They didn't need to. The initial disruption was only a few weeks. The problem is that once companies saw that there would be a shortage, they started buying up all the supplies they could to rapidly build up buffers, which increases the demand for those supplies worsening the shortage, which in turn means even larger buffers are required. It's a vicious cycle that all could have been avoided.

The issue is that when you become brittle supply chain wise, the only real answer is to stock more/buy more individually - which crushes the supply chain even more. Either that, or co-ordinated (gov't level often) rationing, which has it's own problems.

A buffer gives us time. That time can be used to save lives.

A buffer absorbs a short term disruption in a supplier which prevents the shortage. A buffer gives time to look for another supplier in a long term disruption. A buffer delays a shortage when no other supplier is feasible.

(You didn't ask me and I'm not an expert but) Not if you just use them as a pure buffer (and there's no re-re-adjustment before they're used up), no. But they'd give you some time to think 'Hm, stocks being depleted faster than usual, we need to reorder sooner, and more.'

There are all sorts of random shortages right now--truckers, lumber, cars, rental cars, computer chips. They're mostly annoying, but it would be a lot worse if companies didn't get help.

This strategy only works if companies can accurately predict the likelihood of future supply/demand mismatches. This isn't possible for most industries, and it's not sane to hold out for hundred year events.

There's also something like a reverse prisoner's dilemma: if all companies in an industry keep a buffer, they're all worse off (no price spikes = less profit, years of unused capacity = less profit). Only small players can really win from spare capacity, and only if they have a huge excess, and only if their timing is right. They lose if they guess wrong and go broke before the price spike, which is made even more likely by the inefficiency of running with tons of spare capacity.

In real life, factories/farms/hospitals are not designed to agilely shut down and start up again while awaiting inputs, or when there is no demand for the output. Upon a drop in inputs the company goes bankrupt, the crop doesn't get planted, or the patient dies. Upon a drop in demand the company goes bankrupt, the crop gets thrown out, or the travel nurses go elsewhere. Where flexibility in supplies is not an option, the solution is to have a buffer of money (or credit), seed, or medical supplies to smooth out anticipated supply shocks, and we buffer against demand shocks with money/credit, features markets, storage facilities, and some hospital inefficiency.

As we can clearly see now.

> One premise of lean is to match variation in demand to supply as quickly as possible

This is done at a cost of making the whole system less resilient against demand spikes and in-chain disruptions. A perfectly lean system would be following predicted demand precisely, maximizing efficiency at each stage, and as a result break down as soon as anything in the chain changes by even most tiny amount.

I'm a layman in supply chain space, but my observation is that the risk horizons on the market are too small - anything that happens less frequently than once every few quarters may as well not exist. So throw in a big enough wrench, and everything is in shambles for way longer than the existence of initial cause (see the so-called "bullwhip effect", or as it's known in control theory, a positive feedback loop making the system oscillating and unstable). It could've been helped if there was enough buffer in the system to allow time for expanding manufacturing capacity.

As for what to do with different kinds of inventory, two observation. One, the earlier you are in the manufacturing process, the more potential buyers for your product you'll have - so it's that less risky to keep inventory. It's probably not worth it to stock too much of front left doors to 2020 BMWs, but a sheet metal wholesaler doesn't have to run lean and choke everyone downstream when the foundries or miners get disrupted by an epidemic. Two, for some stuff it's really the role of the government to keep buffers. PPE and food would be this. Imagine if any of the Western countries actually had a proper (Cold War style) stock of PPE for a pandemic, and food for everyone for a year. There wouldn't be any worry about staple shortages or hemorrhaging medical staff. There wouldn't be a problem with PPE manufacturers expanding capacity either, as the government could just buy enough goods to fill in the entire buffer capacity they plan on depleting - which would give the manufacturers a chance to recoup their investment in meeting a temporary demand surge.

Bottomline: not saying that fat is good, but I think there's such a thing as being too lean, and that is the problem we're having.

It produces immediate demand at the cost of reduced future investment -- which could potentially keep suppliers afloat temporarily in a crisis.

But while the problem today is a demand problem, we are really only days-to-weeks away from a supply catastrophe unlike anything seen in two centuries or more.

Basically, no new stuff is being made anywhere right now -- because it is illegal to do so most places -- we are all locked in our houses on threat of arrest (or worse in some countries)

Right now, the local warehouses are still full, so the stores get restocked. Those warehouses will get restocked from regional ones.

But, we are draining all of the buffers in all of the supply chains of all of the products. Once it all drains, there is no more supply.

You're assuming that increased profit margins will automatically increase supply chain buffers. But rather, the same incentive to hire too many financialists that "save the company money" will exist, and the extra profit margin will just go to increased dividends.

And increasing the supply chain buffers won't help much right now either, it has to be done during good times. In fact I'd say most of the shortage is from companies deciding to increase their buffers, in the same way as what happened to toilet paper. "Hoarders" and "speculators" are easy illustrations to point to, but the real demand comes from regular consumers silently buying twice as much as they usually do.

Also, is this "fragility" really that big of a problem? Sure, prices are going to move up 20-30% for a year or two until the supply chain issues ease, but is that worth driving up costs for decades preparing for potentially the wrong issue?

If you have a substantial buffer, when demand picks up you notice that you are drawing from your buffer at an increased rate and you order things early so that you can scale with that increased demand. It's okay if your suppliers need some time to hire additional labor or buy a new machine, even at this increased rate of consumption you still have some time before your stocks run out. There is no need for you to pay your suppliers a premium to drop their existing orders from other customers to support your demand.

If you don't have that extra buffer, then when demand increases there is no avoiding shortages - not only do you need to scale up to increase production and meet this new demand, but now you also have an ever growing backlog of orders that you also need to fulfill. These companies scramble to rush in material and equipment asap, which drives up prices and drains the stocks of other companies, and pushes the problem further up the supply chain. Firms that aren't actually seeing an increase in demand nevertheless must buy more to guarantee their buffers will not run out, further increasing shortfalls in production. What could have been a localized hiccup cascades into a global economic problem.

However it's important to note that the pandemic was not simply a shifting in demand patterns. Early on production in many cases stopped or was extremely reduced as employees quarantined and businesses cancelled orders expecting various drops in consumer demand. Again here, JIT is a problem as it led firms to cancel orders much earlier than they should have, and it makes restarting lines much slower. For example auto makers cancelled their chip orders right away at the start of the pandemic expecting people to save money and not buy cars, but it turned out demand for cars increased, and a lack of chips grinds auto manufacturing to a halt. If the auto manufacturers had just accepted that their inventory of chips might sit on a shelf a little longer, the counter intuitive uptick in demand would have been a blessing instead of a curse.

The idea that we run without buffers in the supply chain is contradicted by his own big idea to use one of them.

We don’t have big warehouses full of inventory sitting around like we used to, true. But we do have the money we generated by running more efficient supply chains, and money is more flexible than outdated inventory.

Edit to add: whether that money is sitting with founders, shareholders, or employees is largely irrelevant from a macro perspective.

Toyota, which pioneered lean manufacturing, is currently laughing its way to the bank; it has a stockpile of semiconductors, since the 2011 Tohoku quake and tsunami exposed how fragile its supply chain for semiconductors was.