8 ms·

The Ball and Supply Chain

141 points by luord 5y ago

topspin 5y ago
You look for reasons and inevitably get handed the same old story; the pandemic. Except this was happening before the pandemic. Yes, the problem is worse now, but components having been getting difficult to obtain for a while now. It's consolidation of manufacturers worldwide and centralization of production in select parts of Asia. Lack of competition, in other words.
- viraptor 5y ago
  There was a good comment about it recently which moves the blame to automotive and their inventory management. Not sure if it's true, but it's a good different take to read. https://news.ycombinator.com/item?id=26931498 https://news.ycombinator.com/item?id=26931498
  - topspin 5y ago
    Again, this theory relies on the pandemic; "For some reason in early 2020..." If you're in the business and have to acquire components you know with high confidence that component scarcity did not start with the pandemic.
- kiba 5y ago
  It's a familiar story. Companies think they can save money by outsourcing engineering expertise. They think they can save cost by outsourcing everything to suppliers. So their financials look great, but that's absolutely misleading. Then you have companies like SpaceX eating everybody's lunches, and to my surprise, still eating everybody's lunches.
  - sk1459 5y ago
    Would you say SpaceX has been eating a free lunch, then? Sounds about right.
  - pabs3 5y ago
    That reminds me of this article about how companies/countries/continents lose their tech knowledge: https://berthub.eu/articles/posts/how-tech-loses-out/ https://berthub.eu/articles/posts/how-tech-loses-out/
    - bjelkeman-again 5y ago
      That was very insightful. A bit of a rambling read but worth it.
    - RugnirViking 5y ago
      Incredible read.
  - xondono 5y ago
    This is nothing new, it’s just the MBA syndrome. Go to any MBA school and they’ll tell you how sales is a clear “profit center”, while engineering is a “cost center”, and that companies are made more profitable by “internalizing profit centers” and “externalizing cost centers”. The ridiculous part is that this has extended to the point that subcontractors have other subcontractors, that have yet another subcontractor...
Animats 5y ago
This is where China achieves victory. All the PRC has to do is give priority to domestic manufacturers for small parts. Exports of finished items are preferred over exporting raw materials and parts. That was part of the Made In China 2025 plan. If some other country starts to develop an in-house supply chain for some specific item, exports for that specific item are turned back on and possibly sold at a loss until the threat ceases. That's what happened with rare earths. Remember rare earth shortages. China cranked up the price, Molycorp got the Mountain Pass CA mine going again, China dropped the price, Molycorp went bankrupt. Same strategy Amazon uses with Amazon Basics.[1] This is an explicit national strategy of the PRC. There's no secret about it. [1] https://www.mining.com/caught-between-rare-earths-and-chinese-dominance-the-story-behind-everything-no-one-is-telling-you-part-one/ https://www.mining.com/caught-between-rare-earths-and-chines...
- chrisweekly 5y ago
  This seems like a straightforward description of the problem; what potential solutions / mitigations are available?
  - wmf 5y ago
    Onshoring supply chains and keeping them working whether they're profitable or not.
    - cortesoft 5y ago
      I.E. subsidizing.
  - icegreentea2 5y ago
    Decide on what industries or areas are strategic, and subsidize the crap out of it, and be ready to deal with all the negatives (see farming and oil and gas subsidies) that come with that. If it's important enough, then it's worth negotiating the pitfalls.
    - fiddlerwoaroof 5y ago
dingleschmuf 5y ago
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gundmc 5y ago
There are some really interesting companies that play alongside this space. The one I'm familiar with is Z2Data [1] (not affiliated). They provide component-level part risk and sourcing information factoring everything from active litigation against sub-tier suppliers to geopolitical risk affecting associated manufacturing facilities and supply lines. I rarely encounter data as a service in my line of work. I usually think of that as typically market research, so it's been interesting getting a different angle on that. [1] - https://www.z2data.com/ https://www.z2data.com/
- neolog 5y ago
  Looks cool. Where do they get the data from?
jerzyt 5y ago
Not to criticize the concept of JIT to avoid excessive inventory, but I've always argued that the flipside of JIT is turning every path in the supply chain into a critical path.
- hliyan 5y ago
  If the pandemic has taught us anything, it's that mistaking safety margins for inefficiencies can be deadly.
- xondono 5y ago
  This. I feel like this is the manufacturing equivalent of the financial sector shenanigans back in 08. A bunch of companies increasing profits by baking in risks into the chain, because the risks of your individual providers failing are independent probabilities, until a pandemic closes them all at the same time. The obvious difference is that the financial sector was (and is) way bigger than manufacturing.
- Ericson2314 5y ago
  Yeah JIT is a bit suspicious. I also think there is some planned obsolescence that is making the inventory depreciation so scary the bean counters to begin with. e.g. microcontrols don't require lots of processing power, and if embedded software wasn't complete shit it would be easy to keep portable so there is supply chain flexibility.
- Animats 5y ago
  Just-in-time manufacturing came from automotive, which has a long history of the major automakers exerting tight control over their suppliers. Really tight control, like the ability to send in inspectors for a no-notice quality audit, and the right to look at a supplier's financial records. That control has loosened in recent years, as suppliers have become bigger and not totally focused on automotive. If you have a just-in-time manufacturing operation and your suppliers are more powerful than you are, you're very vulnerable.
varispeed 5y ago
Parts that are not available on Mouser or Digi-key are available in their thousands on Aliexpress and similar sites often for 10x normal price.
- jpm_sd 5y ago
  No, many of them are not. As an EE who does his own supply chain mgmt at a startup, I've been in crisis mode for a couple of months now. Some components are not available at any store, at any price, for the next 6-18 months. Had to make design changes to roll out prototype hardware.
- mikewarot 5y ago
  I wouldn't trust anyone outside of Mouser of Digi-key if my job depended on it... for a one off, why not, but not something when a few failures is going to end up costing more than the profits for the run.
minimuffins 5y ago
> Just-in-time works really well when it works really well. But the ripple effect of a global pandemic upon every sector of the globe...causes a lot of companies to feel the immobilizing weight of the ball attached to the supply chain. We are now feeling the problems that come with the limits of this kind of global supply chain (which is the outcome of a political-economic project which has been underway, outside the spotlight of mainstream media coverage, for about three decades). The problem and possible solutions are inevitably more political than technical (who gets to decide where things are made, how, and how much is not something the average citizen who has to bear the brunt of the effects has any control over--a political problem). I also recently learned about how single-use production techniques exacerbated the supply chain fragility, esp. as regards the US covid response. Interesting stuff. Big, long-term problems. https://exhaust.fireside.fm/18 https://exhaust.fireside.fm/18

141 points by luord 5y ago

You look for reasons and inevitably get handed the same old story; the pandemic. Except this was happening before the pandemic. Yes, the problem is worse now, but components having been getting difficult to obtain for a while now. It's consolidation of manufacturers worldwide and centralization of production in select parts of Asia. Lack of competition, in other words.

viraptor 5y ago
There was a good comment about it recently which moves the blame to automotive and their inventory management. Not sure if it's true, but it's a good different take to read. https://news.ycombinator.com/item?id=26931498 https://news.ycombinator.com/item?id=26931498
- topspin 5y ago
  Again, this theory relies on the pandemic; "For some reason in early 2020..." If you're in the business and have to acquire components you know with high confidence that component scarcity did not start with the pandemic.
kiba 5y ago
It's a familiar story. Companies think they can save money by outsourcing engineering expertise. They think they can save cost by outsourcing everything to suppliers. So their financials look great, but that's absolutely misleading. Then you have companies like SpaceX eating everybody's lunches, and to my surprise, still eating everybody's lunches.
- sk1459 5y ago
  Would you say SpaceX has been eating a free lunch, then? Sounds about right.
- pabs3 5y ago
  That reminds me of this article about how companies/countries/continents lose their tech knowledge: https://berthub.eu/articles/posts/how-tech-loses-out/ https://berthub.eu/articles/posts/how-tech-loses-out/
  - bjelkeman-again 5y ago
    That was very insightful. A bit of a rambling read but worth it.
  - RugnirViking 5y ago
    Incredible read.
- xondono 5y ago
  This is nothing new, it’s just the MBA syndrome. Go to any MBA school and they’ll tell you how sales is a clear “profit center”, while engineering is a “cost center”, and that companies are made more profitable by “internalizing profit centers” and “externalizing cost centers”. The ridiculous part is that this has extended to the point that subcontractors have other subcontractors, that have yet another subcontractor...

Animats 5y ago

This is where China achieves victory. All the PRC has to do is give priority to domestic manufacturers for small parts. Exports of finished items are preferred over exporting raw materials and parts. That was part of the Made In China 2025 plan. If some other country starts to develop an in-house supply chain for some specific item, exports for that specific item are turned back on and possibly sold at a loss until the threat ceases. That's what happened with rare earths. Remember rare earth shortages. China cranked up the price, Molycorp got the Mountain Pass CA mine going again, China dropped the price, Molycorp went bankrupt. Same strategy Amazon uses with Amazon Basics.[1] This is an explicit national strategy of the PRC. There's no secret about it. [1] https://www.mining.com/caught-between-rare-earths-and-chinese-dominance-the-story-behind-everything-no-one-is-telling-you-part-one/ https://www.mining.com/caught-between-rare-earths-and-chines...

chrisweekly 5y ago
This seems like a straightforward description of the problem; what potential solutions / mitigations are available?
- wmf 5y ago
  Onshoring supply chains and keeping them working whether they're profitable or not.
  - cortesoft 5y ago
    I.E. subsidizing.
- icegreentea2 5y ago
  Decide on what industries or areas are strategic, and subsidize the crap out of it, and be ready to deal with all the negatives (see farming and oil and gas subsidies) that come with that. If it's important enough, then it's worth negotiating the pitfalls.
  - fiddlerwoaroof 5y ago

dingleschmuf 5y ago

fuck homosexuals

gundmc 5y ago

There are some really interesting companies that play alongside this space. The one I'm familiar with is Z2Data [1] (not affiliated). They provide component-level part risk and sourcing information factoring everything from active litigation against sub-tier suppliers to geopolitical risk affecting associated manufacturing facilities and supply lines. I rarely encounter data as a service in my line of work. I usually think of that as typically market research, so it's been interesting getting a different angle on that. [1] - https://www.z2data.com/ https://www.z2data.com/

neolog 5y ago
Looks cool. Where do they get the data from?

jerzyt 5y ago

Not to criticize the concept of JIT to avoid excessive inventory, but I've always argued that the flipside of JIT is turning every path in the supply chain into a critical path.

hliyan 5y ago
If the pandemic has taught us anything, it's that mistaking safety margins for inefficiencies can be deadly.
xondono 5y ago
This. I feel like this is the manufacturing equivalent of the financial sector shenanigans back in 08. A bunch of companies increasing profits by baking in risks into the chain, because the risks of your individual providers failing are independent probabilities, until a pandemic closes them all at the same time. The obvious difference is that the financial sector was (and is) way bigger than manufacturing.
Ericson2314 5y ago
Yeah JIT is a bit suspicious. I also think there is some planned obsolescence that is making the inventory depreciation so scary the bean counters to begin with. e.g. microcontrols don't require lots of processing power, and if embedded software wasn't complete shit it would be easy to keep portable so there is supply chain flexibility.
Animats 5y ago
Just-in-time manufacturing came from automotive, which has a long history of the major automakers exerting tight control over their suppliers. Really tight control, like the ability to send in inspectors for a no-notice quality audit, and the right to look at a supplier's financial records. That control has loosened in recent years, as suppliers have become bigger and not totally focused on automotive. If you have a just-in-time manufacturing operation and your suppliers are more powerful than you are, you're very vulnerable.

varispeed 5y ago

Parts that are not available on Mouser or Digi-key are available in their thousands on Aliexpress and similar sites often for 10x normal price.

jpm_sd 5y ago
No, many of them are not. As an EE who does his own supply chain mgmt at a startup, I've been in crisis mode for a couple of months now. Some components are not available at any store, at any price, for the next 6-18 months. Had to make design changes to roll out prototype hardware.
mikewarot 5y ago
I wouldn't trust anyone outside of Mouser of Digi-key if my job depended on it... for a one off, why not, but not something when a few failures is going to end up costing more than the profits for the run.

minimuffins 5y ago

> Just-in-time works really well when it works really well. But the ripple effect of a global pandemic upon every sector of the globe...causes a lot of companies to feel the immobilizing weight of the ball attached to the supply chain. We are now feeling the problems that come with the limits of this kind of global supply chain (which is the outcome of a political-economic project which has been underway, outside the spotlight of mainstream media coverage, for about three decades). The problem and possible solutions are inevitably more political than technical (who gets to decide where things are made, how, and how much is not something the average citizen who has to bear the brunt of the effects has any control over--a political problem). I also recently learned about how single-use production techniques exacerbated the supply chain fragility, esp. as regards the US covid response. Interesting stuff. Big, long-term problems. https://exhaust.fireside.fm/18 https://exhaust.fireside.fm/18