October 8th, 2021

meow, cat, Siamese, catty

The Ongoing Shortages

I think we all remember those strange months of March and April of 2020, when the COVID-19 pandemic begin to hit in earnest and things like toilet paper and hand sanitizer disappeared from the shelves. Just when those things began to reappear on the store shelves, albeit with strict limits on how much any one individual could buy, other things began vanishing. I still remember walking into a grocery store and finding the entire meat department picked clean.

In the past eighteen months we've seen some recovery, only to have other products disappear from the store shelves. A number of stores have been using creative stocking to conceal gaps -- for instance, running a single line of soup cans all along a shelf where previously the cans would've been six or eight deep.

Now I'm reading on some of the business newsletters I follow that catsup and cotton may well be among the new shortages, as producers of each are reporting increasing costs for various things used in the production and packaging of them. One of the newsletter writers made a half-joking comment that it may get to the point that you have to bring your own catsup bottle when you go out to get a hamburger.

The early shortages had relatively simple causes: keeping people at home meant they were using the consumer supply chain more, and the aggregate supply chain (the one that supplies office buildings, hotels, restaurants, etc) was backing up for lack of demand. Solving that problem required finding ways for suppliers in the aggregate supply line to pivot to supplying consumer demand (sometimes by donating goods to food banks for charitable giving to people who were suddenly out of work and didn't have the wherewithal to buy their usual essentials).

The latest round of shortages have more complex causes that are far more difficult to resolve. Many of them have their roots in the shutdowns of early and mid-2020 -- but in ways that highlight just how interdependent our supply chains have become. For instance, we have dozens of cargo ships sitting outside the Port of Los Angeles, waiting to dock -- and some of them have been waiting for so long that they crews are running out of vital supplies, and emergency resupplies have had to be arranged before the situation becomes a humanitarian crisis.

Part of the problem is the shutdown of the port to all but essential shipments during the worst of the pandemic, which resulted in a backlog of ships that is difficult to catch up on. But there's also the problem of a shortage of longshoremen to handle all that cargo, from the guys who run the giant cranes to pick up CONEXex off the ships and transfer them to train cars or semi trailer chassis for overland transport to the people who handle containers that hold multiple purchasers' cargo. But even if that could be resolved, there's also the shortage of truck drivers to haul them over the road -- and even if they do go by train, eventually they're going by truck to their final destination, simply because almost no one these days has a rail head into their factory or logistics center.

But there are also the policy issues that have led to this tangled mess. It's easy to blame Federal largess: the various stimulus payments that people are eager to spend, and the increased unemployment payments making people less willing to take low-paying jobs. However, there are other issues, like the pissing match China got into with Australia over the issue of responsibility for COVID-19, which led to Australia refusing to sell China any more coal, with consequent energy shortages leading to rolling blackouts and periodic factory shutdowns all over China. A lot of those factories are making the stuff that we're wanting to buy, so when those factories aren't working at full capacity, it's going to result in shortages.

And then there's the issue of the manufacturers of integrated circuits -- the chips on which so much of modern life depends -- being shut down or otherwise unable to fulfill demand. I've read several accounts of auto manufacturers shutting down their assembly lines not because they can't get personnel, but because they can't get the runtime computers and other chips that are essential to a modern vehicle -- and these can't just be added to the finished vehicles later. But it's not just the auto industry that is feeling the pinch. Almost every durable good in our homes -- large and small appliances, entertainment equipment, you name it -- uses chips, often because it's cheaper to buy an off-the-shelf microcontroller and get a programmer to write the necessary software to govern the relevant processes than it is to build an electromechanical controller. So your washing machine may still have a mechanical dial control like the ones fifty years ago, but it's now connected to a microcontroller that uses dozens of sensors to allow your washing machine to determine how high to fill the tub based upon the weight of the load, to time the wash and rinse cycles according to amount of soil on the clothes, etc. But if those chips aren't available, the washing machine can't be made.

I'm thinking we're going to be seeing some major shifts in economic patterns, both at the individual level and nationwide. We're going to have to get used to making things last again, and stocking up when things are available rather than just buying what we need at the moment. And there may be some serious re-evaluation of Just In Time logistics, and the offshoring of vital industries like chip fabbing.

I know that we're going to be planning on making quite a few things last a few more years longer than we'd planned. I'd been hoping that we could replace our van in a year or two, but I'm thinking it's going to last a lot longer than that, even if it means some repairs we wouldn't have normally considered. And there are a lot of other things I might have liked to replace that may have to be kept in service, including a stove with an oven that needs repair.