How come my 2024 book of the year is about value chain?
Goodman, one of the most respected economic journalists, has written a fascinating account of what lies behind all the supposedly boring things you might not even be aware of.
Supply chain links are as essential to the economy as veins and arteries are to the human body. I bet you’ve heard of the aorta, the celebrity of the arteries. But how about the inferior epigastric artery? It’s not that “inferior” as its name suggests. You need it just as much as the global economy needs the Suez Canal.
Have you ever imagined how the goods you use daily are delivered to you? I mean the entire process — from a Southeast Asian factory to your front door. That is what a supply chain is about — how to move materials, semi-finished goods, and final products around the globe promptly and efficiently. It’s a somewhat complicated endeavour, as some goods consist of thousands of individual parts (like 30,000 for a car) travelling back and forth between factories. Apple, for instance, buys components from suppliers in 43 countries across six continents (except Antarctica, in case you’re curious) before assembling them in China, Taiwan, or India.
The word chain in “supply chain” is no coincidence. If even one link breaks, the entire chain is screwed. This is precisely what happened when the pandemic froze logistics. Having much more in common with “lodgings” than “logic” [1], logistics is the tangible execution of supply chain needs. A global lockdown halted the physical movement of goods, causing unexpected problems. For instance, buying a new bicycle in Poland for nearly a year was almost impossible. Most bikes are manufactured in Taiwan, which I learned by surprise when I tried to buy new wheels for my son in 2020.
Our ever-smaller global village suddenly reverted to its tangible physical size with all its limitations. I mean the good old Newtonian physics, with weight, speed, distance, and time, not the nobody-understands-WTF-quantum physics.
As its title suggests, how we ended up in this situation — literally running out of everything — is one of the book’s main subjects.
Truly engaging, yet equally dispiriting, is the book’s other central theme.
The book is mostly about people. The supply chain shown in excels, powerpoints and optimization software may look neat, and cost savings may add up nicely. Still, behind it all are vulnerable and often exploited workers who operate ships, ports, trains, and delivery trucks, doing all the dirty (indeed) jobs.
You may lose faith in modern-times capitalism (if you still have some left), and its short terminism, aggressive rent-seeking and profit-at-all-cost principle. But also, you may get a little nervous, as the economy is on the brink of collapse due to supply chains weaknesses.
It appears that we are constantly in a narrow escape mode.
For how long?
How The World Run Out of Everything by Peter S. Goodman, Mariner Books, 2024, 406p.
[1] Term logistics derives from French *logic*, meaning lodgings, and it was coined by a French general (of Swiss nationality) and prominent war theorist Antoine-Henri Jomini in 1838. Since then, logistics have been a key factor for military planners. “Amateurs talk strategy; professionals talk logistics” — as gen. Omar Bradley famously said.
