NEW CAR OR HOUSEHOLD GOODS, SUCH
THINGS CAN BE HARD TO COME BY
AND MORE EXPENSIVE TO BUY THESE
DAYS.
SHORTAGES RESULT IN HIGHER
PRICES AND ARE BEING BLAMED ON A
SUPPLY CHAIN CRISIS.
A SIMPLE VERSION OF IT GOES LIKE
THIS.
THE BROKEN SUPPLY CHAIN STARTED
WHEN THE WORLD AND ESPECIALLY
CHINA SHUT DOWN DUE TO COVID.
EVERYTHING BACKED UP.
WHEN CONSUMERS TURNED TO THE
INTERNET TO BUY STUFF, THERE
WASN'T ENOUGH CAPACITY.
BACKED UP SHIPPING CONTAINERS AT
PORTS TELL PART OF THE STORY.
WE TURN TO JAKE DEAN, DIRECTOR
OF THE GRANGER CENTER OF SUPPLY
CHAIN MANAGEMENT AT UW-MADISON.
>> THANKS FOR HAVING ME.
>> DID I GET THAT SIMPLIFIED
VERSION CLOSE IN MATERIALS OF
HOW THIS HAPPENED?
<!32768> YEAH.
IF YOU'RE GOING TO SIMPLIFY IT
DOWN TO FIVE OR TEN SECONDS,
THAT'S NOT BAD.
>> THANK YOU.
>> ESSENTIALLY MARCH OF 2020 THE
WORLD WENT INTO WHAT MANY SMART
PEOPLE THOUGHT WAS GOING TO BE A
VERY BIG ECONOMIC CONTRACTION
FROM THE PERSPECTIVE OF MANY
PEOPLE LOSING THEIR JOBS.
THERE WERE RESTRICTIONS ON WHAT
COULD BE MADE.
THE SUPPLY CHAIN WENT THROUGH A
BIG CONTRACTION LET'S SAY IN
MARCH.
AND THEN FOR MANY PEOPLE NOT TOO
MUCH BEYOND THAT THEY REALIZED
THAT THE ECONOMY FOR THEM WASN'T
CONTRACTING.
AND I DON'T WANT TO GLOSS OVER
THE FACT THAT IT WAS VERY
DETRIMENTAL TO A LARGE NUMBER OF
PEOPLE AND I DON'T WANT TO SKIP
THAT.
BUT FOR MANY PEOPLE, THEY
REALIZED I'M STILL EMPLOYED, I'M
NOT GOING ANYWHERE.
MY HOUSE NEEDS SOMETHING.
I NEED A NEW COUCH.
I NEED SOMETHING, SOMETHING,
SOMETHING.
SO WE CAME OUT OF THAT.
AND I THINK WE DID ADMIRABLY
WELL IN THE EARLY PART OF THE
PANDEMIC, LET'S SAY THROUGH
2020, FALL OF 2020.
I THINK THAT'S BECAUSE THERE
WERE SOME LEVERS LEFT TO PULL
THEN IN TERMS OF BRINGING IN
SOME EXCESS CAPACITY.
BUT NOW WE'RE IN THIS SITUATION
WHERE THOSE ARE GONE AND THAT,
COMBINED WITH A BUNCH OF OTHER
KIND OF GEOGRAPHIC, GEOPOLITICAL
THINGS, HAVE MEANT EVERYTHING IS
IN THE WRONG PLACE AND THERE
ISN'T CAPACITY TO GET US WHAT WE
WANT.
>> HAS THE WORLD SEEN THE
MAGNITUDE OF THIS KIND OF BREAK
IN THE GLOBAL SUPPLY CHAIN?
>> NO.
NOT THAT I KNOW.
IT'S SIMILAR TO WHAT YOU WOULD
SEE COMING OUT OF A RECESSION.
SO WHEN THE ECONOMY DOES
CONTRACT AS WE SAW IN THE LATE,
ECONOMY WENT INTO A BIG
CONTRACTION.
THEN IT EXPANDED, EXPANDED,
EXPANDED.
WE GOT TO THE PLACE WE ARE
TODAY.
WHEN YOU'RE IN A SITUATION LIKE
THAT, EVERYTHING KIND OF CAN
STEP UP INCREMENTALLY AND WE CAN
ALL SORT OF BE OKAY.
WHAT HAPPENED HERE WAS WE HAD A
CRATER IN EVERYTHING IN MARCH OF
2020.
A STEP FUNCTION BACK.
AND THAT'S THE SITUATION WE'RE
IN.
IT'S GLOBAL.
IT'S NOT CONFINED TO ONE
COUNTRY.
IT'S ALL OVER THE PLACE.
>> SO THE SUPPLY CHAIN IS A
COMPLICATED MATRIX, BUT IS THERE
A PARTICULAR PAIN POINT RIGHT
NOW?
>> I THINK THE WHOLE THING.
IT'S ACROSS THE SPECTRUM.
I LIKE TO USE MATRIX.
SOME PEOPLE USE NETWORK.
I THINK SUPPLY CHAIN IS NICE.
IT'S NOT ONE HOP TO ONE HOP TO
ONE HOP.
IT'S A NETWORK.
>> SO WHAT HAPPENS TO CONSUMERS
OR THE SELLER OF GOODS IN ALL OF
THIS?
>> IT'S DIFFICULT.
I MEAN, SUPPLY CHAINS REACT TO
WHAT CUSTOMERS WANT, RIGHT?
SUPPLY CHAINS DON'T RESPOND IN A
VACUUM.
THEY RESPOND TO DEMAND.
CUSTOMERS AND SELLERS ARE JUST
KIND OF STUCK AT THIS POINT.
AND IT'S UNFORTUNATE.
I FEEL FOR PEOPLE PEOPLE SOME
PEOPLE AREN'T -- IT'S NOT
CONSCIOUS.
IT'S NOT BAD BEHAVIOR THAT WE
ARE NECESSARILY EXPERIENCING.
BUT IT'S GOING TO MEAN THAT
THERE ARE THESE SHORTAGES AND
THAT MEANS PEOPLE DON'T HAVE
THINGS TO SELL AND PEOPLE CAN'T
BUY THINGS THEY WANT.
>> WHAT ABOUT THE OVERALL
ECONOMY?
DOES IT PUT A DRAG ON THAT?
>> IT MIGHT.
I MEAN, CERTAINLY THE PROBLEM
THAT'S HAPPENING RIGHT NOW IS
WHEN EVERYTHING IS CONSTRAINED,
SO I THINK WE'RE SEEING A LITTLE
BIT OF AN OVERALL REDUCTION IN
OUTPUT BECAUSE THERE'S SO MANY
SHORTAGES.
IT'S NOT LIKE ONE SECTOR IS FINE
AND OTHERS ARE HAVING PROBLEMS.
WHEN YOU HAVE PROBLEMS IN
DEMOCRATIC TO THE SYSTEM AND YOU
CAN'T FIND CONTAINERS AND
SHIPPING ROUTES AND TRUCK
DRIVERS, THE WHOLE THING SLOWS
DOWN.
I THINK THERE COULD BE AN IMPACT
TO THE OVERALL ECONOMY.
>> WHAT'S THE EXPECTATION ABOUT
WHEN THE PROBLEM WILL EASE?
>> IF I KNEW THE ANSWER TO THAT
QUESTION.
WE'RE GOING TO BE WITH THIS I
THINK WELL INTO 2022.
WE HAD SOME MEMBERS OF OUR
ADVISORY BOARD A FEW WEEKS AGO
AND THEY WERE SAYING 2023, EARLY
2023.
IT'S GOING TO TAKE A LOT OF TIME
FOR THINGS TO NORMALIZE BECAUSE
WHAT'S GOING TO COME OUT OF THIS
IS SUCH A BACKLOG OF THINGS YET
TO BE MADE THAT THOSE THINGS
HAVE TO WORK THEIR WAY THROUGH
AND SEE WHERE WE COME OUT ON THE
OTHER SIDE.
>> WOW.
LOTS MORE TO DISCUSS ON THIS,
BUT THANKS SO MUCH FOR YOUR
EXPERTISE, JAKE