By now, you’ve probably heard that global supply chains are in a state of disarray.
Here's a simple breakdown of what’s causing it:
1/ There's a lot of talk right now about the global supply chain crisis.
@Business published an article subtitled "Inside the Brutal Realities of Supply Chain Hell”—it's getting serious.
This thread provides my (very) simple framework for understanding the key drivers:
2/ First off, what are the visible impacts of the crisis?
Product delays (good luck getting appliances before 2022), product shortages (see semiconductors), port buildups (fly over LA and you'll see), and rampant freight costs (sorry, retailer margins).
It's pretty bad.
3/ Global supply chains are very complex. We live in a highly-interconnected world.
A butterfly flaps its wings in Shenzhen and impacts when I receive my bike in New York. Ok, maybe not quite, but almost...
So to understand the drivers of the crisis, we need a simple framework.
4/ Let's break down what is happening using an Econ 101 classic: Supply and Demand.
Supply here refers to everything related to manufacturing, production, and transportation.
Demand here refers to everything related to consumption.
I'll walk through each side: