Kind of surprised by the shock and awe of the media over monopolistic power exerted on and by Supply Chains. They can be monopolistic and abusive because they are efficient.
Just a rambling conversation
“Protests have always been a part of America and this one at the Malheur National Wildlife Refuge appears to be no different. Although the exhibited violence and the taking of a life at Malheur did not have to occur. It has also played a part in other protests.”
In this case it was not necessary and it achieved no good results.
These were the words I used to start “Why the Refuge Protestors May Have Been Right.” Quite a few people took issue with my 2016 commentary on the take over of the Malheur National Wildlife Refuge.
Mother Jones pointed out the obvious,
“the ranchers who supply the United States with beef operate under razor-thin, often negative profit margins.
It’s not hard to see why rancher’s grazing rights are an issue. Ranchers’ struggle for profitability gives them strong incentive to expand their operations to increase overall volume and gain economies of scale.”
Here we are again . . . talking about similar issues due to a pandemic rather than an economic shutdown, empty shelves in grocery stores, increasing prices for energy, labor, etc., supply chain capacity overtaxed, and food prices especially high. And small agricultural farmers and cattle ranchers still have the same issues.
A 2011 paper by the US Department of Agriculture found that the average cost per cow for small (20-49 head) operations exceeded $1,600, while for large ranches (500 or more head), the average cost stood at less than $400.
That is old information.
I do not have more current information. I am sure the ratio today is still about the same or worse.
Now the commentary I wrote, to which many took issue with was in 2016. Mother Jones was the same year and I used their article. Going back further, Wall Street was busy blowing themselves up in 2008/9. Housing lost value and many were invested in mortgages which were greater than the value of the homes.
As a Purchasing Manager NA in 2009, I was chasing semiconductors due to; no demand ratcheting up to increased demand, production just starting up again at the chip manufacturers, and paying increased prices and freight charges for allocated parts. Automotive companies did not maintain their orders so the chip manufacturers shut down till new orders were placed. It took about a year for things to settle back to normal after the orders they needed tomorrow were actually filled. Chip manufacturers made money and the public paid for iy in prices.
With over whelming, placed orders 10, 12, 16 and 20 weeks out for these chips, the manufacturers made more money. And increased lead times do nothing for improving manufacturing throughput. I had to explain such to many salesmen. It will not increase capacity. The chip manufacturers knew this. It was game and their profits soared.
Accepting orders beyond lead time while at capacity is futile also. Only increased capacity improves throughput. A manufacturer could add new capacity or reactive old and less efficient capacity to improve throughput.
Doing the latter is smart. Goldratt discussed this in his book “The Goal.” I consulted and worked in this field of endeavor. Companies selling capacity constrained components are cleaning up.
Nothing new here.
Over at the Washington Monthly where Paul Glastris just recently closed down the comments section for the nobodies and the riff-raff who were there just to disrupt. What was an excellent place to pick up a good on-topic conversation disintegrated.. Try to quote something from Angry Bear or tell an experience and you were in moderation.
Paul is the editor in chief who has been cleaning house in an attempt to save the Washington Monthly. Paul has also recently discovered monopolies are controlling business in manufacturing chips, ocean transportation, containers, unloading, meat packing and processing, oil processing, etc. He is right in that the consolidation of businesses into monopolies has given them enough power to control the supply chain and weaponize it. Just dribble out enough to keep them interested.
This is old news. It has happened other times.
And it did not happen overnight. Semiconductors were a big issue in 2008 and 2009 with the Japanese telling the VP of Chrysler to allocate some of their Chip allocation to us for Chrysler product. I had seen the availability of piston rings decrease as demand increased in 1980 due to over selling capacity. Their solution was to lengthen lead time which does nothing. For chips there always was overseas fabrication of them while wafer growth was somewhere else.
Bring Back to the US the Overseas Production . . .
If you do not want to pay overhead in the US, you move production to countries where there is less Overhead. Overhead is everything besides Direct Labor and Materials. However, overseas manufacturing will add 4 weeks of ocean and rail to get parts to Detroit. You own the inventory as soon as it is onboard China.
Squawking about inventory shortages and higher costs after we went overseas to manufacture to avoid US Overhead and get cheap prices seems kind of silly. Pre-pandemic, few were talking about bringing manufacturing back to the US.
Taiwan has the largest chip manufacturing facility. They want US protection from China. We should be talking to them.
Paul Glastris treats monopolistic powers driving the supply chain issues as something new. It is not and has been going on for decades. He just never noticed it as it was not a big concern just like the concentration of news outlets. We had cheap parts and little Overhead.
Barry C. Lynn’s, “Cornered: The New Monopoly Capitalism and the Economics of Destruction,” has about it the feel of a secret history. It arises directly from the old antitrust tradition, and it presents us with an amazing catalogue of present-day monopolies, oligopolies and economic combinations.”
Well It is not so recent anymore having gone public in 2010. In 2006, Barry Lynn wrote” a 2006 essay in Harper’s Magazine in which he described the power Wal-Mart exerted over its suppliers and encouraged Americans to use antitrust law ‘to break Wal-Mart into pieces.'” This is old news regurgitated to sell news.
Paul Kennedy’s “The Rise and Fall of The Great Powers” gives examples of monopolistic powers going back centuries.
The control of a supply chain is nothing new and nothing to be surprised about as it has been occurring. It would not have sold magazine one if the Covid Pandemic had not happened and exposed how supply chain can be used to exert monopolistic power and weaponize.
Some More Reading
“U.S. Food Prices Are Up. Are the Food Corporations to Blame for Taking Advantage?,” Time, Claire Kalloway, January 2022
“The Oregon Militia Is Picking the Wrong Beef With the Feds,” Mother Jones, Tom Philpott, January 2016
“Obama’s Game of Chicken,” Washington Monthly, Lina Khan, November 2012
“The World Turned Upside Down: Lina Khan’s FTC Fights for Domestic Cattle Ranchers,” BIG newsletter, Matt Stoller, July 1, 2021
“A New Age of Monopolies,” WSJ, Thomas Frank, March 2010