The fragility of global supply chains

Tyler Cowen has an interesting Bloomberg column about this. In part, he observes,

Supply chains are not indestructible. If the new costs or risks are high enough, the entire structure will be dismantled. By their nature, supply chains do not fall apart slowly, because each part of the chain relies upon other parts to add its value. It does not help much to have the circuit components of the iPhone lined up, for instance, if you cannot also produce the glass screens. In this way, these supply chains are less robust under extreme conditions.

Global supply chains have yet to come apart mostly because trade and prosperity generally have been rising. But now, for the first time since World War II, the global economy faces the possibility of a true decoupling of many trade connections.

I think he’s right. Complex supply chains will not degrade gracefully. One link will fail and then the whole chain will rapidly disintegrate.

Funny how we’ve built an entire civilisation on just-in-time delivery. (The famous Toyota ‘lean machine’.)