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Where are the paper plates?

Brad Littlejohn | Lessons from the supply chain disruption


Containers stack up in the Port of Long Beach in Long Beach, Calif. Associated Press/Photo by Jae C. Hong

Where are the paper plates?

Across the country, store clerks are nervously preparing for the Christmas shopping rush with already half-empty shelves. Parents are pre-ordering presents online weeks in advance without any assurance that those gifts will arrive in time. Restaurant menus are in constant flux as key ingredients run short; construction crews are postponing projects by months since their suppliers can’t tell them when materials might come in; car manufacturers have slashed production amidst a critical shortage of microchips. Even key drugs and critical medical gear are running short at hospitals and pharmacies around the nation. Why does the “land of plenty” seem for once not to have enough of pretty much anything?

The causes are not hard to determine. Thanks to the ever-expanding ripple effects of Covid-19, the U.S. economy has experienced simultaneous demand and supply shocks. As Americans spent more of their time at home for much of 2020, they spent less money on services and more on consumer goods. Thanks to lavish and poorly-targeted stimulus checks, most Americans, despite pandemic job losses, had plenty of money to spend—especially following the largest round of stimulus checks this spring.

At the same time we wanted more stuff, the world found itself less able to meet our demands. East Asia, the workshop of the world, was dealing with major spikes of the Delta variant this past spring and summer, leading to temporary shutdowns of many key factories. China repeatedly shut down some of the world’s largest container terminals to contain any outbreak of the virus. Adding insult to injury, a massive container ship spent twelve days in March blocking the busiest transportation route globally, the Suez Canal. In the vast, interconnected global trade system, each of these shocks rippled back and forth, creating new disruptions at every link of the chain. Labor shortages in U.S. ports and transportation industries have intensified the strain. At last count, a record 111 container ships were waiting offshore Long Beach, Calif., for a chance to unload their goods.

More than anything else, the current crisis is reminiscent of one not so long ago—the 2008 financial crisis. Then, we discovered for the first time how fragile and interconnected the global financial system was—a row of dominos ready to collapse. Now, the same contagion is playing out in the economy of physical goods. And the root cause is remarkably similar.

American companies can’t keep goods on their shelves because they no longer keep goods in their warehouses. Over the past 40 years, in search of greater and greater efficiency, most industries have embraced the model of “just-in-time” manufacturing: timing new orders from their suppliers just right so retailers can restock but without excess inventory tying up capital and dragging down profits. It resembles the reckless behavior of investment banks in the lead-up to 2008: keeping ever-slimmer capital reserves to boost rates of return. It all works great right up until it doesn’t.

Of course, if most goods in American stores were made in American factories, we might be more able to ramp up production to address shortages. Instead, however, having for decades outsourced every kind of manufacturing to East Asia (by 2019, U.S. manufacturing imports were more than double exports) to boost profits, we find ourselves at the mercy of Chinese container ships and Los Angeles dockyards. Increasingly, we have designed our economy to resemble “the butterfly effect”—a man sneezes in Shanghai, and six weeks later, a Best Buy in Cleveland can’t stock laptops.

Some might argue that Covid-19 is a once-in-a-lifetime anomaly, and it won’t be long before our finely honed global trade machine is humming along smoothly again. Historically, though, it is the past three decades that have been the anomaly, and with rising tensions in the Taiwan Strait, we may never witness a return to seamless manufacture-on-demand international trade. Two thousand years ago, the Apostle James warned against the reckless illusion of economic control: “Come now, you who say, ‘Today or tomorrow we will go into such and such a town and spend a year there and trade and make a profit’—yet you do not know what tomorrow will bring” (James 4:13-14).

Faced with the rude wake-up call of the past year, it’s time for our business leaders and policymakers to realize that short-term profits aren’t everything; the higher costs of inventory and domestic production may prove a small price to pay for a bit more stability, security, and self-sufficiency.


Brad Littlejohn

Brad Littlejohn (Ph.D, University of Edinburgh) is the founder and president of the Davenant Institute. He also works as a senior fellow of the Edmund Burke Foundation and has taught for several institutions, including Moody Bible Institute-Spokane, Bethlehem College and Seminary, and Patrick Henry College. He is recognized as a leading scholar of the English theologian Richard Hooker and has published and lectured extensively in the fields of Reformation history, Christian ethics, and political theology. He lives in Landrum, S.C., with his wife, Rachel, and four children.

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CROB3561

I see a positive sign in the supply chain problem. We are seeing the need for the undervalued worker whether the truck driver or the worker who stocks shelves. We now realize we need them, so we better treat them as fellow brothers and sisters in Christ, or as the person who needs to know the honor Christ gave them on the cross.

CROB3561

I disagree with the attack on just in time and smaller inventories. Significant inventories do not solve problems. What good are large inventories if the items are not what customers want, if they can not be delivered to the customer and if the items are hard to find and move in massive warehouses filled with items that are not unnecessary? Even the efforts to buy in bulk fail, since no one can predict far in the future, with certainty, what items will be needed and at what time. Further, bulk buying increases costs since the company providing the goods must increase production and hiring to meet the demand and then fire workers and decrease production when demand drops.
The problem is not solvable until the supply chain is fixed. Delays must be attacked, whether in ports, in trucking problems due to lack of drivers or containers for the load, poor conditions of roads or bridges, and in making critical parts or accessing critical raw materials.
There is a reason the Biden administration cannot solve the problem even with billions of dollars going to infrastructure. It takes a deep commitment of many people willing to work long hours and clear leadership that understands transportation. We have a former mayor who never had experience in large-scale transportation. It is inevitably something that takes an intimate knowledge of the transportation system by the government and action by businesses affected by the supply problem. Centralized bureaucracies cannot solve a problem that requires each company to recognize their problems and work on them. This problem has a spiritual dimension since as a culture we have lost that sense of sacrificing to meet a goal and of concern for the weak and needy who suffer the most without daily goods or goods too expensive to buy.

John Hale

Just the differences expressed here about what is a “Christian” foreign trade policy illustrate why Marvin Olasky and others at WORLD warned against it becoming another conservative opinion journal.

Steve S

Seems like the assumption of this opinion article is that maximizing security and prosperity of Americans is the proper goal of Christian thinking. If we put on a worldwide view, things may look different. Free trade has lifted millions out of poverty and improved the material quality of life for people around the world (including Americans.) Where would America ship all of its excess corn and agriculture products without global trade? Would it be better for all the stuff sold in Wal-mart to be much higher priced for Americans?
Also, Mr. Littlejohn, please don't gratuitously co-opt Scripture to lend credence to your personal economic viewpoint. “Come now, you who say, ‘Today or tomorrow we will go into such and such a town and spend a year there and trade and make a profit’—yet you do not know what tomorrow will bring” (James 4:13-14) This verse would apply 100% to businesses in America even if there was no international trade at all. Just as there are risks with global trade, there would be risks to the American economy if it wasn't integrated with the rest of the world.

RPUR1601

Seeking ever higher profits, no matter how poor the customer service, is how corporations want to do business now. Used to be, companies would think about their employees, about their reputation, and about attracting even more customers. Now, its just in time ordering of goods, at the absolute cheapest, even if it falls apart, as well as just in time scheduling of workers. Neither is good for our society. It's time to insist on well made goods sold by a company that cares for it's employees by offering consistent scheduling at a good wage. The next "pandemic" shortages may leave us looking for more important missing items than just toilet paper and toys.

FIMIKI

It's true that there's a tension between efficiency and stability when it comes to supply chain management. For critical goods like oil (or in Canada's case, maple syrup!) it makes sense for governments to stockpile extra inventory to draw on while supply/demand disruptions are worked out. After last winter's bitter freeze and blackouts, most Texans are probably OK with trading in their cheap electricity for some more stability in the form of better backup generators and winterized equipment. But it's easy in moments like this to see all the problems that come with decentralized global trade and just in time manufacturing and forget all the good things it has given us. Calling for governments to throw up new tariff regimes, subsidize domestic industries, and craft nativist industrial policy all in an effort to mitigate risk is itself a reckless illusion of economic control.

https://www.nationalreview.com/2021/10/in-defense-of-i-pencil/