[archildress]

Thank you Toyota and practitioners of "lean" / "Six Sigma" that told us all about the wonders of just-in-time, to only carry exactly as much inventory was needed for demand. After all, we'd rather have that cash in a bank account than tied up in inventory.

While well intentioned, the problem is that it all relies on assumptions, largely tied to demand. And when demand goes through a wild whipsaw, and everyone takes diverging viewpoints of the shape of that whipsaw curve, the highly interdependent chain snaps.

Labor is an issue for sure. But make no mistake, the "restart from COVID" supply chain conundrum owes a lot of its pain to optimizing everything to the hilt, then reacting slowly as the world around us changed.

[jdlshore]

I hear this complaint frequently, and I always wonder if the people making it are well-informed about supply chain logistics or are just parroting what they’ve heard elsewhere. Because my understanding of TPS and Lean is that it solved serious issues with supply chains involving waste due to outdated and rusted (figuratively and literally) inventory. It also doesn’t prevent the use of buffers to absorb shocks, as Toyota demonstrated in the first year of the pandemic.

[philwelch]

The problem isn't with the methodology itself but with how it's implemented in practice. Lean makes your buffers a lot more visible to management, and if you combine that with a culture of short-sighted cost-cutting, you run into issues. The problem isn't lean; it's a management culture of short-sighted cost-cutting.

[wongarsu]

And that management culture is an effect of how compensation works. Cut costs, put "reduced overhead by X Million" on resume, either get promoted or switch jobs before negative impact happens.

[philwelch]

Which might explain how Toyota has less of these problems. I don't think Toyota executives are the type of people to make these kinds of moves and hop jobs.

Ted Ogawa, President and CEO of Toyota North America (https://pressroom.toyota.com/biographies/tetsuo-ogawa/):

> After joining Toyota in 1984....

Mark Templin, President and CEO of Toyota Financial Services(https://pressroom.toyota.com/biographies/mark-templin/):

> Since joining Toyota Motor Sales (TMS) in 1990, Templin has held a number of positions.

Chris Nielsen, Executive Vice President, Product Support & Chief Quality Officer (https://pressroom.toyota.com/biographies/chris-nielsen/):

> Nielsen joined Toyota in 1987 as a buyer at its Georgetown, Kentucky, plant

Toshio Niimi, Executive Vice President, Production Engineering and Manufacturing (https://pressroom.toyota.com/biographies/toshio-niimi/):

> Niimi joined TMC in 1984 and has held positions in the company’s engineering and manufacturing divisions.

Takeshi Uchiyamada, Chairman of the Board of Directors (https://global.toyota/en/company/profile/executives/board-of...):

> Takeshi Uchiyamada was born on August 17, 1946. He graduated from Nagoya University with a degree in applied physics in March 1969, and joined Toyota Motor Corporation (TMC) in April the same year.

Shigeru Hayakawa, Vice Chairman of the Board of Directors (https://global.toyota/en/company/profile/executives/board-of...):

> Shigeru Hayakawa was born on September 15, 1953. He graduated from the University of Tokyo with a bachelor's degree in economics in March 1977, and joined Toyota Motor Corporation (TMC) in April of the same year.

Akio Toyoda, President (https://global.toyota/en/company/profile/executives/board-of...):

> He joined Toyota Motor Corporation (TMC) in April 1984.

(He also happens to be the grandson of the founder of Toyota.)

Koji Kobayashi, Member of the Board of Directors (https://global.toyota/en/company/profile/executives/board-of...):

> He graduated from Shiga University with a bachelor's degree in economics in March 1972, and joined Toyota Motor Corporation (TMC) in April of the same year.

I can see how that would discourage short-term decision-making.

[mzs]

Here's recent supply-chain thread calling-out a current bottle neck:

https://threadreaderapp.com/thread/1451543776992845834.html

https://twitter.com/typesfast/status/1451543776992845834

[missinfo]

That is amazing. Why is the Flexport CEO apparently the only one trying to diagnose and solve this critical problem? It's not even that hard. He lays out a relatively simple solution:

1) Executive order effective immediately over riding the zoning rules in Long Beach and Los Angeles to allow truck yards to store empty containers up to six high instead of the current limit of 2. Make it temporary for ~120 days.

This will free up tens of thousands of chassis that right now are just storing containers on wheels. Those chassis can immediately be taken to the ports to haul away the containers

2) Bring every container chassis owned by the national guard and the military anywhere in the US to the ports and loan them to the terminals for 180 days.

3) Create a new temporary container yard at a large (need 500+ acres) piece of government land adjacent to an inland rail head within 100 miles of the port complex.

4) Force the railroads to haul all containers to this new site, turn around and come back. No more 1500 mile train journeys to Dallas. We're doing 100 mile shuttles, turning around and doing it again. Truckers will go to this site to get containers instead of the port.

5) Bring in barges and small container ships and start hauling containers out of long beach to other smaller ports that aren't backed up. This is not a comprehensive list. Please add to it. We don't need to do the best ideas. We need to do ALL the ideas.

We must OVERWHELM THE BOTTLENECK and get these ports working again. I can't stress enough how bad it is for the world economy if the ports don't work. Every company selling physical goods bought or sold internationally will fail.

The circulatory system our globalized economy depends has collapsed. And thanks to the negative feedback loops involved, it's getting worse not better every day that goes by.

I'd be happy to lead this effort for the federal or state government if asked. Leadership is the missing ingredient at this point.

[extrapickles]

There is a emission’s control law that is effectively banning any truck older than a 10 years from entering California which would also need a temporary stay to help get the bottleneck cleared as fast as possible.

[dikaio]

Please upvote this users comment.

[jdlshore]

That’s a great thread, thank you. Do note that one of the replies calls his fundamental thesis into question, though: empties are sitting on chassis not due to regulation, but due to lack of equipment for stacking them higher.

[margalabargala]

Reasonably large mobile cranes exist and the cost of renting one for a day is small compared to the amount of capital bouncing around logistics operations surrounding the Port of LA.

They're not currently in use at truck yards because it's illegal to stack containers high, but if it were no longer illegal then they could be quickly and temporarily set up.

[jdlshore]

There’s a respondent in the thread claiming that it’s not illegal, but I don’t know how accurate their information is.

[jawns]

I think some companies recognized that it's possible for once-in-a-generation and once-in-a-lifetime disruptive events to occur, but they crunched the numbers and decided that they could squeeze more from lean practices over the long term than they stood to lose in the disruptive events.

Like, suppose you could make $X in profit that is highly resilient to infrequent disruption or twice that with the understanding that every 20 years or so, you're going to have a few bad years because of black swan events. You might determine that you're willing to take your lumps during the chaotic times.

[mywittyname]

Planning for black swan events would be really dumb: they will never go exact as you plan them to. What if they planned for a GFC-like black swan event where nobody bought cars? Or one where gasoline suddenly went to $400 barrel?

There are a million possible black swan events and there's a million ways to plan for them.

[londons_explore]

Few companies plan that far ahead....

You'd get the same outcome by hiring someone and telling them they get a bonus proportional to increased profits, and no bonus in bad years.

[yunohn]

> Thank you Toyota and practitioners of "lean" / "Six Sigma" that told us all about the wonders of just-in-time, to only carry exactly as much inventory was needed for demand.

While Toyota might have popularized the concept, it seems odd to blame them for the common-sense idea of just-in-time.

It’s quite natural, normal humans also don’t hoard everything they can possibly think of needing, nor should companies. It’s eco-friendly to be JIT as it leads to less wastage; while optimizing for rare shortages will result in wastage all the time.

[blix]

> It’s quite natural, normal humans also don’t hoard everything they can possibly think of needing...

For most of human history we did exactly that. The deeply interconnected "JIT Consumption" world is really quite new. And if consumption patterns suddenly change then you can't buy toilet paper anymore.

[munk-a]

I'd actually disagree pretty strongly with this. For most of human history the spoilage rate of pretty much everything we produced was so high that stockpiling goods for the sudden economic shocks was solely reserved to governing bodies. Remember how you built ten bazillion granaries in Civ? Sure, the game has taken quite a few liberties with history but we have evidence of communal food storage going all the way back to Babylon. When's the last time you saw a granary or any sort of food stock that was actually built and maintained by a government in the modern world?

Before the modern epoch it was really rare to personally stockpile goods due to the extreme possibilities of spoilage (everyone loves weevils and moths right?) - that's only been an option in the near history.

[blix]

For most of the pre-modern era, 'governing body' simply means a group with enough stockpiled resources, especially food, to project power. Anyone who could get in on this action tried to. Spoilage is an issue, but humans came up with many neat tricks to work around this, many of which are still used today (fermentation, for example). Anyone who didn't want to live or die soley by the whims of the local warlord during a harsh winter had to maintain their own food stockpile.

The great lie of Civ is to present this as centrally organized when for most of human history this power was very finely decentralized due to the expense of communication and logistics. But as socities become more centralized food stockpiles haven't disappeared. Many governments still maintain food stockpiles, especially poorer countries.

[anttisalmela]

National Emergency Supply Agency in Finland did have real granaries not a long ago - they still have emergency supplies of grain, nowadays it is just done by owning grain and paying private companies to store it in their normal logistical network.

In the beginning of the pandemic the agency was heavily in local news when they started deliveries of protective gear from their stockpiles - but to be honest, some rubber bands of the stored masks did need replacing.

[yunohn]

Do you have some sources to prove that “most of human history”, everyone was hoarding?

Necessity leads to JIT, only in times of surplus can you even try to hoard. Famines were common before, and still occur now - you just don’t notice now thanks to globalization and in part, essential reserves maintained by governments and companies.

[blix]

Humans very quickly realized that food doesn't always come in at a constant rate and learned to hoard[1] in times of plenty to protect against times of scarcity. As you note, current governments still stockpile food, but before power was so heavily centralized this responsiblity fell to smaller communities and family units. The very first proto-states formed around resource stockpiles[2], but food preservation had been a big deal for much longer, some 12k years ago[3], predating agriculture. In contrast, the expectation that I can go to Walmart and buy fresh ground beef at any time is not even a century old.

Neccesity leads to JIT, but also sustained surplus. If the winters are mild and food can grow year round, why bother stockpiling? If any widget can be obtained quickly and cheaply, why spend the extra effort to maintain inventory? If I can always buy ground beef at Walmart, why should I keep a winter's worth supply in my freezer? These practices are fine as long as the underlying assumptions remain valid. If one suddenly finds that they can't reliably buy toilet paper on demand, there is an incentive to hoard it. And that's exactly what happened.

[1] While it has taken on a somewhat different meaning in recent times, the early meaning of the word was 'to store and preserve for future use.' https://www.etymonline.com/word/hoard

[2] https://www.jstor.org/stable/44687105

[3] https://nchfp.uga.edu/publications/nchfp/factsheets/food_pre...

[yunohn]

So… what’s your point then?

We agree that humans were not able to hoard (ever, despite changing definitions) at the level we actually currently do. But, obviously, we don’t hoard enough to meet incredibly rare supply chain shortages like these.

It seems to me like we are at a well optimized level; do you feel otherwise, and if so, how do you plan to solve it without resource wastage and price increases?

[blix]

I don't think this is our last pandemic. Really the modern globalized era is a vanishingly small slice of human history. Ancient societies were often wiped out by unexpected events. I would not bet that nothing unexpected will ever happen again. On the contrary, the relatively consistent climate that has sustained literally all of human civilization is changing at an unprecedented rate. I expect frequent major challenges to existing systems. I think COVID is actually a minor challenge in this space; the economic effect is only so large because of how poorly we were prepared.

I reject your constraints. Optimizing for minimum resource wastage and price is also optimizing for minimim reslience to the unexpected. If you want to experience this first hand try living paycheck-to-paycheck. I'd rather pay more and consume less while relying on more resilient systems; I think we need it now more than ever.

[snarf21]

Would you be making the same statement if covid hadn't happened? I think companies realized that net net, JIT is more profitable and they'll worry about the outliers when/if they happen.

[imtringued]

The problem isn't Toyota. It's that companies are so damn risk averse that they would rather have money in bank accounts rather than take a risk and keep producing too much even during a half year downturn.

[cascom]

Except that when companies do this, and then ask to be rewarded for making that investment, they are lambasted for price gouging or profiteering…just ask any hardware store that has sat on a pile of snow shovels through the summer in order to capture a premium price when a blizzard is approaching…

[throaway46546]

I agree price gouging laws lead directly to shortages. Take the recent toilet paper shortage. What is a more preferable outcome, not having toilet paper available or having to pay 4x as much for a roll? Because the latter is illegal we have empty shelves instead.

[mywittyname]

The problem with price gouging is that people are irrational and feel entitled to the price they paid last week. People get super fucking angry at price gougers. Which is how the nation ended up with these laws to begin with.

So even if the government were okay with "market adjustments" on basic goods, there would still be this risk of stores getting looted/destroyed because people are so angry at how quickly prices increased.

Businesses are much less emotional. Most are just going to adapt to the new price.

[rsj_hn]

It is more than just people being angry. As was famously pointed out by Axel Leijonhufvud, inflation makes the process of economic planning extremely difficult. If you are a business, you need to make long term production plans, and when you have no idea what the costs will be, that severly disrupts the production process and leads to shortages regardless of how you feel emotionally about something.

Instead of talking about "inflation", talk about "cost uncertainty". That should make clear how a complex society with long production chains can't really deal with it. That also includes households, who have much less capability for planning than firms and really need to know what their bills will be and how much things will cost when making decisions.

https://www.academia.edu/43768978/NOTES_ON_COSTS_AND_CONSEQU...

[dragonwriter]

> inflation makes the process of economic planning extremely difficult.

It doesn't, though.

> If you are a business, you need to make long term production plans, and when you have no idea what the costs will be, that severly disrupts the production process

Sure, but that's the effect or unpredictable price changes, not inflation. USD is inflationary, Bitcoin is deflationary, but future (short or long term) prices of other goods and services in USD have a lot less uncertainty than those in Bitcoin. Inflation is not at all the same thing as difficulty projecting future prices.

[mywittyname]

Inflation is not the same as price gouging.

Price gouging is a legal term for people/retailers taking advantage of shortages or spikes in demand by charging well over market price for basic necessities.

[Workaccount2]

I don't think it's risk aversion so much as it is "Parts on the shelf don't pay interest/dividends".

[bluGill]

Parts on the shelf also rust. My company saves a lot of money not having to de-rust iron parts now that everything is back out the door 5 days after it arrives in the factory. Not to mention sometimes parts rust enough that they no longer pass quality standards.

[LurkingPenguin]

Toyota actually isn't as JIT as you make it out to be, but that notwithstanding, what's the alternative? Stockpile 30 years' worth of Christmas ornaments in warehouses in Oklahoma, right next to the oil storage?

[archildress]

It’s almost as if there are happy mediums in between the two scenarios. :)

[LurkingPenguin]

2 years' worth of Christmas ornaments? 10 years' worth?

The amount of crap that we consume is astounding. And in many cases, each specific type of crap requires a bunch of smaller crap (components).

There is literally no way for a consumption-driven society as broad and deep as ours to stockpile years' worth of everything.

[archildress]

All planning really is based on assumptions, like safety stock levels. In organizations you typically have someone who decides "hey, this is the right level of inventory to keep, based on our demand right now." That's not a bad approach, but the problem is a lot of supply chain planning is top-down and dictates "we only want to keep $x tied up in inventory" and as you can imagine that number is driven by management as low as possible. When COVID happened last year, levels were slashed so low and now the supply chains can't recover.

Basically my view is that it's this over reactiveness and obsession with free cash flow has swung so far so as to create a too-painful jam.

I would agree that over consumption is a problem, albeit a separate one to the conversation at hand.

Cheers.

[LurkingPenguin]

> That's not a bad approach, but the problem is a lot of supply chain planning is top-down and dictates "we only want to keep $x tied up in inventory" and as you can imagine that number is driven by management as low as possible.

This actually isn't true to the extent you seem to think it is, though.

> Basically my view is that it's this over reactiveness and obsession with free cash flow has swung so far so as to create a too-painful jam.

But that's not the only cause of the supply chain situation. Transportation is also a big part of the issue. Even if you had 10 years' worth of widgets in a warehouse in China, if you can't get them on a ship, or the shipping costs are too high, you get supply shortages where the customers need those widgets.

[swiley]

Is there an easy way for people with yachts to transport stuff like this for a profit?