
Is It Time to Rethink Globalized Supply Chains? - sarapeyton
https://sloanreview.mit.edu/article/is-it-time-to-rethink-globalized-supply-chains/
======
tvanantwerp
I feel like the problem is less that supply chains are globalized, and more
that they aren't redundant. By that I mean, there's too much reliance on China
as the primary producer/exporter for countless industries and products. Having
just one nation account for such a large share of manufacturing introduces
single points of failure. It would be wise to have multiple sources for any
given good, especially if it's essential.

~~~
alexose
In my experience, it's not that companies are choosing any one strategy over
another. It's more that companies have _no idea_ what their supply chain
actually looks like. Only that the widgets show up at their loading dock every
week, and that the shipments have always been reliable in the past, so that
there's no reason to look any further.

There are often strong disincentives, as well. Nike, for example, got
themselves into trouble when parts of their supply chain became public. Many
more companies regard their unique supply chain as a competitive advantage.
So, even if you should take up the time, effort, and expense to research your
own supply chain, there's a high likelihood that your upstream vendors will
have no interest in sharing their suppliers with you.

There are exceptions to this. Reportedly Apple has excellent supply chain
visibility, but they've achieved it at great effort.

(I'm by no means an expert, but I used to work for sourcemap.com, an MIT
startup based around the idea of understanding supply chains end-to-end.)

~~~
jcims
This is it 100%. I work at a major financial institution and we invest
ridiculous amounts of money, effort and, frankly, delay, in understanding our
supply chain, its security posture and risk management model. It's a
unbelievably gargantuan effort and if it weren't for the scary shit that we
find all the time one could easily argue it's a waste.

~~~
victor9000
What problems have you encountered that others should avoid?

~~~
Spooky23
Over the years, I have run into:

\- Counterfeit components, like memory out of spec that creates scaled
failures.

\- Fake products from the channel.

\- Fundamental mistruths with regard to how services are delivered.

\- Poor operational practices for maintaining SLA, especially for off-shored
services. Those ops folks will move mountains to meet the minimum standard of
"up", but will allow problems to fester.

\- Fraud. Fake on-site employees sending work back to a boiler room with
people actually doing the work.

\- Fraud. Named users actually being fake people sharing a credential. In one
case, a colleague in a manufacturing case discovered this when he accidentally
received a link to an open video stream of a MFA token.

\- Fraud. Stuffing fake or inferior products into orders. Example: Order new
laptops, find a bunch of refurbs in the pallets.

Basically, people suck and if you primarily make purchasing decisions based on
price, and you care about what you are buying, you need to treat the counter-
party as a potentially hostile actor and assume that you are going to be
ripped off.

~~~
6510
I read when having bicycle frames made in Taiwan you get the best
price/quality ratio if you have a permanent onsite observer in the factory.
That guy doesn't really do anything but they wont cut corners if he is around.

~~~
notyourday
You get what you pay for. If you aren't paying for the guy to be the observer
there's no one to observe.

~~~
dredmorbius
You _don 't_ get what you pay for.

But generally value derives from multiple independent credible verifiable
audit mechanisms.

~~~
eru
Or from reputation.

A company with a reputation for quality can charge more, because you don't
need observers and can just rely on them. And they want to deliver on the
reputation, so that they can keep milking it.

~~~
dredmorbius
The value of trust.

JS Mill has some interesting observations going back a ways.

Auditing is still recommended.

~~~
eru
Definitely, auditing is one way to speed up the process.

Ignoring auditing for a moment:

The trustworthy reputation is quicker to build, if the quality of the product
is easy to ascertain quickly.

But if you are a company in a sector where that's not possible, the reputation
for quality becomes even more valuable.

And you can potentially ride it out for a long time in an exit scam.
[https://en.wikipedia.org/wiki/Exit_scam](https://en.wikipedia.org/wiki/Exit_scam)

------
jonrimmer
The price advantages of globalised supply chains vs. the relative rarity of an
event like this means that, during normal periods, firms using them will enjoy
a significant advantage over those doing the "right" thing and market forces
will weed out the latter. So I don't expect management to be taking a lead on
this.

~~~
jobu
Yeah, not only is this a once in 100years event, it's also staggered in such a
way that the Chinese manufacturing will likely be caught up by the time the
European and North American economies are coming back to life.

~~~
TeMPOraL
> _it 's also staggered in such a way that the Chinese manufacturing will
> likely be caught up by the time the European and North American economies
> are coming back to life._

It's more difficult than that. Links in the supply chain aren't independent.
Supply and demand must balance. Chinese manufacturing is spinning back up just
as European and US demand is dropping. This will cause further damage to the
companies on the supply side. And as Europe and US spin their economies back
up, China may not be able to meet the growing demand in full. It'll take a
while before this reaches something resembling an equilibrium.

------
jimbob45
Counterpoint: YKK (look at your zipper) relies on absolutely no one else for
its supply chain [0]. This could easily be seen as a waste by those who would
say YKK should just source its metal from the foundry down the street. It's
easy to do a quick thought experiment in your head to think about how feasible
it might be for every company to vertically integrate the way YKK has. On the
other hand, YKK can't get jerked around by greedy corporations looking to take
advantage of their dependencies.

[0] [https://ykknorthamerica.com/the-ykk-difference/vertical-
inte...](https://ykknorthamerica.com/the-ykk-difference/vertical-integration/)

~~~
bkeyes
Never heard of them. Their company setup is pretty impressive. However to say
'relies on absolutely no one else for its supply chain' is an extreme
exaggeration and frankly impossible.

They don't make the computers, fiber optics, switches, exchanges, or software
that their web site requires to run. They don't own the fleet of trucks,
boats, and planes required to get their product to their customers - or their
raw materials from plant to plant. They likely use rubber mats in their plants
but I don't think they have a rubber plant. Unless they use outhouses I'm
pretty sure they don't make toilets and sinks and plumbing. I don't know if
they produce their own electricity but I'm sure they didn't build a generating
plant from scratch....and on and on it can go.

If you haven't read it, search for the essay - I, Pencil - I'm sure YKK uses
pencils as well.

The point is noone is even remotely close to being their own supply chain
every one is deeply dependent.

~~~
s_dev
>Never heard of them.

We had an argument in a CS class once about what the most "pervasive
technology" in the room was. We were examining claims that "computing would
become so pervasive and ubiquitous that it would become invisible" like
electricity and that zipper.

The reason it won was because we could count more of them than any other piece
of tech in the room. Every person had more than they thought -- often as many
as half a dozen between their pants and schoolbag.

~~~
hammock
The thing about zippers is, YKK is hands down the best and most reliable
zipper. Yes I know there are types of zippers, metal coil, molded plastic etc-
YKK makes the best of each.

Plenty of companies try to source their own (Levi's is the first to come to
mind), but the best companies all use YKK zippers because they know. If it
doesn't say YKK on it, it's not a YKK zipper.

~~~
jschwartzi
YKK also has a lot of imitators. I recently saw an "HKK" zipper on a cheap
piece of clothing from Amazon, for example.

------
fennecfoxen
The problem is that almost no one buys products based on the stability of the
supply chain, so irresponsibly-global supply chains will beat out responsibly-
global ones on price.

The problem is our tools to addressing this are either (a) some sort of tariff
arrangement, which will almost certainly be political footballs far more than
they will address any real problem, or (b) some regulatory/compliance
arrangement, where regulated industries will have to sift through billions of
dollars of compliance paperwork annually describing their supply chains, and
which may be subject to the scare-of-the-month and _international_ political
football. Neither is ideal.

~~~
AnthonyMouse
There is a third option. Apply the same regulations to the manufacture of all
products _sold_ in your country. You want to manufacture in China and sell in
the US, that's fine -- but you have to do it in accordance with US
environmental rules.

That does two things. One, no more cost advantage to global manufacturing in
whatever place has the least respect for the environment, which lets others
compete better and removes the race to the bottom. Two, there are lots of
different and potentially conflicting rules everywhere, so then you get more
specialization as there is an advantage to smaller companies that only comply
with the rules for the markets where they're selling.

~~~
swsieber
There's a fourth option: close down all U.S. trade ports for a month once a
year. No paperwork or other administrative headaches. "Just" a dry run once a
year.

~~~
aembleton
That'll just mean stockpiling before the month it gets closed.

~~~
spaceknarf
Not if it's unknown _which_ month. Then you'll have to keep a stockpile year
round, which is precisely the objective of grandparent.

------
naasking
Definitely time to rethink globalized supply chains. The centralization
inherent to this obsession with efficiency is simply not resilient to
disruptions. We learned to build redundancy into our food production to handle
disruptions like, centuries ago, which is (partly) why we pay farmers to
produce more food than we technically need. We don't invest much to keep
manufacturing of some other critical goods domestic.

I'm frankly astounded that exclusively outsourced supply chains were ever a
serious consideration. Yes they're more efficient, but efficiency isn't the
only consideration. Imagine if someone seriously came forward to suggest China
should also produce all of our food. It's nuts.

I blame the continued financialization of our economy which leads to an absurd
obsession with efficiency above all other considerations. It's yet one more
example of borrowing against the future that has led to many of the recent
economic crises.

Edit: we regulate risk in financial sectors, like the debt ratio, and supply
chain resiliency is simply another risk assessment. I think more comprehensive
legislation surrounding corporate risk taking will ultimately be needed.

~~~
giantrobot
Farming is not a good comparison to manufacturing when it comes to
overproduction. Food can be eaten or processed/preserved to be eaten later.
Some foods have elastic demand but in general food doesn't since we all need
to eat.

With a lot of manufactured items demand is far more elastic and any given
manufactured item isn't necessarily a substitute for any other. If Intel or
AMD overproduces higher power desktop CPUs but there's market demand for low
power laptop CPUs or ARM SoCs...the oversupply isn't going to spur any demand.
Even if the oversupply depresses prices on those chips and desktop systems,
they're not portable or phones so there's no useful substitution.

Managing production volumes and forecasting demand is a huge aspect of modern
manufacturing. Responding to demand quickly is one of the reasons
manufacturing consolidates geographically. If a production line needs
Component X at volume Y to keep moving, they can't wait weeks to get that
supply. Too much surplus of components is also a problem because those all
need to be stored until used. So the most economical configuration tends to be
shipments of sub components feed almost directly into component manufacture
lines that feed into packaging which feeds into shipment and distribution.
That's difficult or impossible to accomplish if your supply chain is
geographically dispersed.

Slower and less dynamic supply chains aren't necessarily better at responding
to crises since the production schedule of whatever will have been set well
before the onset of whatever crisis. Responding to the crises then takes
longer since extant component supplies likely don't match the crisis
production needs.

You can see this right now with industries the produce regulated/qualified
products like medical supplies. A random factory can't just supply medical
grade components. Without proper quality controls, sterilization, or batch
tracking those items can end up more dangerous than not having them. Face
masks that are ineffective due to manufacturing issues can get healthcare
workers sick or spread disease to uninfected but at risk populations.

I'm not saying JIT manufacturing is a panacea or that it's a good thing China
has such a lions share of commodity goods manufacturing. But the solution to
supply chain issues is more complicated than just building factories. Many
companies are also simply unwilling to take a profit hit by diversifying their
supply chains or moving to longer production cycles.

~~~
naasking
I never said supply chains should be slower or less dynamic, I said they
should be less centralized and thus more robust, and arguably critical goods
manufacturing absolutely also need a domestic presence.

This is completely obvious when you see how Hurricane Maria led to drug
shortages because Puerto Rico was the sole produce of some critical drugs, or
how China recently had to halt outgoing shipments and everyone else in the
world started running out of masks and medical equipment.

> But the solution to supply chain issues is more complicated than just
> building factories.

Right, it's building factories _in the right places_ , and ensuring they can
tolerate disruptions.

> Many companies are also simply unwilling to take a profit hit by
> diversifying their supply chains or moving to longer production cycles.

Sure, just like banks and investment firms would be unwilling to have more
robust debt ratios in order to improve their returns when all is well, if we
didn't force them to maintain a less risky debt ratio in order to avoid
catastrophes when all is not well.

Manufacturing isn't meaningfully different in this respect, it's all about
managing risk. Corporations should have more responsibilities to quantify and
manage risks like this.

~~~
giantrobot
> I never said supply chains should be slower or less dynamic, I said they
> should be less centralized and thus more robust, and arguably critical goods
> manufacturing absolutely also need a domestic presence.

If manufacturing supply chains are more geographically dispersed they are
automatically slower and less dynamic. They're not necessarily more robust
either. As soon as the supply chain involves moving materials farther than a
few hour drive by truck it becomes constrained by modes of transport that
can't be easily dispersed (rail, air, water) or reprioritized.

> Right, it's building factories in the right places, and ensuring they can
> tolerate disruptions.

As demonstrated by...all of history since the beginning of the Industrial
Revolution the _right_ location for a factory today is not necessarily the
_right_ location for tomorrow. Relocating factories is expensive and difficult
in the best circumstances. Every factory has a logistics train attached to it;
not just equipment and trained workers but power requirements, waste disposal,
physical siting requirements, and dozens of other factors. Some are easy to
uproot and others are not.

Again, I'm not arguing that China should just make everything and all
factories should be located next to one another. I am saying that
manufacturing is not like AWS. You can't just spin up new instances when you
run out of capacity. You can't just move everything to a new factory closer to
some resource or retool a factory for a totally different type of production
with a deploy script.

> Corporations should have more responsibilities to quantify and manage risks
> like this.

Some do and several industries are regulated when it comes to sourcing.
Defense contractors have all sorts of supply chain requirements. More
industries can have supply chain security requirements but then end products
will get more expensive. The added cost will get pushed to consumers. So you
can optimize for the common case where pandemics are rare but manufacturing
tends towards consolidation and low cost or you can optimize for robustness
and everything manufactured carries with it the amortized cost of that more
robust but expensive supply chain. Unless regulation forces all manufactured
items to have a similarly robust supply chain and all manufacturers have the
same burden, there's a competitive advantage to having a supply chain more
susceptible to rare disruption but far less expensive.

~~~
naasking
> If manufacturing supply chains are more geographically dispersed they are
> automatically slower and less dynamic.

You keep hammering on this geographic dispersal, but as far as I can see, no
one is suggesting geographically dispersing or relocation supply chains, but
are instead suggesting _replicating_ supply chains in different geographical
locations. You know, the standard approach to adding resiliency to literally
any system.

> Some do and several industries are regulated when it comes to sourcing.
> [...] there's a competitive advantage to having a supply chain more
> susceptible to rare disruption but far less expensive.

Yes, and I'm suggesting that a more comprehensive legal approach where
corporations providing critical goods or services should have to perform risk
assessments and ensure a maximum tolerable risk. Everyone recognizes the
competitive advantage of ignoring risk. I described it in my very first post
to which you replied, and I then said improved risk management should be
legislated.

------
nostromo
My dad was in agriculture.

When I was a know-it-all college student I would complain about farm subsidies
and how they're inefficient and unfair to tax payers, etc.

But he would mention that America should never have a food shortage because of
them. We've never outsourced our food to China or OPEC.

And now I'm really seeing the wisdom in that. For essential goods, like food,
medicine, maybe energy, it makes sense to keep some production local.

~~~
lsllc
You know, that's a really good thought!

------
GuB-42
Is it _really_ a problem? Obviously, now, it is. But everything is a problem.

Having the supply chain less globalized doesn't mean there is an excess. Now,
there is a shortage of surgical masks, but that's because the demand is too
high, not just because they are made in China.

You have to balance efficiency and reliability. And normally, the global
supply chain is very efficient, and surprisingly reliable. Black swan events
happen regularly and besides a few price hikes and some company coming and
going, business continues as usual. A de-globalized supply chain will
certainly be able to deal with such event better, but at the expense of
permanent inefficiencies.

Of course, right now, it is far from "business as usual", but that's because
there is a freaking virus in the air, and if you catch it, you may die. Still,
you can still buy food, and the essential shortages are of things that are
directly related to the disease, like masks, hand sanitizers, and respirators.

And governments and companies alike do plan for shortages. Most countries
produce more food than necessary to account for the risk of famine. There is a
reserve of essential medical items, and it is being used right now... within
reason.

One thing is for sure, it is too soon to draw conclusions.

~~~
shadowtree
This is HN, so let's use tech nerd examples.

Do you want a single server handle the load, located in China?

Or a decentralized, load balanced system?

9bn users.

Go.

~~~
nexuist
But that's not accurate either. In this analogy China would in fact be hosting
thousands of different servers. There is no "China Business"; there are
businesses in China.

A more apt comparison would be between cloud providers (which are the supply
chains of modern IT) - do you want to stay at AWS's mercy, or expand to Azure
and GCP as well? Maybe you should consider Linode or DigitalOcean as well?
There are pros and cons to those approaches - both in experiences, pricing,
innovation, etc. The same applies to global supply chains.

------
SpicyLemonZest
It seems to me like the problem is just that supply chains aren’t legible. I
forget where I read this from, but Walmart or Amazon would easily pay billions
of dollars to know which shipments won’t arrive over the next few months
because of the rolling wave of factory shutdowns.

Once you have that legibility, the extra step of snipping the globalized
supply chains seems unnecessary. Some businesses will plan to maintain
continuity with all international shipping stopped, and a few will receive
subsidies and mandates to do so. Others won’t, and that’s fine too; there’s a
ton of value in making our lives better even in ways that can’t be sustained
during a crisis. (It’s worth noting that international shipping in everything
but coronavirus-fighting medical equipment hasn’t stopped during the currrent
crisis.)

~~~
zozbot234
> It seems to me like the problem is just that supply chains aren’t legible.

There are a number of efforts to make supply chains in all sorts of sectors
more transparent using blockchain-like protocols. So this will hopefully
improve in the future.

~~~
hef19898
Over a decade ago, the supply chain hype was RFID chips. Now, more htan ten
years laer, they are not used besides your occasional pallet tracking. or for
hteft preventin at shops. And RFID would just have replaced bar codes, so no
process changes necessary for a first implementation.

Blockchain is a different beast. And most companies wouldn't like the full
transparency that comes with it. Decentralized ledgers would result in a lot
transparency for everyone. And that trust building is a main issue. That, and
that the information flow (blockchain) has to be _always_ sychronized with the
physical flow (goods).

~~~
mschuster91
> And RFID would just have replaced bar codes, so no process changes necessary
> for a first implementation.

There would have been changes necessary. RFID chips fall as electronics under
RoHS and probably regional/national recycling regulation which means that
their introduction into products would cause an enormous overhead.
Additionally chips cost _at least_ 10ct each in bulk which means for a lot of
1m units you would lose at least 100k $ in profit (or offer the product for
more money, which is ... difficult to do when dealing e.g. with Walmart).

The only way RFID could have taken off would have been if governments mandated
their usage.

~~~
hef19898
Yeah, especially price is a major obstacle. A barcode costs nothing and does
the job.

~~~
giantrobot
Not only do barcodes do the job but better and cheaper image sensors and
processors allow even 1D barcodes to be read at greater distances and from
multiple angles. This was one of the promises of RFID, pallets could just
stream off a truck and their ID could be read by some fixed reader on the
loading dock. A robot could zip past shelves and take stock of everything.

Better barcode reading allows a lot of the same advantages for none of the
marginal cost or dealing with extra regulation. Even handheld barcode scanners
are starting to use cameras rather than lasers because they're more flexible.

------
cmrdporcupine
Not sure about global shipping concerns, but I do think that 30 years of
companies optimizing for Just In Time delivery in order to avoid the risks of
excess inventory has made us prone to shortage crisis when 'excess' inventory
is needed.

I'm in the situation of being able to buy whatever luxury goods I want, but
getting staples like canned meat and bread and rice and toilet paper requires
lining up, virtually or physically.

------
cs702
As others here have mentioned, during normal times, companies have strong
economic and competitive incentives _not_ to invest in expensive, redundant,
inefficient infrastructure that is robust to rare events.[a]

This is true of financial companies too. For example, banks that are run to
survive rare events like global pandemic or world war cannot compete with
banks that ignore the possibility of such events during normal times.

The obvious question is, should societies impose limits on competition to
ensure there is always a minimum baseline level of redundancy in the economy,
and if so, what kinds of limits? I don't know of any obviously good answers to
this question.

[a] See, for example,
[https://news.ycombinator.com/item?id=22628239](https://news.ycombinator.com/item?id=22628239)
and
[https://news.ycombinator.com/item?id=22628157](https://news.ycombinator.com/item?id=22628157)

~~~
BoiledCabbage
> This is true of financial companies too. For example, banks that are run to
> survive rare events like global pandemic or world war cannot compete with
> banks that ignore the possibility of such events during normal times.

The opposite can't be allowed to continue. Spending heaps on stock buybacks to
then months later be completely out of cash.

> Take McDonald’s. With $21.1 billion in revenue last year, it ended 2019 with
> only $898.5 million in cash on its balance sheet, a little more than two
> weeks’ worth of sales. Considering that the fast-food chain, which owns more
> than 2,600 stores, franchises 36,000 more and employs 205,000 people,
> generated $5.7 billion in free cash flow last year, it could have as much
> cash as it wants. Instead, McDonalds’ bought back $4.9 billion worth of
> stock in 2019 and paid another $3.6 billion for its dividend, almost exactly
> the $3.24 billion the company borrowed last year.

This is a joke. It borrowed 3.2 billion to pay a 3.6 billion dividend? And now
it's CEO is meeting directly with the president to argue how enforcing paid
sick time off due to coronavirus is a bad idea because it will hurt businesses
too much. The system is so broken there are barely words.

[https://www.cnbc.com/2020/03/17/crash-shows-major-
corporatio...](https://www.cnbc.com/2020/03/17/crash-shows-major-corporations-
broke-no-1-personal-finance-rule.html)

------
hef19898
There is one thing good coming out of this, among all the desastrous things we
saw so far.And that is increased awareness of the importance of jobs like
nurses, shop clercks, truck drivers, deliverydrivers, warehouse workers and
logistics and supply chain management.

of all the companies Isaw, from insideand the outside, in my lifeso far, only
the rare minority treated supply chain management and logistics as anything
else than cost centers. If that perception changes, supply chains will become
more robust. Because all the points that are now visible for everyone due to
covid-19 are kind of well known in the supply chain community.

That being said, i don't think global supply chain will go away. After, they
survived two world wars so far. And the economic upside of specialization is
simply to big to ignore. Supply chans have to become more robust, especially
for things needed for events and crisis like we see now. And that part was
kind of neglected.

------
tyrust
My feeling as a layman is that the scale of globalization an industry uses
will emerge naturally as a result of the trade-off between the costs and
benefits. So far, the benefits have been worth it, otherwise companies
wouldn't do it. As the article notes, there are a number of examples where
safeguards are already in place, for in those cases it's worth being cautious.

The more serious, but harder to deal with, issue is that globalization lets
companies indirectly exploit labor and environment in a way that their home
region would not allow. Until this is sufficiently economically
disincentivized, it will continue.

~~~
tspike
The short-term benefits have been worth it. Long-term is much more
questionable.

------
nickpinkston
We in the manufacturing tech space have been thinking a lot about
reconfigurability, beyond just 3D printing locally, but to how do you tool up
(make molds, program machines, etc.) automatically akin to a deploy script,
Docker container, etc.

These analogies are no where in the current paradigm, but if we have them, we
could quickly allocate work across the manufacturing space to get stuff made
far quicker. The material part of tool up (cutting molds, etc.) only takes
days if you parallelize it, whereas the human aspect of dialing in the
machines, etc. is where all the time goes.

Here's my proposal for what a more software-like engineering / manufacturing
system would look like:

[https://www.slideshare.net/nickpinkston/the-future-of-
tools-...](https://www.slideshare.net/nickpinkston/the-future-of-tools-nyc-
whats-now-at-capgemini)

~~~
j88439h84
I looked through it but couldn't understand what the proposal is from the
pictures. A blog post would be more helpful.

~~~
nickpinkston
Thanks for the look! The YouTube video is linked in the description, but here
it is:

[https://www.youtube.com/watch?v=oXk1O6biJSE](https://www.youtube.com/watch?v=oXk1O6biJSE)

Would love your thoughts. (and yes, eventually I will write all of this up,
but there's a lot to get out, and I've been focused on building)

------
Lldjjxnn
Nothing will change because if we all fail together then we will be bailed out
together by the government. So the best solution is to minimize costs today by
maximizing the chance that we will all fail together as an industry in a
downturn and get bailed out.

------
thaway757383884
If we are making changes solely on the basis of COVID-19, then isn’t the
lesson that whatever you do, make sure you’re manufacturing and hiring people
in China? (Or South Korea).

I mean, China was the first one affected by this, and after a few weeks of
covering up (something western countries like the US also engaged in despite
having already witnesses the negative effects of COVID in other countries),
China took swift and drastic action (the kind which other countries may not
even be able to do legally) and got the situation under control.

The US, on the other hand, is gonna be shut for months, and if the global
supply chain was dependent on the US we would likely have been even more
screwed.

------
ansmithz42
I think the unfortunate fallout from this is that China now has confirmation
that they are in a dominant position world wide and likely will start to
exploit that fact. This isn't a statement on the country, as any country in
that position would do the ame and has done so in the past many times over.

~~~
shusson
And other countries might try to become more self sufficient. Which sounds
similar to what happened after the great depression.

------
hintymad
I'm afraid it will be hard for the US to bring back its supply chain. The US
has been moving out its manufacturing business for at least three decades. As
a result, we've lost generations of talent in manufacturing and supply chain.
It's not like we can bring back the talents overnight.

And even if we create redundancies in the US, the redundancies need to stay
competitive. Otherwise, we will just repeat the sad stories of the rare earth
industry, the solar energy industry, or the electronic industry.

------
carapace
In re: "Black Swans" the articles says:

> But over the past decade, we have had a number of black swan events.

which links to this: [https://sloanreview.mit.edu/article/the-science-of-
managing-...](https://sloanreview.mit.edu/article/the-science-of-managing-
black-swans/)

> To a risk manager, “black swan” phenomena are highly unlikely events that
> have massive impacts on a business or society on the rare occasions they
> occur.

But the whole point of the "Black Swans" is that they are both unpredictable
_and_ we forget about or rationalize them away after the fact.

[https://en.wikipedia.org/wiki/Black_swan_theory](https://en.wikipedia.org/wiki/Black_swan_theory)

Pandemics aren't unpredictable. This virus isn't a _black_ swan it's just a
large _white_ swan.

If we manage to cope with it well enough to keep things more-or-less stable
and then forget about it _then_ it's a black swan.

\- - - -

We could and should know better. You watch Star Trek and they're always
beaming down to random planets in their shirt-sleeves, no space suits.
Meanwhile, in the real world, we are expanding our "attack surface" (there are
more of these viruses out there, as we invade more wild areas we will
encounter more viruses) while weakening our systemic defenses (cheap
international travel, extended supply chains).

------
twomoretime
Having such reserve knowledge and experience is invaluable to national
security, justified even under subsidy. Especially for critical supplies like
semiconductors and medicine.

------
hinkley
I think we're damned if we do or damned if we don't.

There's a philosophy on international politics that basically posits that
countries that don't share get jealous neighbors. I forget the line but it's
something to the effect of, "Either goods cross your borders or soldiers
will".

Instead, as someone else suggested, it's supply chain optimization that's the
problem. But when you have a company that's making 20% margins, an 8% gain in
margins by running right at the ragged edge would be pretty damned tempting.
And if your competitors do it and you don't?

I think at the end of the day we are all to blame a little bit. And I proposed
in the first article of this sort that it might be a good idea if
Congressional pork were more evenly distributed throughout infrastructure and
logistics instead of being concentrated entirely in Defense.

------
shalmanese
This is what people were talking about in the beginning of the pandemic but,
if anything, all this has taught us is we should invest even more deeply in
global supply chains. If US made most of the masks that the US needed, then we
would be shutting down all of our mask making factories right when we needed
them. Because China makes our masks, China can buy global masks while they
were locked down on a pandemic and now they can turn around and be the factory
for the world while everyone else desperately needs masks.

What we should be wary about is Single Points of Failure but we should be
worried about that regardless of what the supply chain looks like.

------
selfishgene
In light of the recent evacuation order issued by MIT administration over
concerns about the spread of COVID-19, students should rethink whether or not
the campus experience is really worth the exorbitant price that schools like
MIT are charging for it.

Perhaps it's time now for the "globalized supply chain" of higher education to
go online.

A recent hacker news article talked about the precipitous decline in
applications for on-campus business school degrees. If that trend continues,
maybe future MBA's can lead the way on this one.

------
marcosdumay
Hum, nope. We will not rethink globalized supply chains.

It's a good time to invest in research about knowledge protection and flexible
production. It's also a good time to invest in emergency production capacity
(best if it's of the flexible kind) by the government, most likely inside the
military. (It may also be a good time for most countries to rethink the role
of the military.)

But we will not adopt suboptimal methods on the private economy. It doesn't
work that way.

~~~
Gustomaximus
> But we will not adopt suboptimal methods on the private economy. It doesn't
> work that way.

It does. Many business in many natiins are encouraged or forced to remain
domestic for strategic reasons. Eg why were car companies in US bailed out.
Ports are very restricted. Semiconductors. Farmland. Aero industry. Steel
manufacturing etc.

This is often done for security rational. And what nations consider 'for
security' may well expand post Coronavirus.

------
klodolph
If you think about it, cloud services add another layer in the supply chain.
For example, just think about a UK company buying cloud services from a US
company who buys hard drives from a company in Thailand. Now, you’re affected
not only by the floods in Thailand in 2012, but you’re affected by natural
disasters in the US as well. Even if you’re not using US data centers, they’re
part of the control plane for the data centers in Europe.

------
ceohockey60
Redundancy and diversification is always a good idea in general, but I find
the recent clamor for supply chain diversification due to COVID-19 bit of a
knee-jerk reaction, especially considering the virus is now global. Where to
diversify to is not an easy question to answer, compare to say a few weeks
ago, when the virus was mostly just infecting China.

Most supply chain analysis focus on cost/location/scale (this one too), but
ignore the manufacturing and engineering skills that are accumulated from
experience, which are much harder to replace. Countries level up to make
themselves more valuable. And the cost v quality tradeoff is really hard to
figure out.

Apple's failing foray into India's supply chain a few years ago is a case in
point [0]. I've written about this too in an India and China comparative
context when it comes to Apple [1]. Tim Cook said recently on TV that he's not
leaving China anytime soon [2].

Not everyone is Apple. How do you think about the tradeoff depends on your
business model. But rushing to "rethink" something as complex as global supply
chain, because of an unrelated, intervening event, however severe, seems
imprudent to me.

[0] [https://www.theinformation.com/articles/inside-apples-
search...](https://www.theinformation.com/articles/inside-apples-search-for-
an-indian-supply-chain)

[1] [https://interconnected.blog/leaving-china-supply-chain-a-
pip...](https://interconnected.blog/leaving-china-supply-chain-a-pipe-dream/)

[2] [https://www.youtube.com/watch?v=rsDU-
QsfkX4&feature=emb_logo](https://www.youtube.com/watch?v=rsDU-
QsfkX4&feature=emb_logo)

------
dredmorbius
Fron 2012: Trade Off: Financial system supply-chain cross contagion – a study
in global systemic collapse. By David Korowicz

 _...in order to understand systemic risk in the globalised economy, account
must be taken of how growing complexity (interconnectedness, interdependence
and the speed of processes), the de-localisation of production and
concentration within key pillars of the globalised economy have magnified
global vulnerability and opened up the possibility of a rapid and large-scale
collapse. ‘Collapse’ in this sense means the irreversible loss of socio-
economic complexity which fundamentally transforms the nature of the economy.
These crucial issues have not been recognised by policy-makers nor are they
reflected in economic thinking or modelling...._

[https://www.feasta.org/2012/06/17/trade-off-financial-
system...](https://www.feasta.org/2012/06/17/trade-off-financial-system-
supply-chain-cross-contagion-a-study-in-global-systemic-collapse/)

------
ansmithz42
I think the unfortunate fallout from this is that China now has confirmation
that they are in a dominant position world wide and likely will start to
exploit that fact. This isn't a statement on the country, any country in that
position would do exactly the same thing and had done many times in the past.

------
StylusEater
Really MIT? This is news? You and other top business schools taught throngs of
MBA students to outsource and manage costs to increase shareholder value. You
and your peers taught many a business leader to indirectly leverage a pool of
slave labor provided by a dictatorship to make cheaper and cheaper components.
Ever thought how they could be so cheap? It’s called lax environmental
regulations and not valuing life; suicide nets at Foxconn ring a bell? I don’t
wish ill will towards anyone, and it sucks so many people are losing their
jobs right now, but based on the “preservation of money” principle (think
thermodynamics for money) it’s time large business leaders reap what they’ve
sowed; the collapse of the business on their watch. Sucks, but, it’s a reality
and something had to give.

~~~
orthecreedence
> Is It Time to Rethink Globalized Supply Chains?

"Hey guys, wait. Is neoliberalism actually a really stupid idea??"

------
VikingCoder
I highly recommend the Daniel Suarez novels Daemon and Freedom. They start
with a (computer) virus taking over the world, and end up asking all kinds of
interesting questions about long supply chains and how much we should trust in
government and big business.

------
luckylion
As often, I have a feeling that the answer depends on the person/group you're
optimizing for.

As the government will swoop in and save the companies that are large enough,
there is little risk for them, so why would they spend enormous amounts on
mitigating that risk?

------
maerF0x0
I think this issue is analogous to the politician one. As a politician/CEO you
only care about what happens under your term and to get re-elected.

Maybe Executives should be paid with very long vesting schedules like 10 yrs?
(vests even if no longer employed...)

------
jdennah
That's silly, you can easily fix the problem by using a subscription only on
staples like food. That way they can't surge the supplies and you end up with
one guy getting all the eggs and reselling them.

~~~
xkcd-sucks
The word for this is "rationing", right?

------
alkonaut
No company will trade efficiency for resiliency. If you prepare for black swan
events your company is eaten by the efficient ones that don't. Even if the
black swans come every 10 years.

------
BooneJS
Is it time to rethink the Bay Area and NYC having all of the tech jobs?

------
acd
Yes agree that its time to rethink global supply chain. Actually its time to
rethink the whole economy. Economist now say we need to consume more to keep
the economy going. But the earth is warming due to global warming. When we
consume more we also consume more energy to make those things.

Thus what economist the current economy need and what the environment need is
disconnected and not in harmony.

We need to reinvent into a circular environmentally friendly economy where we
put the environment first.

------
ceilingcorner
I hate to make this political, but in a neutral sense: is this not precisely
what Trump ran and won the election on? I didn't vote for him, but clearly the
offshoring of factories to China has had serious negative consequences. These
were noticed by everyone in "flyover country" a decade ago, but the
coronavirus seems to have made everyone aware of the downsides of distributed
supply chains, especially to a totalitarian state in a time of crisis.

~~~
int_19h
Trump ran on it, but his presentation of it was tailored to right-wing
nativist populism, and the specific plan (tariffs etc) seems more like trying
to show that something is getting done, than actually fixing the problem.

But it's not unique to Trump - Sanders also makes similar points wrt
globalization.

------
fleetside72
Globalized Supply Chains incentives cooperation (like not war)

------
ape4
There is the climate change / pollution angle too. Its such a waste to ship
things half way around the world. A proper carbon tax on ships could improve
things.

~~~
yellow_postit
It’s also a waste and maybe (don’t know enough to do the modeling) worse for
the environment to spin up many duplicative factories with poor economies of
scale.

------
toshk
Fun side note. Since we always think of international supply chains as a
modern phenomena. The Dutch have been, among other things, importing their
grains since the 17th century from Eastern Europe:
[https://eh.net/encyclopedia/the-dutch-economy-in-the-
golden-...](https://eh.net/encyclopedia/the-dutch-economy-in-the-golden-
age-16th-17th-centuries/).

------
Dumblydorr
If those in power dealt with emergent threats like epidemics, climate change,
AI safety, nuclear war, maybe we could trust them with globalized supply
chains. But since they hoard profits and refuse to pay taxes, while failing to
prioritize the populace survival, seems we may do well to localize into our
own communities. Why should we accept global threats and barely reap the
rewards of global commerce?

------
BubRoss
The actual title is "Is It Time to Rethink Globalized Supply Chains?" which
doesn't use a question mark after a statement.

~~~
netvarun
Also this fails HN’s guidelines of title editorializing, by including the
author’s name.

------
Invictus0
Executives aren't paid to build resilient organizations, they're paid to
return capital to shareholders. Until you incentivize them otherwise, it won't
be a priority. Right now, everyone is content to throw their hands up saying
"it couldn't have been predicted" and then return to business as usual once
the crisis blows over.

------
pembrook
Often, when bad things happen, humans tend to go broad and deep and question
everything around them. This is the wrong approach, IMO. Nobody has the power
to alter everything around them, so nothing gets done.

If we look at history, we see tiny, continuous improvements in reaction to bad
events are what have led to the relative stability of modern life. Bad thing
happens, we figure out the (usually small) root cause, then we stop it.

For example, when the automobile emerged, we learned that allowing people to
drive without rules resulted in gridlock and frequent crashes. Did we ban
automobiles altogether? No. We created regulations (traffic rules), and
improved the issue.

Then we then learned that more people die in car crashes if they have nothing
protecting their body in a crash, so we created seatbelts. Then we learned
they still needed cranial protection in a crash. We created airbags, and
improved the issue. And so on.

After coronavirus, the solution is not to lock down global supply chains and
force everybody to stay indoors forever. The solution is easy. We simply
change regulations and practice around the storage of certain animal species.
Until the next thing comes along, and we tweak our model of the world again to
address it.

This is not complicated. Human life is one giant continuous improvement model.

~~~
hilbertseries
The wet markets were already illegal. I’m not sure that betting we can prevent
another pandemic is the right approach here.

~~~
cultus
They actually banned them after SARS, but then legalized them again after it
all wound up being sold on the black market anyway, but with worse safety.

------
mgoetzke
On the contrary. Global is good, but it has to be globally _distributed_.
Global cannot mean just make it in China.

Right now, since China is ahead of the curve, it is valuable to be globalized
in many respects. But it is not enough.

------
kazinator
You can sit there in your academic cubbyhole at MIT and rethink all you want;
at the end of the day, you need something from halfway across the word that
they don't make here, or not at the price you want or other requirements.

------
olivermarks
Hopefully Sloan MIT will retool their supply chain masters courses that train
managers in the efficiencies of just in time global chains
[https://scm.mit.edu](https://scm.mit.edu)

------
agapon
I think that there is a general rule that the more optimal a system is the
less robust it is. So, it seems that we have to choose a balance between the
two. And the current market incentives are to choose the minimum costs.

------
eanzenberg
It's time to rethink conducting business and trade with oppressive
authoritarian and frankly communist countries. The world should not have to
endure a pandemic every decade from countries that continues to suppress its
people, its scientists its media. Enough is enough.

And to be clear, this is targeted at the country's government, and never its
people. The government needs to be held accountable.

------
jmount
Probably "de-globalizing" a supply chain would turn out to mean off-shoring
the entire production to one country, instead of the probably intended on-
shoring of production to one's own country.

------
ineedasername
I think the rethink just needs to address the need for uncorrelated
redundancy. And yep, that's more expensive than the current mode of
operations.

------
tonyedgecombe
Global supply chains are a problem now but I wonder if the virus would have
spread like it has without global tourism.

------
nraynaud
Well, isolationist policies are not really possible for small countries, they
can't possibly make everything they need. Having bigger countries depend on
each other is also the opportunity to somewhat teach them diplomacy; otherwise
they would have an even worse behavior towards small countries.

Imagine China or the US without any need for an external country, their
behavior as citizens of the world would be 10 times worse.

------
NicoJuicy
It's already moving somewhat to India.

Slowly, but China 2025 made a lot of people fear it.

------
frequentnapper
out of curiosity why haven't american companies been outsourcing to Mexico or
Canada instead of China?

~~~
Gibbon1
Companies have been outsourcing to Mexico for a while.

------
grej
I think this article might be a good counterexample to Betteridge's law of
headlines:

[https://en.wikipedia.org/wiki/Betteridge's_law_of_headlines](https://en.wikipedia.org/wiki/Betteridge's_law_of_headlines)

------
fartcannon
Robotics!

------
pjc50
Supply chains have been globalized since the silk road. The famous "I, Pencil"
essay is 50 years old. It may not be _possible_ to deglobalise supply chains
without unreasonable cost.

So that means we have to start looking at local resiliency and what that means
instead; arguably this is where parts of the environmental movement are way
ahead, such as the "transition towns" movement. And anti-consumerism in
general: there's no supply chain for something you don't buy.

