Tag Archives: inventory

Shadow inflation: Shipping costs are up way more than you think

This article gives lots of measures of factors contributing to supply chain cost. There are good graphs indicating the changes.

But these are contributing hidden costs to products, and those costs will be borne by consumers of the final products. That’s inflation.

It may be the first time that inflation is influenced by marine supply chain problems since the incessant wars on the seas in the 17th and 18th century. And in those days, frequent shooting wars guaranteed recessions; it was leisure goods like tea that had inflated prices. World Wars I and II also caused inflation, and shortages, but these were only partly caused by pillaging of marine traffic on the high seas. In most cases price controls were put into effect to resist inflation for ordinary people; and the extra goods were needed for the soldiers. We don’t have those now.

Somehow in the US and EU we need to find people to do the hard jobs in the supply chain to keep goods moving— warehouse jobs and driving jobs.

Greg Miller, Senior Editor Friday, October 22, 2021

Shadow inflation: Shipping costs are up way more than you think

Are panicked, overbuying American shippers the reason for today’s container crisis?

The short answer may be no!

But we should expect inventories to try to rise given all the supply chain dislocations in the US. Driver shortages, delays internationally, and a rise in consumer buying may all be responsible.

One of the professionals viewed calls it a multiple black swan event!

Sam Chambers September 20, 2021

Are panicked, overbuying American shippers the reason for today’s container crisis? – Splash247
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Asia-Europe rollovers are back

It appears that ocean carriers are again playing fast and loose with delivery dates for cargo.  There’s a telling remark by an NVOCC source: “You might be able to book at that rate, but you have absolutely no idea when you are going to get the boxes shipped.”

Carriers still have not got the message that most shippers want their cargo when it was promised.  There might be a few that can stand a long delay, but the trend in inventory over the last 20 years has been toward rightsizing inventory by factoring in its logistics.  You can’t do that well if there is substantial variation in lead times. The formula for overall variation of inventory— measured by variance (square of standard deviation)— weights variance of lead time by the demand, but variance of demand by the lead time.

Looking at the formula, a mathematical truth deducible simply from the definition of variance and the assumption of independence of demand and lead time distributions, shows that often lead time variation has an outsized effect.

Ocean carriers can’t control the demand, but they can control the lead time. But it seems that they ought to spend more time thinking about how to help keep the customer’s overall variation low, rather than only dealing with what they alone can control.

Time to get on the supply chain thinking boat!  It left the dock years ago!

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 via Asia-Europe carriers leave boxes on quays as they eye better-paid cargo – The Loadstar