5 ms·

Let's say that all Banana growers were shut down for 8 months and during that time all existing supply was bought up that were sitting on store shelves. After t

by cronix 5y ago

Let's say that all Banana growers were shut down for 8 months and during that time all existing supply was bought up that were sitting on store shelves. After they were allowed to start growing again, how long until you see a Banana in your local store? You better be there when they arrive, because everyone else who has been wanting Bananas is waiting too. On top of that, can the Banana grower even get all of the items needed to grow the same sized crop as last year? All of the fertilizers, etc.? Those companies have been shut down during this time too. Oh, you're not the only company who needs those exact same supplies and the Potato farmer down the road is trying to purchase it too? After you've grimaced that the price has risen due to short supply and you had to source the items from 3x as many suppliers as you used to, now, you're relieved that your Bananas are almost done growing. You call the trucking company to deliver them to the distributor, who you learn is short staffed and prices have risen in order to attract truckers who are now in short supply, and factor in the gas price increases. Every single segment of the economy that the Banana grower relied on is going through the same thing, at the same time. Making chips is several orders of magnitude harder/more complex than growing Bananas. Think about how many different companies products must be purchased to make a wafer. How many different highly specialized chemicals are used in addition to solid materials? If any single one of them is having supply or labor issues...

nostrademons 5y ago
Also imagine that there are no truck drivers to drive the bananas from the plantations to your local stores, and no ships to bring fertilizer to the banana plantations. Even when they start growing again, it's going to be a while before you can get one. Supply chains in general are in shambles. We had mass COVID outbreaks at the ports that shut down unloading, as well as outbreaks at see. Truck drivers are quitting because it ain't worth their while anymore. Countries closed their borders. Patterns of consumer demand changed, so all the containers got stuck in North America. Chips are the most obvious manifestation of this because the supply chains for them are long and complex, but we're going to see it in many other products as well once inventory buffers run out.
- vkou 5y ago
  Countries have closed their borders to casual travel, but not to shipping.
  - thehappypm 5y ago
    China, notably, closes ports to end outbreaks.
- avs733 5y ago
  Chips are also obvious because they are a discrete thing that is at the end of one long supply chain and then beginning of other long supply chains.
- mschuster91 5y ago
  > Also imagine that there are no truck drivers to drive the bananas from the plantations to your local stores, and no ships to bring fertilizer to the banana plantations. In the UK, the situation is even worse: because there is an acute shortage of truckers to truck pigs from farms to slaughterhouses and a lack of butchers, 100k pigs are set to be killed and burned - they simply grow each day, and butchers have limits on how big/heavy the pigs may be: https://www.dailymail.co.uk/news/article-9958663/Farms-set-kill-burn-100-000-pigs-post-Brexit-butchers-shortage.html https://www.dailymail.co.uk/news/article-9958663/Farms-set-k... Turns out, no one but immigrants wanting to send or set aside money for their home country wants to do the job for the wage the companies are paying. And companies can't pay better wages because customers are conditioned on cheap meat. And politicians haven't done anything to curb that because tolerating rising food prices is one of the fastest ways of not getting reelected. Brexit really hit at the worst possible time, and now innocent pigs have to suffer for society's failures. What a damn tragic waste.
  - jaywalk 5y ago
    > now innocent pigs have to suffer for society's failures. They were going to be killed no matter what. I don't think it matters much to the pig what happens after it's dead.
stagger87 5y ago
Don't forget people panic buying extra bananas so they have inventory in case banana production shuts down again.
- contingencies 5y ago
  This is now the main problem.
joe_the_user 5y ago
Let's say that all Banana growers were shut down for 8 months and during that time all existing supply was bought up that were sitting on store shelves. -- But chip manufacturers didn't shut down. That's even close to the immediate cause, which was that the anticipation of changed future demand on the part of other manufacturers lead to them decreasing and change future orders. If you're going to ELI5("explain this to me like a five year old"), at least give some reasonably analogous situation, jeesh. I mean, I think people understand that supply takes some time to catch up with demand when you have a complex, interdependent economy. But the adjustment to this shock has taken longer than seems reasonable or seems like happened in the past so more data than X has to adjust for Y which has to adjust for Z is appropriate.
- vidanay 5y ago
  A closer analogy might be that all of the banana growers were told they should grow mangos, so the plowed under the banana trees and planted mangos.
- detaro 5y ago
  Not that massively, but various plants had to shut down at various times, which really isn't helping matters. It's not just "misjudged demand", that would be relatively easy to fix or be limited to few sectors if everything otherwise ran at needed capacity.
- MarkSweep 5y ago
  Some fabs did shutdown this year. One in Japan due to a fire and some in Texas due to power loss. I think both are back up and running, but it did not help to lose production. https://www.taipeitimes.com/News/biz/archives/2021/03/30/2003754719 https://www.taipeitimes.com/News/biz/archives/2021/03/30/200... https://www.statesman.com/story/business/2021/04/30/austin-fab-shutdown-during-texas-freeze-cost-samsung-millions/4891405001/ https://www.statesman.com/story/business/2021/04/30/austin-f...
  - vkou 5y ago
    I'd expect these shutdowns to be more-or-less randomly distributed across calendar years[1], and in aggregate, accounted for, on a macro level, in supply/demand projections. [1] The examples you cited suffer from confirmation bias - a plant shutting down due to a fire when there isn't already a chip shortage, would not really make the news. And if it did, you wouldn't be actively looking for it!
throwaway894345 5y ago
I don't think it's that the fabs were shut down because of covid, but rather because automotive manufacturers (and presumably others) forecasted record low sales for 2020 and canceled all of their chip orders such that chip suppliers and upstream fabs had to lay off staff and so on. As I understand it, this was what reduced fab capacity, not "fabs were closing to avoid the risk of covid". On the flip side, rather than demand decreasing as auto manufacturers expected, it actually spiked, and automotive manufacturers demanded more chips and were willing to pay $$$ for it. So other industries that use chips and accurately forecasted their demand were now bidding against automotive manufacturers for that fab capacity.
- brendoelfrendo 5y ago
  Auto makers and others are part of the problems with forecasted demand, but there are also larger supply chain issues. Basically every part of the industry, going back to raw materials, is having similar shortages; either because people shut down for COVID or because they, too, underestimated demand during the pandemic.
  - throwaway894345 5y ago
    I suspect it has a lot more to do with failing to properly forecast in general, whether overestimation or underestimation. Supply chains are finely tuned for life as usual and they take a long time to recalibrate.
TrispusAttucks 5y ago
I was contemplating the shortages the other night while sitting around a fire. It hit me that the problem is the whole global system is now just one big Just-In-Time (JIT) system built from smaller JIT units of industry which is a collection of yet more JIT factories. It's JIT all the way down! And JIT doesn't work well when the spice isn't continuously flowing.

by cronix 5y ago

nostrademons 5y ago

Also imagine that there are no truck drivers to drive the bananas from the plantations to your local stores, and no ships to bring fertilizer to the banana plantations. Even when they start growing again, it's going to be a while before you can get one. Supply chains in general are in shambles. We had mass COVID outbreaks at the ports that shut down unloading, as well as outbreaks at see. Truck drivers are quitting because it ain't worth their while anymore. Countries closed their borders. Patterns of consumer demand changed, so all the containers got stuck in North America. Chips are the most obvious manifestation of this because the supply chains for them are long and complex, but we're going to see it in many other products as well once inventory buffers run out.

vkou 5y ago
Countries have closed their borders to casual travel, but not to shipping.
- thehappypm 5y ago
  China, notably, closes ports to end outbreaks.
avs733 5y ago
Chips are also obvious because they are a discrete thing that is at the end of one long supply chain and then beginning of other long supply chains.
mschuster91 5y ago
> Also imagine that there are no truck drivers to drive the bananas from the plantations to your local stores, and no ships to bring fertilizer to the banana plantations. In the UK, the situation is even worse: because there is an acute shortage of truckers to truck pigs from farms to slaughterhouses and a lack of butchers, 100k pigs are set to be killed and burned - they simply grow each day, and butchers have limits on how big/heavy the pigs may be: https://www.dailymail.co.uk/news/article-9958663/Farms-set-kill-burn-100-000-pigs-post-Brexit-butchers-shortage.html https://www.dailymail.co.uk/news/article-9958663/Farms-set-k... Turns out, no one but immigrants wanting to send or set aside money for their home country wants to do the job for the wage the companies are paying. And companies can't pay better wages because customers are conditioned on cheap meat. And politicians haven't done anything to curb that because tolerating rising food prices is one of the fastest ways of not getting reelected. Brexit really hit at the worst possible time, and now innocent pigs have to suffer for society's failures. What a damn tragic waste.
- jaywalk 5y ago
  > now innocent pigs have to suffer for society's failures. They were going to be killed no matter what. I don't think it matters much to the pig what happens after it's dead.

stagger87 5y ago

Don't forget people panic buying extra bananas so they have inventory in case banana production shuts down again.

contingencies 5y ago
This is now the main problem.

joe_the_user 5y ago

Let's say that all Banana growers were shut down for 8 months and during that time all existing supply was bought up that were sitting on store shelves. -- But chip manufacturers didn't shut down. That's even close to the immediate cause, which was that the anticipation of changed future demand on the part of other manufacturers lead to them decreasing and change future orders. If you're going to ELI5("explain this to me like a five year old"), at least give some reasonably analogous situation, jeesh. I mean, I think people understand that supply takes some time to catch up with demand when you have a complex, interdependent economy. But the adjustment to this shock has taken longer than seems reasonable or seems like happened in the past so more data than X has to adjust for Y which has to adjust for Z is appropriate.

vidanay 5y ago
A closer analogy might be that all of the banana growers were told they should grow mangos, so the plowed under the banana trees and planted mangos.
detaro 5y ago
Not that massively, but various plants had to shut down at various times, which really isn't helping matters. It's not just "misjudged demand", that would be relatively easy to fix or be limited to few sectors if everything otherwise ran at needed capacity.
MarkSweep 5y ago
Some fabs did shutdown this year. One in Japan due to a fire and some in Texas due to power loss. I think both are back up and running, but it did not help to lose production. https://www.taipeitimes.com/News/biz/archives/2021/03/30/2003754719 https://www.taipeitimes.com/News/biz/archives/2021/03/30/200... https://www.statesman.com/story/business/2021/04/30/austin-fab-shutdown-during-texas-freeze-cost-samsung-millions/4891405001/ https://www.statesman.com/story/business/2021/04/30/austin-f...
- vkou 5y ago
  I'd expect these shutdowns to be more-or-less randomly distributed across calendar years[1], and in aggregate, accounted for, on a macro level, in supply/demand projections. [1] The examples you cited suffer from confirmation bias - a plant shutting down due to a fire when there isn't already a chip shortage, would not really make the news. And if it did, you wouldn't be actively looking for it!

throwaway894345 5y ago

I don't think it's that the fabs were shut down because of covid, but rather because automotive manufacturers (and presumably others) forecasted record low sales for 2020 and canceled all of their chip orders such that chip suppliers and upstream fabs had to lay off staff and so on. As I understand it, this was what reduced fab capacity, not "fabs were closing to avoid the risk of covid". On the flip side, rather than demand decreasing as auto manufacturers expected, it actually spiked, and automotive manufacturers demanded more chips and were willing to pay $$$ for it. So other industries that use chips and accurately forecasted their demand were now bidding against automotive manufacturers for that fab capacity.

brendoelfrendo 5y ago
Auto makers and others are part of the problems with forecasted demand, but there are also larger supply chain issues. Basically every part of the industry, going back to raw materials, is having similar shortages; either because people shut down for COVID or because they, too, underestimated demand during the pandemic.
- throwaway894345 5y ago
  I suspect it has a lot more to do with failing to properly forecast in general, whether overestimation or underestimation. Supply chains are finely tuned for life as usual and they take a long time to recalibrate.

TrispusAttucks 5y ago

I was contemplating the shortages the other night while sitting around a fire. It hit me that the problem is the whole global system is now just one big Just-In-Time (JIT) system built from smaller JIT units of industry which is a collection of yet more JIT factories. It's JIT all the way down! And JIT doesn't work well when the spice isn't continuously flowing.