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Whenever you see such absurdly high numbers attached to cost estimates, always try to understand how they calculate it. This took the "$400 million / hour of s
by scrollaway 6y ago
Whenever you see such absurdly high numbers attached to cost estimates, always try to understand how they calculate it.
This took the "$400 million / hour of shipped goods are being delayed" figure and ran with it by multiplying it, claiming that's the total damage cost.
Now ask yourself: Let's say you're sending a parcel via UPS that contains an iphone, or simply $1000 worth of goods. At the last stopping point of the UPS truck, they get a flat tire before being able to deliver it. Your iphone delivery is unexpectedly delayed for a day.
How much damage has been caused? What if it's two days? Six days?
There's just a big fat "this isn't how it works" attached to this $58bn figure.
Edit: For context since parent comment was deleted, this refers to istheshipstillstuck.com's estimate of $58bn worth of damages being caused by the ship being stuck.
- Karunamon 6y agoDelivery to end customers is not equivalent to delivery as part of a supply chain. Instead of $1K of iPhones, think of it as $1Mn worth of components for a manufacturing process or items to be placed on a shelf. Many of those items' shipping timeframes are well-known and factored into calculations of supply and demand. If a customer wants to buy something from you and you're out of stock, they're generally not going to sit on their hands and wait patiently, they're going to buy from your competitors or not at all. That money is gone. Also, consider that we're at the end of a financial quarter, and this could also account for missed targets for all manner of industry.
- scrollaway 6y agoSo what you're saying is, "it's complicated"?
- Karunamon 6y agoQuite, but I'm also saying that your analogy was terminally flawed. Supply chain shipping != shipping your widget from Amazon.
- scrollaway 6y agoWasn't supposed to be an analogy but rather a simplification of the fact that delayed goods do not translate 1:1 to losses.
- lanstin 6y agoIt’s not Just complicated but a ton of math has been used for the last fifty years to make it as cheap as possible at the cost of robustness. Removing stacks of supplies at factories and ware houses in favor of just in time deliveries. Consolidating redundant factories. That sort of thing. I am not in logistics but I worked I a factory as an intern with the operations research group in the 1980s.
- mindslight 6y agoYou've just gone up a level to draw the boundary at the wrong place. That money isn't "gone", because as you've said, the customer simply buys from a competitor. This is going to be bad for some individual businesses (imagine a small business buying a whole container of perishable goods), but systemically it's a blip. Delays are not destruction. Failure to make something is not the same as spending resources to make it only to have it destroyed. Money shifted around to different winners, but very little damage occurred.
- randerson 6y agoOne impact I read about was that Egypt makes ~$300K per ship in tolls, which they won't make if ships take the long route around Africa instead.
- rantwasp 6y agoor, they’re gonna make more money with the “rush hour” that will follow and they will only lose a small fraction of what people think they’re gonna lose