What got me going to write this was reading a short blurb on The Lever about the economy. The transcript was provided and I read part of it. The content is all about supply chain which I was a part of for 40-something years. I find The Lever script (link below) interesting as it parallels my experience. It may be boring to you.

Some background

Nineteen seventy-four was a pretty good year for my wife and I. Finished college after three years with a minor in math and majoring in business. My sights were set on getting a degree in engineering until the bottom dropped out of the discipline. It did change after a few years. I had already changed course due to getting some advice from a VP of patents and trademarks. My wife worked for him and the other attorneys as a paralegal. She was the bread winner then.

Having a couple of years in Calculus never really paid off for me. What did pay off was being intuitive. By that I mean, understanding the manufacturing process within the company and the suppliers, in transit times, and what the weeks of inventory meant and how much time I had. With this knowledge, I could game the system. The college degree allowed me to enter business at a different level.

I was introduced to the American Production and Inventory Control association by my manager’s boss. Didn’t excite me till a couple of years later. It did ground me in planning, the flow of materials, and systems (MRPII) used in the manufacturing process.

Allow me to speed this up a bit. Being close to manufacturing gave me insight. Working in Purchasing and becoming a Certified Purchasing Manager gave me more background. Picking up a Masters added to my level of knowledge. Finally, working as a consultant along with engineers, going from one business to another, and working with one Rensselaer doctorate allowed me to use my knowledge. And I was able to develop a foundation for my beliefs in how to improve the processes of companies.

Some premises:

– It is easy to manipulate the supply chain.
– It is easier to manipulate a supply chain based on manufacturing overseas.
– Labor costs are a smaller part of manufacturing cost then when I started out.
– Due to technical improvements in manufacturing (cell, robotics, etc.) Labor content has decreased even more.
– Many of the issues related to supply could have been resolved. The same holds true for in transit issues.
– Etcetera and the list could be even longer.

It is always thrilling (not) to me when the pundits find something that rings true and has done so for years as I mentioned above in the leadup to this part of my commentary. The following is being offered up. I have added the link so you can read the rest. I cut it short.
 
Part of a transcript posted on The Lever.

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I’m David Sirota.

Inflation is one of the pundit classes favorite words. For years, we were deluged with theories that it was rising workers’ wages or too much government spending that was forcing up the costs of goods.

But rarely did any of them ever consider that it wasn’t workers or public programs that were the culprit. In fact, the real target of their ire should’ve been the corporations themselves who control pricing.

But don’t take it from me. That’s what the CEOs of major corporations have literally told their shareholders. That inflation has been good, and in fact has given them cover to raise prices on unexpecting consumers.

And it’s not just the CEOs saying it. In a new study by the Federal Reserve Bank of Boston, researchers found that prices grew faster than labor costs.

So, no. It’s not workers wages. It’s corporate profiteering. But the story goes even deeper than that. Corporate profiteering is behind what kicked off the inflation crisis to begin with.

Today on Lever Time, we’re going to go to senior podcast producer Arjun Singh. He’ll first look at just how far corporations went to price gouge consumers recently. Then, he sits down with reporter Peter Goodman to understand how this crisis began: with a broken supply chain that was controlled by 3 mega corporations.

That’s here on Lever

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The Close Explanation

What a surprise, prices grew faster than costs which includes Labor. Why is such occurring? Because they can do it under the guise of a pandemic occurring. Similar happened in 2008-2010 with the bad boy product called semiconductors. A salesperson called me up. He announced their company was increasing prices and to live with it or find somewhere else to go for a new semiconductor.

For us, it would have meant a new qualification process to be approved by the automotive company we were supplying to. The process is long and is not a guarantee of success. Meanwhile the old company would cut us off. So, we sucked it up and ate the cost.

David Sirota is correct. One example . . . The container issue on the west coast was a sham and could have been corrected by Long Beach and Los Angeles ports. Such confusion and delay did play a role in increasing prices. It wasn’t until Biden stepped in and demanded it be corrected. How quick we forget what was done previously during the pandemic and who did it.

Another example . . .The supply chain is not broken and never was broken. It is being used to justify prices increases along with other things such as same pricing for smaller amounts of the product. a half an ounce here an ounce there and the profits go up. Oh, we had an increase in packaging costs for non-standard box or bottle size.

And the sleight of hand continues.