In particular, the article talk about supply line disruption. Rebuilding your supply lines means you can't use the existing ones, and that's certain not to be cheap either.
The short term is too short: the investment won't pay back. Almost all profiteering reduces supply by causing hoarding and waste rather than use. Plus the dead weight loss of people killed by lack of PPE.
Exactly. Less replenishment means more flexibility.
Lots of people killed by IEDs on long supply lines in Afghanistan is an extreme example of the human and military costs. Some of those died to fuel A/C for uninsulated tents... madness.
You can always argue that a problem that involves shortages will be alleviated by more supply (like saying that building more roads will solve traffic congestion), but if the increased supply is just captured by the same forces that capture it now, you haven’t solved anything.
Money doesn't do you much good if you can't actually spend it on anything. Getting rid of warehouses full of car parts to save some cash doesn't do a lot of good when no one can sell you car parts for any price.
Buffers won't solve a long term shortage, but they can prevent a short term shortage from cascading. When the entire global economy is running with minimal buffers, then the effects of supply disruptions can last years, and that problem can't just go away by throwing money at it.
The economy is too big to centrally plan what depends on what. We've stopped producing tools and supplies for essential jobs (and parts for those tools, and so on). Instead we're drawing down stockpiles that hadn't been sold yet. When those stalled pipelines fully drain it's going to get ugly.
The article even has a graph that shows that stockpiles are very high. The doom seems to come entirely from projections due to China reducing production. The article doesn't explain why other countries cannot step up production to meet demand.
The article's quality is poor. It wasn't worth my time to read.
The problem isn't RoE itself, it's the focus on short-term RoE.
You can juice RoE in the short term by removing slack and shock absorbers, because increasing the brittleness of the supply chain probably won't show up in this quarter's returns.
The supply chain for fuel is brittle. There isn't sufficient inventory in tanks to buffer even short disruptions. A pipeline offline for a couple days is enough to make a crisis.
People catch wind of the crisis and start filling their tanks at three-quarters full instead of one-quarter full, and the brittle supply chain breaks with the accelerated demand.
Same thing we're seeing with the global supply chain which was already brittle, now individuals and companies are putting in bigger orders sooner to compensate, and it fails in the face of accelerated demand.
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