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Even if this consortium constructs a North American fab, a single natural disaster near that fab could wreak the same follow-on effects in the headlines today;

Even if this consortium constructs a North American fab, a single natural disaster near that fab could wreak the same follow-on effects in the headlines today; the underlying problem isn't only that we've outsourced our critical manufacturing, but also that we keep so little buffer that any disruption could cause today's headlines. The MBAs running US manufacturers need to scrap their JIT strategies, build some warehouses, and start keeping a store of the essentials. If a tangible good is essential to your business continuity on a 6 or 12 month horizon, then your business should not outsource the maintenance of this lifeline, regardless of whether your supplier is domestic.

leesalminen 5y ago
> The MBAs running US manufacturers need to scrap their JIT strategies, build some warehouses, and start keeping a store of the essentials. Just the other day here on HN I read an account from a founder who did just that- in early 2008. He ended up having a warehouse full of raw materials and no cash to make payroll. That's one way a business dies. So, this talking point sounds good, those damn MBAs and their JITs!, but carries its own set of risks. It's important for each business to balance those risks and arrive at their own decision. It's not as cut-and-dry as one would necessarily think.
- sbeller 5y ago
  cash it the most important thing that should not be done JIT. ;-)
- DebtDeflation 5y ago
  A few months into the pandemic. a Texas manufacturer of N95 masks offered to ramp up capacity and start cranking out millions of N95 masks so long as hospitals and the government were willing to sign a multiyear contract to continue to buy masks from him at pre-pandemic prices after the pandemic ended. No one took him up on his offer. He said without a long term contract there would eventually be a supply glut and all of the buyers would just go right back to the offshore suppliers who would undercut him by a few cents per mask. At the time, I thought he was crazy, but it looks like he was exactly right.
  - mjevans 5y ago
    This is exactly where the government should operate with emergency stockpiles. Buy stuff and sit on it for half it's shelf life, and when it's done sell it at just a little bit under fair market cost. E.G. Buy N95 masks with a 5 year shelf life, hold them for 2, and rotate it out of the warehouse so the warehouse always has newer stuff and places that use it like construction and hospitals have a price stabilized source.
Mountain_Skies 5y ago
Isn't one of the problems that JIT was made to solve that there is a tax on inventory? That the government punishes you for maintaining slack in the manufacturing chain by taxing it?
- kingsuper20 5y ago
  I would expect that it depends on the state.
- elevation 5y ago
  Yes, tax policy compounds the problem; if you have a warehouse of goods, you're already risking that your tangible goods will be damaged by mold, rodents, fire, severe weather, improper employee handling, theft, or changing market conditions. Now on top of that the IRS treats your inventory as if it's an appreciating asset, and Sarbanes Oxley makes you out to be an enron-class criminal if you claim to hold any value there -- because it's not as easy to audit as other financial instruments as stores of value. We could definitely retool our regulatory policy if we want to improve our posture in the trade conflict.
- bsder 5y ago
  > Isn't one of the problems that JIT was made to solve that there is a tax on inventory? Then hold that inventory in Canada or Mexico or India or China? This isn't a hard problem.
- LatteLazy 5y ago
  This came up a while back and no one seemed to be able to say what tax is paid on inventory. The best we could work out was you need a warehouse and warehouses are taxed as they are real estate. JIT is about freeing up capital (which in the 80s when JIT came in was expensive). It also reduces waste a lot.
8note 5y ago
Business idea: caching layer for kit manufacturing. You have a warehouse that stores stuff, and sells it to manufacturers when JIT runs into issues.
- MrBuddyCasino 5y ago
  This exists, those are called distributors. Its just that the fluctuations are too large now.

leesalminen 5y ago

> The MBAs running US manufacturers need to scrap their JIT strategies, build some warehouses, and start keeping a store of the essentials. Just the other day here on HN I read an account from a founder who did just that- in early 2008. He ended up having a warehouse full of raw materials and no cash to make payroll. That's one way a business dies. So, this talking point sounds good, those damn MBAs and their JITs!, but carries its own set of risks. It's important for each business to balance those risks and arrive at their own decision. It's not as cut-and-dry as one would necessarily think.

sbeller 5y ago
cash it the most important thing that should not be done JIT. ;-)
DebtDeflation 5y ago
A few months into the pandemic. a Texas manufacturer of N95 masks offered to ramp up capacity and start cranking out millions of N95 masks so long as hospitals and the government were willing to sign a multiyear contract to continue to buy masks from him at pre-pandemic prices after the pandemic ended. No one took him up on his offer. He said without a long term contract there would eventually be a supply glut and all of the buyers would just go right back to the offshore suppliers who would undercut him by a few cents per mask. At the time, I thought he was crazy, but it looks like he was exactly right.
- mjevans 5y ago
  This is exactly where the government should operate with emergency stockpiles. Buy stuff and sit on it for half it's shelf life, and when it's done sell it at just a little bit under fair market cost. E.G. Buy N95 masks with a 5 year shelf life, hold them for 2, and rotate it out of the warehouse so the warehouse always has newer stuff and places that use it like construction and hospitals have a price stabilized source.

Mountain_Skies 5y ago

Isn't one of the problems that JIT was made to solve that there is a tax on inventory? That the government punishes you for maintaining slack in the manufacturing chain by taxing it?

kingsuper20 5y ago
I would expect that it depends on the state.
elevation 5y ago
Yes, tax policy compounds the problem; if you have a warehouse of goods, you're already risking that your tangible goods will be damaged by mold, rodents, fire, severe weather, improper employee handling, theft, or changing market conditions. Now on top of that the IRS treats your inventory as if it's an appreciating asset, and Sarbanes Oxley makes you out to be an enron-class criminal if you claim to hold any value there -- because it's not as easy to audit as other financial instruments as stores of value. We could definitely retool our regulatory policy if we want to improve our posture in the trade conflict.
bsder 5y ago
> Isn't one of the problems that JIT was made to solve that there is a tax on inventory? Then hold that inventory in Canada or Mexico or India or China? This isn't a hard problem.
LatteLazy 5y ago
This came up a while back and no one seemed to be able to say what tax is paid on inventory. The best we could work out was you need a warehouse and warehouses are taxed as they are real estate. JIT is about freeing up capital (which in the 80s when JIT came in was expensive). It also reduces waste a lot.

8note 5y ago

Business idea: caching layer for kit manufacturing. You have a warehouse that stores stuff, and sells it to manufacturers when JIT runs into issues.

MrBuddyCasino 5y ago
This exists, those are called distributors. Its just that the fluctuations are too large now.