99% Invisible: How the World Ran Out of Everything
Released on October 29, 2024
Host: Roman Mars

Introduction

In the episode titled "How the World Ran Out of Everything," Roman Mars delves into the intricate and often unseen world of global supply chains. Through insightful discussions with Peter Goodman, an economics reporter for The New York Times, the podcast explores how decades-old design and management philosophies have led to the vulnerabilities exposed by the COVID-19 pandemic.

The Fragility of Global Supply Chains

Roman Mars opens with a vivid recollection from the early days of the pandemic: cargo ships stacked with containers anchored off Southern California, empty grocery store shelves, and significant delays in online orders. This imagery underscores the pandemic's impact on supply chains that once seemed resilient and seamless.

[00:02] Roman Mars: "Before the pandemic, the system seemed to be just humming along smoothly in the background."

Peter Goodman adds that signs of an impending supply chain meltdown had been overlooked by corporate leaders for decades.

[02:21] Peter Goodman: "There's a guy at Oxford named Ian Golden who predicted that a pandemic would hit the global supply chain, cause financial shocks, bring the global economy to its knees."

Innovations That Shaped the Supply Chain

The Shipping Container

One of the pivotal innovations discussed is the shipping container, introduced by Malcolm McLean in the early 1950s. This standardized steel box revolutionized how goods are transported globally, drastically reducing costs and increasing efficiency.

[03:29] Peter Goodman: "The key innovation that allows companies to draw on suppliers around the globe is the advent of something we now take for granted: the shipping container."

However, this innovation also marginalized dock workers, transforming the labor dynamics within the shipping industry.

[05:14] Peter Goodman: "The shipping container is about diminishing the dependence on those human beings and squeezing them out of the cost equation."

Just In Time Manufacturing

Another significant concept covered is "Just In Time" (JIT) manufacturing, pioneered by Toyota post-World War II. JIT emphasizes efficiency by reducing inventory and synchronizing production with demand, contrasting sharply with Ford's mass production approach.

[06:35] Peter Goodman: "Toyota takes this approach to making cars and they have their suppliers clustered close at hand and they say, just bring us the parts and components that we need in real time."

This methodology gained widespread adoption in the 1980s, promoted by business consultants like McKinsey, who linked JIT with corporate profitability and shareholder value.

[09:22] Peter Goodman: "McKinsey pushes this idea that the template for corporate success is you fire lots of people... you look for cheaper suppliers around the globe."

The Rise of China as the Factory of the World

China's emergence as the central hub of global manufacturing is a critical theme. Following the Cultural Revolution, Deng Xiaoping's market reforms and China's accession to the World Trade Organization positioned it as the "factory floor to the world." This transformation attracted massive foreign investment, leading to China's dominance in various manufacturing sectors.

[11:14] Peter Goodman: "China has become the ultimate place to make products cheaply and at scale."

By 2021, Chinese companies were producing substantial shares of global goods, from air conditioners to mobile phones, solidifying China's role in the global supply chain.

Supply Chain Crisis During COVID-19

The pandemic exposed the fragilities of a supply chain heavily reliant on China. Roman Mars narrates the story of Hagan Walker, founder of the toy company Glow, whose experience epitomizes the broader systemic issues.

The Story of Hagan Walker and Glow

Hagan Walker ventured to manufacture Sesame Street-themed bath toys in China, attracted by significantly lower production costs. However, the outbreak of COVID-19 led to lockdowns, raw material shortages, and skyrocketing shipping costs. Walker faced immense challenges securing shipping containers and navigating unprecedented logistics hurdles to meet the 2021 holiday season deadlines.

[20:17] Peter Goodman: "China is struggling to turn itself back on... and you have to make the biggest order in one shot because you're going to have a hard time finding plastic."

Despite these obstacles, Walker managed to deliver his products just in time for Christmas, but this was an exception rather than the norm. Most importers faced severe delays and exorbitant costs, illustrating the supply chain's brittleness.

[26:20] Peter Goodman: "We got dock workers sick... people are stuck in these long queues. So the whole system just kind of buckles at once."

Lessons Learned and Future Paths

Nearshoring and Diversifying Manufacturing

In the aftermath of the supply chain crisis, there is a growing push towards "nearshoring"—relocating manufacturing closer to consumer markets to enhance resilience. Companies like Walmart are diversifying their manufacturing bases to include countries like Mexico and India, reducing dependency on China.

[30:47] Peter Goodman: "Companies like Walmart... have been moving production to Mexico, to Central America, to India."

However, shifting away from China presents challenges due to the established infrastructure and ease of doing business facilitated by platforms like Alibaba.

[28:53] Peter Goodman: "He decides that even though the risks are now evident, the rewards are too great and it's risky to actually move the business somewhere else."

Proposed Solutions and Reforms

Peter Goodman advocates for significant reforms to prevent future crises. These include:

• Antitrust Enforcement: Addressing monopolistic practices in key industries like shipping and rail to ensure fair pricing and reliability.

  [32:00] Peter Goodman: "We gotta have serious antitrust enforcement."

• Regulatory Adjustments: Enhancing labor and workplace safety regulations to protect workers and ensure stable productivity.

• Consumer Awareness: Encouraging consumers to consider the true cost of cheap goods, which often masks the human and environmental toll.

  [35:07] Peter Goodman: "Ask, 'Where's my money going?'... There are a lot of costs to that kind of cheapness, and we all bear them."

Conclusion

The episode underscores the intricate balance between efficiency and resilience in global supply chains. While innovations like shipping containers and JIT manufacturing have driven economic growth and lowered consumer costs, they have also introduced vulnerabilities that were starkly revealed during the pandemic. Moving forward, a combination of regulatory reforms, diversification of manufacturing bases, and heightened consumer consciousness are essential to build a more robust and equitable global supply chain system.

[35:07] Peter Goodman: "If there's one thing I hope my book will bring home for people, it's that there are a lot of costs to that kind of cheapness, and we all bear them."

Roman Mars praises Peter Goodman's book, How the World Ran Out of Everything Inside the Global Supply Chain, as a comprehensive exploration of these themes, encouraging listeners to engage with the deeper narratives that underpin our everyday lives.

Notable Quotes:

• Roman Mars on pre-pandemic supply chains:
  "Before the pandemic, the system seemed to be just humming along smoothly in the background." — [00:02]

• Peter Goodman on shipping containers:
  "The key innovation that allows companies to draw on suppliers around the globe is the advent of something we now take for granted: the shipping container." — [03:29]

• Peter Goodman on Just In Time's corporate adoption:
  "McKinsey pushes this idea that the template for corporate success is you fire lots of people... you look for cheaper suppliers around the globe." — [09:22]

• Peter Goodman on China's manufacturing dominance:
  "China has become the ultimate place to make products cheaply and at scale." — [11:14]

• Peter Goodman on the need for antitrust enforcement:
  "We gotta have serious antitrust enforcement." — [32:00]

This episode of 99% Invisible offers a compelling examination of the unseen frameworks that govern global trade, highlighting the need for systemic changes to create a more resilient and humane economic landscape.