The Plumbing is Bad

Terry H. Schwadron

May 16, 2020

Back in school, a big lesson for thinking about how businesses need to operate for an efficient economy grew out of the unintended benefits of technology.

It was a lesson from Jack Welch of General Electric fame that boomed through graduate management programs: The introduction of supermarket scanners was not the labor-saving device that had been intended. But it was a data roadmap to understand what was selling, and opened the door for all businesses to live by Just in Time inventory practices.

Businesses responded, cutting expensive warehousing and storage of inventories and remaking processes to make items as they sell, as they are needed by a marketplace.

The consequences of those changes have hit home during a pandemic that blew the idea of immediate need for masks and protective equipment, ventilators, supply-line thinking and the rest to smithereens.

The exact things that Donald Trump and friends want to celebrate in our marketplaces as they creakingly re-open are based on those principles for a lean, mean economy built around maximizing profit over worker safety or preparation for an unanticipated tidal wave of social need.

Even as Trump smacks re-opening efforts into moving faster, while paying only paper attention to details of how to keep “embers” of coronavirus outbreak under control without a dedicated federal testing program and widespread contact tracing, he’s reinforcing the literally fatal mistake of forgoing preparation for a second round of virus.

What’s important to him is the appearance of a booming economy with unrestricted profits, regardless of the various ways that will continue to worsen income gaps, leave more people at the bottom struggling for food security, and increase corporate profit at the expense of state public expense.

What Are We Seeing?

The Washington Post and The Wall Street Journal among others, have been harvesting conclusions from our experience of the last two months:

— In a bid for profit, the hospital industry cut inventory of supplies. Rather than bulk up after the swine flu, hospitals turned to inventory-tracking software to winnow stocks of protective gear and other supplies, hoping to be able to replenish it as needed.

— After swine flu, manufacturers too found they were left with inventory and walked away from rebuilding supplies of masks and devices for emergency use, ceding the market to overseas manufacturers.

— The U.S. government focused on preparing for terrorism rather than pandemic. The government dropped budgets for protection, for the CDC, for a White House office on pandemic planning, and removed a small planned budget to buy respirator masks for the national stockpile, according to former officials. Just this weekend, the Post reported on a Texas manufacturer of masks who repeatedly offered the government the chance to start a mass manufacture of N95 masks, requests that were turned down.

— Despite intentions, Food Stamp regulations, state unemployment rules, and the federal bureaucracy’s implementation of congressional aid bills all reflect systematic, institutional ways that seek to deny benefits rather than reach out to invite aid seekers into these programs.

Put these all together and what you have is an operational mess, a need for follow-through and a mission of looking ahead two steps.

The Jack Welch lesson was that we are at our best if we are most lean and wholly profit-centric. The coronavirus lesson is that the Jack Welch model won’t work to keep all of us safe.

The Supply Lines

Over four decades, the country’s meat industry has followed other sectors in using just-in-time supply chain management to lower the cost and increase the quantity of meat, Washington Post columnist Megan McArdle noted recently. Animals are bred and fed to be be shipped off to the processor during a precise window, at which point they are supposed to be shipped off to the processor. If the plant for which they were destined has to shut down for weeks because of an epidemic, the whole system backs up, she explained.

Coronavirus is interrupting farm-to-consumer lines, trucking, warehousing, airlines and local transportation. The Trump administration is threatening through its policies to disrupt postal services and let states go bust trying to keep up with the ever-quickened pace of federal handoffs of essential services to the states themselves.

The profit-centric thinking of companies across the country has created a steady push of pharmaceutical manufacture to China, parts manufacture for ventilators as well as cars to Mexico, protective garments to the Bangladeshes of the world.

The complicated supply line plumbing that has fueled our market-crazed world is now showing serious leaks because we forgot that we are subject to natural disaster, were arrogant enough to believe that we were simply owed fealty from overseas economic vassal states that we now label unfair trading partners, and short-sighted enough not to recognize that we are totally dependent on the people to whom we pay the least money.

Those gun-toting protestors objecting to stay-at-home orders would be better rewarded by looking at the more root causes of what has brought us here today.




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