There’ve been many reports recently of supply chain problems in the run up to Christmas – with worries about everything from turkeys to toys. But what is a supply chain? How do they work? And what happens when they go wrong?
December is when many of us start to look forward to Christmas presents. This year, however, some of us might be disappointed. Global supply chains have been coming under pressure, which is making some goods hard to get.
There’s a debate about why that is.
Some economists argue that the decision by governments to protect people’s incomes during Covid-19 lockdowns led to a massive increase in broad money supply that people are spending on more goods. That has led to a spike in demand – demand that supply chains can’t meet.
A recent paper by Bridgewater Associates says, “Chinese production is 20% higher, and exports a full 40% higher, than at the start of 2020.”
If that’s correct, this year’s Christmas stockings might be slimmer than usual as supply chains get overloaded and break down.
How do supply chains work?
A supply chain reaches from the raw materials to the delivery of the end product. There are many steps in between, including:
- mining and shipping raw materials – such as metal ores
- preparing raw materials
the production of parts or components, such as silicon wafers
- shipping parts – for example the components of a car – often on a ‘just in time basis’
- assembly of the finished product
- shipping of finished product.
What happens when supply chains go wrong?
Because many products can contain many different parts – each of which is likely to be manufactured and delivered separately – supply chains can be complex. If one part of the supply chain gets overloaded, problems quickly ripple out in unexpected ways.
For example, Bloomberg recently reported that a shortage of connector plates –the pieces of metal used in holding wooden roof and floor trusses together – has caused a slump in the cost of timber. When builders can’t get the connector plates they need, they no longer have use for the timber.
Christmas supply chain challenges
Even if supply chains cope with increased demand, Christmas brings its own challenges.
There are scientists who have questioned whether Santa and his reindeer can manage global Christmas Eve deliveries even in normal times.
The Massachusetts Institute of Technology, for example, calculates that Santa’s sleigh would need to move at 650 miles a second – or 3,000 times the speed of sound to get to every child who hangs a stocking on Christmas Eve.
Even if the reindeer can do that – and they generally have a top speed of 15 miles an hour – they might not keep it up for long, MIT says.
At that speed, “the entire reindeer team [would] be vaporised within 4.26 thousandths of a second. Santa, meanwhile, will be subjected to centrifugal forces 17,500.06 times greater than gravity. A 250-pound Santa (which seems ludicrously slim) would be pinned to the back of his sleigh by 4,315,015 pounds of force.”
Can more conventional supply chains – the ones not sprinkled with magic – do better when it comes to keeping the supply of goods flowing? Let’s hope so.
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