WEBVTT - The Supply Chain Crisis Isn’t Going Away 0:00:15.396 --> 0:00:24.676 Pushkin from Pushkin Industries. This is Deep Background to show 0:00:24.716 --> 0:00:28.076 where we explore the stories behind the stories in the news. 0:00:28.636 --> 0:00:33.196 I'm Noah Feldman. One of the important stories that's come 0:00:33.276 --> 0:00:36.836 out of COVID is the disruption of the global supply chain. 0:00:37.396 --> 0:00:41.076 If you've recently tried to buy a new car or 0:00:41.116 --> 0:00:45.156 some furniture, you know all about this problem. The system 0:00:45.196 --> 0:00:49.516 of making and distributing goods around the world is not 0:00:49.596 --> 0:00:53.876 working quite the way we're accustomed to it working, and 0:00:54.196 --> 0:00:58.156 we're not exactly clear on how to fix it. For 0:00:58.236 --> 0:01:01.436 today's show, we wanted to speak to someone could explain 0:01:01.556 --> 0:01:05.116 what's going on to us and deepen our understanding and 0:01:05.236 --> 0:01:10.116 knowledge of this headline topic, supply chain disruption. I'm very 0:01:10.116 --> 0:01:13.116 glad to say that our fantastic team here at Deep 0:01:13.116 --> 0:01:17.596 Background found someone who could do exactly that. Hannah Kane 0:01:17.756 --> 0:01:21.076 is the founder and CEO of a Loom, a global 0:01:21.196 --> 0:01:25.676 supply chain company based in California. She has decades of 0:01:25.756 --> 0:01:28.756 experience in supply chain management, and I'm going to talk 0:01:28.796 --> 0:01:32.436 to her about what's causing supply chain slowdowns, what we 0:01:32.476 --> 0:01:36.036 should think of the supply chain as actually being the 0:01:36.116 --> 0:01:39.076 role that government has to play in this and how 0:01:39.196 --> 0:01:48.676 we make our way out of it over time. Hannah, 0:01:48.716 --> 0:01:51.596 thank you so much for joining me. So, when we 0:01:52.356 --> 0:01:58.116 entered this COVID world, many people who were consumers spent 0:01:58.636 --> 0:02:02.116 exactly zero time ever thinking about the words supply chain. 0:02:02.636 --> 0:02:05.036 I'm sure if one ran any kind of a company 0:02:05.076 --> 0:02:08.996 that made a product, these were everyday, day to day concerns. 0:02:09.956 --> 0:02:12.876 But the sense from the end consumer's perspective was it's 0:02:12.916 --> 0:02:15.716 all under control, right, We're convinced there are people out 0:02:15.756 --> 0:02:17.756 there like you who are expert in it, who keep 0:02:17.756 --> 0:02:19.756 it all flowing, and the rest of us just didn't 0:02:19.756 --> 0:02:23.516 worry about it very much. Then COVID came and suddenly 0:02:23.556 --> 0:02:27.116 everyone noticed that we were interdependent on one another in 0:02:27.156 --> 0:02:31.276 a very complex set of ways. And then people started 0:02:31.356 --> 0:02:36.396 using the words supply chain problems to justify almost any change. 0:02:36.956 --> 0:02:40.596 Was there a particular feature in your view of the 0:02:40.636 --> 0:02:44.156 COVID disruptions. Are there specific moments or events that you 0:02:44.196 --> 0:02:49.316 could point to as inherently transformative that sort of put 0:02:49.396 --> 0:02:53.716 your topic on the front page or was this just 0:02:53.876 --> 0:02:56.716 a slow, gradual thing that the rest of you were 0:02:56.756 --> 0:02:58.516 following the entire time and the rest of the world 0:02:58.556 --> 0:03:01.476 only noticed it because of these events well, it's a 0:03:01.516 --> 0:03:04.716 little bit of both. So for a long time we 0:03:04.756 --> 0:03:08.076 have been teaching at the edge of the ABYSS when 0:03:08.076 --> 0:03:11.956 it comes to supply, and many of us have already 0:03:12.516 --> 0:03:18.116 wasted flags because things like infrastructure has been totally underserved. 0:03:18.156 --> 0:03:22.076 When you look at at our population growth, we are 0:03:22.196 --> 0:03:27.276 essentially in the US thirty three percent more population over 0:03:27.316 --> 0:03:31.596 the last three decades, and we're allmost invested in the 0:03:31.916 --> 0:03:36.316 new infrastructure. And that is a huge problem because we 0:03:36.916 --> 0:03:40.316 know that the demand is going up, but in the 0:03:40.436 --> 0:03:43.116 end we need to have the infrastructure to keep up 0:03:43.156 --> 0:03:46.636 with that. So we knew things like infrastructure was the problem. 0:03:46.916 --> 0:03:51.156 We also know that regulations are exploding. And when I 0:03:51.196 --> 0:03:57.116 say regulations, it's things like how do you get product 0:03:57.156 --> 0:04:00.236 from point A to point B. You've got to get 0:04:00.276 --> 0:04:04.396 it out of one country into another country. The bureaucracy 0:04:04.636 --> 0:04:10.036 and the regulations concerning that keep increasing. We are at 0:04:10.036 --> 0:04:13.716 a trade wall with a number of different open countries, 0:04:14.036 --> 0:04:19.076 and that trade those trade walls really heavily impact the 0:04:19.116 --> 0:04:22.676 supply team. So all of this is not really COVID related. 0:04:23.236 --> 0:04:25.916 You know, we saw it coming. We've been dealing with 0:04:25.956 --> 0:04:28.196 it for a long time. Edge of the ABYSS is 0:04:28.196 --> 0:04:32.156 a very strong formulation. And it's fascinating because I mean, 0:04:32.156 --> 0:04:33.436 of course it's going to leave it to ask you 0:04:33.476 --> 0:04:36.236 whether we're now in the ABYSS or whether we're still 0:04:36.276 --> 0:04:38.476 clinging to the edge of it. But before I ask 0:04:38.516 --> 0:04:41.956 you that infrastructure, do you mean give some examples? Do 0:04:41.996 --> 0:04:46.836 you mean ports where products arrive, roads where things are 0:04:46.836 --> 0:04:51.676 carried by trucks, railroad? What are the features of infrastructure 0:04:51.716 --> 0:04:54.556 in the US that seemed particular lead to have been 0:04:54.596 --> 0:04:56.516 teetering on the edge of the abyss to you? I 0:04:56.556 --> 0:05:00.316 think pots are a really good example, and that's mainly 0:05:00.716 --> 0:05:05.636 the seaports. We also have some restrictions on our airports, 0:05:06.116 --> 0:05:11.596 restrictions on planes and trock limitations. We certainly have a 0:05:11.676 --> 0:05:14.476 big crisis when it comes to a number of truck drivers. 0:05:14.676 --> 0:05:18.196 We simply have two few truck drivers. And this already 0:05:18.236 --> 0:05:23.836 started and had become an issue before COVID. But what 0:05:23.956 --> 0:05:27.116 happened with COVID was really that all of a sudden 0:05:27.156 --> 0:05:31.796 we saw a big demand shift. Demand switched to home partucts, 0:05:31.796 --> 0:05:36.076 shift to shifted to different parduct types, and and all 0:05:36.116 --> 0:05:39.756 the travel money went away and instead it was used 0:05:39.876 --> 0:05:46.116 on getting a new, more fancy home television home set 0:05:46.236 --> 0:05:49.716 up for your home office, etc. And all of a 0:05:49.756 --> 0:05:53.476 sudden that demand shift happened. So that was a really 0:05:53.556 --> 0:05:57.516 big supply chain event that happened in the beginning of 0:05:57.556 --> 0:06:00.676 the pandemic. And then you had the other The other 0:06:00.836 --> 0:06:04.276 problem was that you had the disruption and the labor 0:06:04.596 --> 0:06:08.836 and that was a global issue. So those two issues 0:06:08.876 --> 0:06:12.516 to get have made it now it's too complex. So 0:06:12.716 --> 0:06:16.596 if you think back a couple of yes, you could 0:06:16.636 --> 0:06:20.196 probably do a fodcast that was ninety percent great. You 0:06:20.196 --> 0:06:23.556 could probably plan for ninety to ninety eight percent of 0:06:23.596 --> 0:06:26.796 all events that were going to happen. And here during 0:06:26.876 --> 0:06:30.636 COVID we have been lucky if we've been hitting fifty 0:06:30.716 --> 0:06:34.836 sixty seventy percent great focast. And then when you look 0:06:34.876 --> 0:06:37.836 at what the SAT mean and supply chain, it means said, 0:06:37.876 --> 0:06:40.796 you're buying the wrong thing. I want to talk about 0:06:40.796 --> 0:06:42.556 the demand shift and I want to talk about the 0:06:42.676 --> 0:06:45.356 labor disruptions, both of which I think are hugely fascinating 0:06:45.636 --> 0:06:47.436 and important, and also both of which are relevant to 0:06:47.476 --> 0:06:49.876 the question of inflation. But I also want to ask 0:06:49.916 --> 0:06:52.956 you about how unique the United States is with respect 0:06:52.956 --> 0:06:57.236 to these infrastructure problems, because in other places in the 0:06:57.236 --> 0:06:59.916 world that at least I traveled to. Back when we 0:07:00.036 --> 0:07:03.036 traveled more, it struck me that, at least at a 0:07:03.076 --> 0:07:07.156 superficial level, the infrastructure seemed much fresher, much newer, and 0:07:07.316 --> 0:07:09.556 much more updated than in the US. I don't just 0:07:09.676 --> 0:07:13.396 mean Western European countries, where Americans who are accustomed to 0:07:13.396 --> 0:07:15.836 traveling to those countries in the last thirty or forty 0:07:15.916 --> 0:07:18.836 years are accustomed to seeing the infrastructure as being really 0:07:18.836 --> 0:07:22.996 superior to US infrastructure, but also in countries that one 0:07:23.076 --> 0:07:25.836 might have thought of as developing countries, some of which 0:07:25.836 --> 0:07:27.996 are not so developing anymore and are are pretty developed, 0:07:28.036 --> 0:07:30.276 but some of which are really still very much developing countries, 0:07:30.436 --> 0:07:34.036 which still looked like they had newer airports, newer roads. 0:07:34.156 --> 0:07:36.956 I'm not an expert in seaports, but you could drive 0:07:36.996 --> 0:07:39.836 by and see large, functioning seaports that looked like they 0:07:39.876 --> 0:07:41.716 were fancier than the ones that we see, at least 0:07:41.716 --> 0:07:44.356 in the northeast. Am I right to think that the 0:07:44.476 --> 0:07:48.796 US lagging behind an infrastructure is pretty distinctive? It is. 0:07:48.956 --> 0:07:53.116 It most definitely is, and certainly I mean the physical infrastructure. 0:07:53.316 --> 0:07:57.716 We're definitely lagging, and especially compared to some of the 0:07:58.236 --> 0:08:03.596 growing Asian nations. There are some great standouts in Asia 0:08:03.916 --> 0:08:07.676 where they built infrastructure and in a very impressive manner, 0:08:08.076 --> 0:08:11.996 China Coast in one of them, Singapore, Japan to a 0:08:12.276 --> 0:08:15.476 very large extent. And then there are some countries that 0:08:15.516 --> 0:08:19.676 are lagging behind, and we are seeing as we already 0:08:19.756 --> 0:08:22.916 pre pandemic, we saw a shift away from China with 0:08:23.196 --> 0:08:26.836 shifting productions to a country like Vietnam where also the 0:08:26.916 --> 0:08:31.196 infrastructure is really lacking and companies have their product get 0:08:31.276 --> 0:08:34.756 stuck in Vietnam because they cannot get it moved, they 0:08:34.796 --> 0:08:38.556 cannot get it out of the country, and so it's 0:08:39.116 --> 0:08:42.236 a course of board. Infrastructure really important and it's an 0:08:42.276 --> 0:08:46.196 important consideration when you design your supply team. Where is 0:08:46.196 --> 0:08:49.876 the infrastructure that can really help you. Another area where 0:08:49.916 --> 0:08:52.716 the US is, of course lacking, is in the technology. 0:08:53.076 --> 0:08:56.956 We are not nearly as advanced as some of the 0:08:56.996 --> 0:09:01.156 top players within broadband and speed of the networks and 0:09:01.436 --> 0:09:05.636 for that matter, coverage in remote areas. So that's another 0:09:05.716 --> 0:09:09.636 area we need to work on. You mentioned, and the 0:09:09.756 --> 0:09:16.116 regulatory barriers to smooth supply chain operation. The trade wars 0:09:16.236 --> 0:09:19.116 I sort of can account for. I personally don't believe 0:09:19.116 --> 0:09:22.156 they're rational. I don't think they're helping for the most part, 0:09:22.196 --> 0:09:23.956 at least in the United States and the trade wars 0:09:23.956 --> 0:09:26.316 that we've started in recent years. But at least I 0:09:26.356 --> 0:09:28.756 can understand where they come from. Right, there's a domestic 0:09:28.836 --> 0:09:33.036 sentiment that says we're getting taken advantage of by other countries. 0:09:33.436 --> 0:09:36.436 There are interests domestically that imagine that it will lead 0:09:36.436 --> 0:09:38.396 to more US jobs. There's not a lot of evidence 0:09:38.436 --> 0:09:41.356 that always happens, but at least you can understand the impulse. 0:09:42.036 --> 0:09:44.636 But what about the other kinds of regulatory barriers that 0:09:44.676 --> 0:09:47.036 you mentioned. I mean, what's in it for the regulators? 0:09:47.156 --> 0:09:54.876 Who is asking for greater regulatory intervention in ordinary effective trade? Well, 0:09:55.076 --> 0:09:58.716 let me give you a couple of examples. California decide that, 0:09:59.356 --> 0:10:03.156 in order to get products from the ports and into 0:10:03.196 --> 0:10:07.956 the country, use something called yage. Those twyage trucks have 0:10:08.156 --> 0:10:12.956 traditional in the most polluting trucks on the road, and 0:10:13.236 --> 0:10:17.396 California decided that you cannot use trucks that are older 0:10:17.436 --> 0:10:21.236 than yet two thousand and eleven to move products from 0:10:21.316 --> 0:10:25.596 the port. And that regulation then meant that many of 0:10:25.636 --> 0:10:28.356 the truckers simply could not do it, could not move 0:10:28.436 --> 0:10:32.796 that product. And so that's a small part of the 0:10:32.876 --> 0:10:35.836 port crisis, but certainly it happens. And I think we 0:10:35.996 --> 0:10:40.516 all have the sympathy for the environmental regulations that we 0:10:40.596 --> 0:10:43.796 don't want polluting trucks out there, but this is an 0:10:43.836 --> 0:10:47.596 example of where where the balance may shift and it 0:10:47.636 --> 0:10:52.436 may become more difficult. Another type of regulation is hope 0:10:52.476 --> 0:10:56.556 for social responsibility, where you can say child's labor, we 0:10:56.636 --> 0:11:00.516 don't want any child's labor or other human rights abuses 0:11:00.596 --> 0:11:05.036 in the supply chain, and had then creates some intrigacies 0:11:05.236 --> 0:11:07.876 in where you place the supply chain and how you 0:11:08.116 --> 0:11:11.516 are able to run. So there's a lot of regulationship 0:11:11.716 --> 0:11:15.996 are very important in many ways, but certainly they impact 0:11:15.996 --> 0:11:30.356 a supply chain. We'll be right back, Hannah. You spoke 0:11:30.396 --> 0:11:34.516 of the demand shift that happened at COVID when suddenly 0:11:34.876 --> 0:11:37.436 consumers didn't want to buy the same things they previously 0:11:37.476 --> 0:11:41.476 wanted to buy. I recognize that that can cause problems 0:11:41.516 --> 0:11:44.476 for the supply chain. If I'm running a company and 0:11:44.556 --> 0:11:47.636 I suddenly need some product that I didn't otherwise have, 0:11:48.116 --> 0:11:49.916 and where I need more of something that I had 0:11:49.916 --> 0:11:53.636 a little bit of, is it fundamentally a supply chain 0:11:53.676 --> 0:11:56.036 problem though, or is that fundamentally just the kind of 0:11:56.076 --> 0:11:59.556 economic problem that sometimes arises, right? I mean, if we 0:11:59.596 --> 0:12:01.276 said that there is a change in supply of a 0:12:01.356 --> 0:12:04.036 product or a change in demand of a product, those 0:12:04.076 --> 0:12:07.436 seem to be underlying economic forces that they impinge on 0:12:07.436 --> 0:12:10.116 the supply chain, but they don't seem to be answerable 0:12:10.196 --> 0:12:13.276 as it were, just via the supply chain. Well, it 0:12:13.436 --> 0:12:16.876 certainly it becomes the supply chain problem because you need 0:12:16.956 --> 0:12:20.356 to be able to produce what the consumer wants in 0:12:20.436 --> 0:12:23.396 the end. That's what it's about, is producing what is 0:12:23.436 --> 0:12:26.476 needed and getting it to the location where it's needed. 0:12:27.036 --> 0:12:30.716 And so when we saught the demand shift, of course 0:12:30.836 --> 0:12:34.356 companies have to respond and it creates a lot of 0:12:34.436 --> 0:12:37.276 problems when we have these big swings. As we saw, 0:12:37.796 --> 0:12:41.316 the swings are becoming bigger over time, and it's a 0:12:41.436 --> 0:12:44.876 very interesting thing. I think social media is driving a 0:12:44.876 --> 0:12:49.516 lot of the demand shifts. That many people go and 0:12:50.396 --> 0:12:53.116 buy what others seem to be buying, and so you 0:12:53.236 --> 0:12:56.676 get these big shifts, and of course they need to 0:12:56.716 --> 0:13:00.316 be produced. What also has happened over time is that 0:13:00.516 --> 0:13:04.036 we as consumers have gotten really spoiled when we get 0:13:04.036 --> 0:13:07.276 it in any type, configuration color it said right that 0:13:07.596 --> 0:13:11.956 we want. And one of the ways companies have tried 0:13:11.996 --> 0:13:17.076 to minimize complexity and focus on at least getting product 0:13:17.116 --> 0:13:20.756 out in the supply chain is to cut down on 0:13:20.796 --> 0:13:23.316 the number of selections. And you see that a little 0:13:23.316 --> 0:13:26.756 bit when you're out shopping, that there's a little bit 0:13:26.836 --> 0:13:29.716 less selection these days than they used to be. Not 0:13:29.876 --> 0:13:33.036 that we are suffering any big card shifts, but it's 0:13:33.076 --> 0:13:37.356 a good way to decrease the complexity. And complexity is 0:13:37.356 --> 0:13:40.716 really a big issue in supply chain right now because 0:13:40.756 --> 0:13:43.876 the systems cannot handle it, and because there's so many 0:13:44.236 --> 0:13:48.956 unexpected events, and supply chain professionals are joggling all these 0:13:48.996 --> 0:13:52.836 balls in the air because of those shifts. The complexity 0:13:52.916 --> 0:13:57.196 also seems to be part of our current moment of consumerism, 0:13:57.236 --> 0:14:00.476 where I not only understand that if I go to 0:14:00.516 --> 0:14:02.436 the shop, the product that I want may exist in 0:14:02.476 --> 0:14:05.076 ten colors, but I expect it to exist in those 0:14:05.076 --> 0:14:07.836 colors as well, and that's sort of what keeps me 0:14:07.876 --> 0:14:09.796 buying in some sense, at least to the low end 0:14:09.796 --> 0:14:12.676 of expenses. But when you gave that answer, which is 0:14:13.036 --> 0:14:16.156 totally fascinating to me, I had this feeling that maybe 0:14:16.396 --> 0:14:18.556 people are using the words supply chain is kind of 0:14:18.596 --> 0:14:21.076 an excuse to kind of catch all excuse that, at 0:14:21.116 --> 0:14:23.796 least for some consumers, I think, I include myself here 0:14:23.996 --> 0:14:26.996 might be misleading. So you know, it's been COVID. I've 0:14:26.996 --> 0:14:29.236 been sitting on my couch a lot. My couch isn't 0:14:29.316 --> 0:14:32.596 very good. It's time for a new couch. So I go, 0:14:32.716 --> 0:14:35.036 this actually happened to me recently. I go shopping for 0:14:35.076 --> 0:14:38.316 the couch and they say, oh, for that couch, the 0:14:38.396 --> 0:14:41.756 weight will be you know, nine months. And I say, well, 0:14:41.756 --> 0:14:43.396 oh my goodness, that seems like a long time to 0:14:43.436 --> 0:14:45.996 wait for the couch, and they say, well, supply chain. 0:14:47.196 --> 0:14:49.956 Then they also say, but actually there is one color, 0:14:49.996 --> 0:14:51.876 and if you get that couch in this one color, 0:14:52.156 --> 0:14:54.156 we actually do have those, and those are in the 0:14:54.156 --> 0:14:57.756 warehouse and you can get those. Now, I guess it 0:14:57.876 --> 0:14:59.916 is a supply chain question. You're convincing me that everything 0:14:59.996 --> 0:15:02.236 is a supply chain question, because if they have something 0:15:02.276 --> 0:15:04.316 in the warehouse and I can get it, that means 0:15:04.316 --> 0:15:07.276 the supply chains has sent it here and it's functioned correctly, 0:15:07.396 --> 0:15:09.756 and if I'm willing to buy the product, you know, 0:15:09.796 --> 0:15:11.076 even if it's not the color that I would have 0:15:11.076 --> 0:15:13.596 first chosen. Pretty good, right, It's a pretty good outcome. 0:15:14.516 --> 0:15:17.676 The year weight for the sofa or the couch and 0:15:17.716 --> 0:15:20.516 the color that I would have wanted. Seems to be 0:15:20.836 --> 0:15:23.196 that they're using the word supply chain as a shorthand 0:15:23.236 --> 0:15:26.236 for We had no idea so many people were going 0:15:26.276 --> 0:15:30.276 to want to buy sofas, and so it takes a 0:15:30.316 --> 0:15:33.036 while to make the new sofas. And we also have 0:15:33.076 --> 0:15:34.996 to hire people. You spoke about labor. We have to 0:15:35.076 --> 0:15:37.756 hire people in the factory wherever that is to build 0:15:37.796 --> 0:15:40.196 these sofas, and we need to hire truckers so that 0:15:40.236 --> 0:15:43.236 the sofa can be transported, and if it's coming internationally, 0:15:43.236 --> 0:15:45.716 it has to come in through report. But they're using 0:15:45.916 --> 0:15:50.356 supply chain effectively as a grab bag to mean all 0:15:50.436 --> 0:15:53.276 of those things, and I think too many consumers, at 0:15:53.316 --> 0:15:55.796 least to myself, it sounds like they're saying, oh, it 0:15:55.916 --> 0:15:57.516 just takes a long time for it to get here, 0:15:57.596 --> 0:15:59.356 or something like that, or you know, there was a 0:15:59.396 --> 0:16:02.236 particular part of the fabric that we can't get enough 0:16:02.276 --> 0:16:04.636 of because people want that. But the reality seems to 0:16:04.676 --> 0:16:07.516 be that they just didn't anticipate that there would be 0:16:07.556 --> 0:16:10.196 the kind of demand that there is, and they can't 0:16:10.196 --> 0:16:11.636 be blamed for that. I mean, no one could have 0:16:11.676 --> 0:16:13.796 anticipated we would all spend such a higher percentage of 0:16:13.796 --> 0:16:15.876 our days sitting on our couch than we previously did. 0:16:16.716 --> 0:16:20.396 But it sounds like the words supply chain are covering many, 0:16:20.516 --> 0:16:25.036 many different causes of delays. That is correct, and that's 0:16:25.076 --> 0:16:27.836 because I gained the supply chain is ultra complex and 0:16:27.876 --> 0:16:31.036 there are many different places where you can have and 0:16:31.516 --> 0:16:35.436 currently you have delays in the supply chain. And so 0:16:35.516 --> 0:16:39.156 what supply chain professionals do is they try to work 0:16:39.196 --> 0:16:43.436 around these delays and try to circumvent them. But you 0:16:43.516 --> 0:16:46.636 can only do so much. If we step back and 0:16:46.676 --> 0:16:49.276 look at this over a long time and sort of 0:16:49.476 --> 0:16:54.716 from a more macroeconomic standpoint, what has happened over the 0:16:54.796 --> 0:16:59.116 last thirty years is we have driven cost of manufactured 0:16:59.396 --> 0:17:03.436 goods down and down and down, so it's now cheaper 0:17:03.476 --> 0:17:06.996 than ever to buy a thing, and that's of all 0:17:06.996 --> 0:17:10.876 a good thing. That downside that we are seeing now 0:17:11.036 --> 0:17:15.916 is as we are producing cheap things in cheap countries 0:17:15.956 --> 0:17:20.516 and cheaper countries and driving down the manufactured cost, we 0:17:20.556 --> 0:17:23.996 are increasing the risk and we are also increasing the 0:17:23.996 --> 0:17:29.116 supply chain cost, the supply chain cost of transportation and customs, 0:17:29.156 --> 0:17:33.996 cleerens and all of those type of things, and governance 0:17:34.036 --> 0:17:37.156 for that matter. So that's what we're seeing right now, 0:17:37.236 --> 0:17:40.596 and explosion and those costs. It's not really that the 0:17:40.676 --> 0:17:43.876 things are getting much more expensive to manufacture. It's all 0:17:43.956 --> 0:17:47.316 the extra supply chain cost, and we are seeing the 0:17:47.476 --> 0:17:51.676 increased problems in managing that complexity. So I'm sorry you 0:17:51.756 --> 0:17:54.636 have to wait for your sofa. I can't help you 0:17:54.796 --> 0:17:56.476 get it there far. I just I just took the 0:17:56.516 --> 0:17:58.276 one color they had in stock because I didn't want 0:17:58.276 --> 0:18:00.676 to wait a year for za. You know, I was 0:18:00.676 --> 0:18:05.876 a good soldier at least with respect of that decision. Labor, So, 0:18:06.036 --> 0:18:10.796 labor cost is obviously an important part of making anything 0:18:11.236 --> 0:18:14.996 and an important part of transporting anything. And as you mentioned, 0:18:15.036 --> 0:18:18.516 manufacturing costs have been going down, and some of that 0:18:18.636 --> 0:18:21.836 is by pushing down wages in some places and times, 0:18:22.156 --> 0:18:26.676 but more of it is by gaining efficiencies from other aspects. 0:18:26.996 --> 0:18:29.476 Right now, at least in the United States, the cost 0:18:29.516 --> 0:18:32.756 of labor is very high for complex reasons that no 0:18:32.756 --> 0:18:34.436 one fully understands. That that that I have to do with 0:18:34.476 --> 0:18:36.996 people coming back from COVID and deciding they're not going 0:18:37.036 --> 0:18:38.716 back to the jobs they were in before and they 0:18:38.716 --> 0:18:41.476 don't wish to participate in the official economy in that way. 0:18:42.796 --> 0:18:45.196 When you think about labor in its relationship to the 0:18:45.236 --> 0:18:47.476 supply chain, how do you think of that. I think 0:18:47.476 --> 0:18:51.876 it's a course abort. So we already, as I mentioned, 0:18:51.916 --> 0:18:56.636 have a labor crisis, ongoing labor crisis in truck Trucking 0:18:57.036 --> 0:19:00.556 has been an area where we have seen a lot 0:19:00.596 --> 0:19:04.156 of retirement and not a lot of new people coming in, 0:19:04.556 --> 0:19:06.876 and so that has been a big concern for a 0:19:06.876 --> 0:19:10.756 while and been talked about for a while. But you're right, 0:19:10.796 --> 0:19:13.676 what we're seeing right now is an emotional shift where 0:19:14.156 --> 0:19:18.556 everybody is asking themselves whether they're working the right job 0:19:18.796 --> 0:19:22.116 and whether they want to do something different, and it's 0:19:22.116 --> 0:19:25.956 certainly impacting the supply chain big time. You're also seeing 0:19:26.916 --> 0:19:29.956 an increased need for staff in the supply chain, so 0:19:30.436 --> 0:19:35.116 a lot of the workforce have shifted from retail to 0:19:35.236 --> 0:19:38.116 supply chain. So we're buying more and more online, We're 0:19:38.116 --> 0:19:41.236 getting more and more shipped to our homes, so people 0:19:41.876 --> 0:19:46.196 move from retail into warehouses. There's a big move to 0:19:46.236 --> 0:19:49.756 automate much of what's going on and the supply chain, 0:19:50.796 --> 0:19:54.636 but there's still we still need labor, and so I 0:19:54.676 --> 0:19:58.556 am very concerned about the inflation that we are seeing 0:19:58.676 --> 0:20:03.436 and the inflationary pressures coming from the labor as well 0:20:03.476 --> 0:20:08.596 as inflation or materials and components coming in and for 0:20:08.716 --> 0:20:11.316 that to finish good, so the cost is just going 0:20:11.396 --> 0:20:15.516 up tremendously. I think we are going to see the 0:20:15.596 --> 0:20:20.716 supply chain crisis continuing for another several years. And I 0:20:20.756 --> 0:20:23.276 think supply chain issues are going to stick with us 0:20:23.316 --> 0:20:28.676 for a while until we get the infrastructure fixed, until 0:20:28.796 --> 0:20:32.836 we get more automation in the supply chain, until we 0:20:32.956 --> 0:20:35.996 get better systems to be able to handle with all 0:20:36.076 --> 0:20:39.716 the exceptions that we deal with in supply chain. So 0:20:39.876 --> 0:20:44.356 definitely a lot of big investments need to happen and 0:20:44.556 --> 0:20:47.916 development needs to happen before we are in a position 0:20:47.956 --> 0:20:51.356 where we can say supply chain is just humming it all. 0:20:51.636 --> 0:20:54.116 So what I'm hearing you saying is that the process 0:20:54.196 --> 0:20:57.916 of not only manufacturing but of delivering things is a 0:20:57.916 --> 0:21:01.916 process that is still very human intensive. Right, Maybe someday 0:21:02.516 --> 0:21:06.076 we'll have automated trucks, but we don't have automated trucks. 0:21:06.356 --> 0:21:09.116 Maybe someday we'll have a way in a fully automated fashion, 0:21:09.116 --> 0:21:12.156 and to take the products off the ship at the 0:21:12.196 --> 0:21:14.476 port and put it onto the trucks or the trains 0:21:14.516 --> 0:21:16.956 and get it from place to place. We don't. We 0:21:17.036 --> 0:21:19.556 still require human beings to participate in this. So I 0:21:19.556 --> 0:21:22.316 guess the question I want to end with is, when 0:21:22.356 --> 0:21:24.276 you say, you know, well we need more automation in 0:21:24.316 --> 0:21:27.996 this space, how fast can that happen and how good 0:21:27.996 --> 0:21:30.716 will that be? Are these jobs that can be replaced 0:21:31.476 --> 0:21:34.796 by automation as opposed to by humans, at least in 0:21:34.796 --> 0:21:38.036 the foreseeable future, and will that lead to the opposite effect, 0:21:38.036 --> 0:21:41.516 an effect where many many people whose jobs depend on 0:21:41.556 --> 0:21:44.676 being the human beings who operate the supply chain find 0:21:44.716 --> 0:21:48.756 themselves desperately needing some other kind of work, much as 0:21:48.756 --> 0:21:53.436 we've seen in manufacturing, where many relatively good blue collar 0:21:53.556 --> 0:21:56.516 jobs went away, and to the extent they're replaced, they're 0:21:56.516 --> 0:21:59.796 replaced by much less appealing surface sector jobs. I mean, 0:22:00.036 --> 0:22:01.596 is it basically the case that that's going to happen 0:22:01.636 --> 0:22:03.916 and elsewhere in the supply chain as well. It just 0:22:03.996 --> 0:22:09.036 hasn't happened yet. I am a firm believer that automation 0:22:09.116 --> 0:22:12.156 and it's not a bad deal, and that it's all 0:22:12.196 --> 0:22:15.956 about how we transition the workforce. I don't see right 0:22:15.996 --> 0:22:18.916 now that we're going to have a surplus workforce. I 0:22:18.996 --> 0:22:22.836 see that we are very much in need of more workforce, 0:22:22.996 --> 0:22:25.476 and I think that trend is going to stay with 0:22:25.556 --> 0:22:27.836 us for a long time. And the other thing we 0:22:27.876 --> 0:22:31.796 can do, apart from, of course, automation, is to go 0:22:31.876 --> 0:22:34.716 in and say, maybe we can do more near sourcing 0:22:35.036 --> 0:22:39.996 and not have to transport products so far distances. We 0:22:40.076 --> 0:22:43.876 are seeing that right now, corporations are coming in and saying, Okay, 0:22:44.476 --> 0:22:49.356 we have so much cost in transporting all these goods around, 0:22:50.316 --> 0:22:52.996 maybe we can buy some of them locally where we 0:22:53.076 --> 0:22:56.996 need them and closer to the market. And so that's 0:22:57.036 --> 0:23:01.516 called near sourcing and a really strong strategy from a 0:23:01.556 --> 0:23:06.556 sustainability standpoint. But also it takes risks down. The closer 0:23:06.596 --> 0:23:09.356 you are to the less, the less can go wrong 0:23:09.436 --> 0:23:12.676 in the supply chain, and so that may be a 0:23:12.996 --> 0:23:16.636 possible opportunity for small and mid sized companies also to 0:23:16.756 --> 0:23:20.236 come in and play a stronger role in the supply chain. 0:23:20.356 --> 0:23:23.556 So there's a lots of good things that could come 0:23:23.556 --> 0:23:28.356 out of this as cooperations, A reevaluating their supply chains. 0:23:29.596 --> 0:23:31.876 And I want to thank you so much for educating 0:23:31.876 --> 0:23:36.076 me and our listeners and for the fascinating and important 0:23:36.076 --> 0:23:38.276 work that you do. And I guess I want to 0:23:38.276 --> 0:23:40.316 apologize on behalf of all of us for not paying 0:23:40.396 --> 0:23:44.116 enough attention to the significance and importance of supply chain 0:23:44.476 --> 0:23:48.516 affairs until suddenly we experience disruptions. Thank you very much, 0:23:49.116 --> 0:24:02.756 Thank you. We'll be right back. Talking to Hannah Kane 0:24:03.036 --> 0:24:06.156 brought home some reality to me that I truly did 0:24:06.156 --> 0:24:09.396 not anticipate before speaking to her. Maybe, like a lot 0:24:09.436 --> 0:24:13.396 of you, I've mostly taken the excuse supply chain delays 0:24:13.636 --> 0:24:17.196 to be a reasonable explanation of the difficulty in getting 0:24:17.516 --> 0:24:21.756 goods to market in the time of COVID. But as 0:24:21.796 --> 0:24:24.556 Hannah argued, we were on the edge of the abyss 0:24:25.076 --> 0:24:29.676 her striking phrase even before COVID happened. In other words, 0:24:29.836 --> 0:24:34.636