukraine war have shown firms that the efficiency gains implied by the global division of labor – and just-in-time production – come at the cost of resilience. With global supply-chain bottlenecks unlikely to resolve themselves soon, firms have turned their attention to reshoring or at least “friend-shoring,” which seeks to combine closer geographic proximity with greater geopolitical peace of mind.
But turning re-establishing the shorter and more national (or regional) supply chains of a generation ago will be costly in terms of growth. For a hint of just how costly, look no further than post-Brexit Britain’s lack of any post-pandemic trade recovery. The United Kingdom’s independent Office for Budget Responsibility estimates that productivity will be 4% lower in the long run than it would have been had the UK retained its deep trading links with the European Union. The specialization enabled by globalization has brought significant benefits, as many economists (including me) have long argued.
Businesses will adjust to supply-chain shocks in different ways. Some will reshore. Some will find subcontractors in diverse locations. And some may opt for increased automation. The latter two strategies will carry a lower productivity penalty than reshoring, but will involve adjustment costs and new investment. All three options will roll back some of the globalization of the past four decades.
Other firms, however, will not be able to take any of these steps, given the scale and nature of the upstream activities they have outsourced over the years. In some sectors, such as pharmaceuticals and chemicals, outsourced production accounts for as much as 15-20% of total output.
After 1980, there was a substantial shift among companies toward buying components, rather than making them in-house. This reflected the spread of information and communication technologies that made it possible to send instructions and receive feedback instantaneously, along with a management philosophy that emphasized cost efficiency and lean production. Many multinational firms kept high-value activities such as research and development or design in the headquarters’ countries, and sent formulae or blueprints to factories in lower-cost locations such as Malaysia and China. After an initial learning period, these facilities could produce goods at a far lower cost than at home, and often with more consistent quality.
Over time, however, this pattern has generated another hidden cost: the loss of what is often termed tacit knowledge, or know-how, in manufacturing. This refers to the kind of tweaking and learning from experience that never gets written down but happens on every production line. Such insights can provide vital feedback to researchers and engineers, but the feedback is lost when production takes place thousands of miles away.
Rich-country firms have allowed these capabilities to erode for decades and cannot reshore them quickly. East Asian manufacturing centers such as China, Malaysia, and Singapore have developed sustainable, hard-to-replicate advantages in specific sectors and also in areas such as logistics.
This presents problems for policymakers, too. Secure supplies for key commodities such as food and microchips are now at the top of most governments’ agendas. Some advanced economies have launched initiatives aimed at rebuilding their manufacturing capability, such as the EU’s ambitious €43 billion ($45.5 billion) semiconductor plan or California’s $100 million proposal to manufacture insulin and other generic drugs.
Such plans may be a good idea, but they will need considerable time and money to succeed. Meanwhile, strategic stockpiles are another possibility. Some countries already hold oil or gas stocks, and many have food reserves such as the cheese and butter stocks in the United States – albeit aimed at supporting farm incomes rather than ensuring security of supply. (The UK, however, ran down its strategic food stockpiles in the mid-1990s.)
Current supply-chain bottlenecks have also highlighted a generally unnoticed reduction in competition. Although economists have been pointing to increasing concentration in many markets, the focus has generally been on the large “superstar” companies at the end of production chains. But today’s shortages are a reminder that the more specialized each link in the chain becomes, the less competition there can be at each stage.
At least until recently, competition policy had shown little concern about vertically integrated companies so long as the retail market remained competitive. The presumption was that pressure at the downstream end would flow upstream. Some had already started to question this consensus amid growing evidence of large firms’ market power. But the shortage of carbon dioxide (a fertilizer byproduct) in UK food production and the huge impact of one factory closure on supplies of baby formula in the US make the same point forcefully.
These supply-chain challenges are a consequence of forgetting that other considerations besides economic efficiency matter, and that hands-on craft knowledge cannot be transmitted online. Unfortunately, problems that have been four decades in the making cannot be solved overnight, and the best course of action for policymakers is not obvious. That is all the more reason to start rethinking the model now.
Article found here.
Diane Coyle, Professor of Public Policy at the University of Cambridge, is the author, most recently, of Cogs and Monsters: What Economics Is, and What It Should Be (Princeton University Press, 2021).