[the48thronin]

So I was watching the discussion of shipping ( yes there is an ongoing collapse in shipping and word trade )

I might be wrong, BUT IMHO this is proof of the effects of P O rather than a cause of or even a relief from P O.

When crude spiked, and energy costs spiked, the ramifications included the pretensions to revive all the alternative energy stuff, the ramping up of defective alternative with no thought to the effects that would have on the limited supplies those alternatives demand.

From the corn price rise to the lack of transmission infrastructure for wind to the lack of components & plastics for solar, to the lack of developed storage for electric motivation, waste and disposal issues for solar, batteries, and nuclear, the pressure from dead past mass transit technologies the alternatives were and are too costly, too far away, and unable to respond to the rapidity of the effects of the massive price rise resulting in a demand destruction that will result in price depression which as writers on PO have stated over and over will result in volatility and widely swinging prices on commodities and investments. These are not causes these are effects.

JIT on the other hand is a cause of some of the volatility and some of the amplification of the pricing swings.

Comments anyone?

edit to clarify ( LOL )

[Sys1]

Well... I agree and don't agree.
There's indeed a link between peak oil and shipping collapse, but it's not a direct one.
When oil became too expensive (let's say 100$ and more), inflation set in the system, making many people spending less in toys and fun but more in energy. The flow of dollars went more on OPEC and less on China. As people spent less, enterprises were hit hard especially as USA/Europe jobs are related to the dispensable domain, like selling plasma tvs, working in SUV industry and... well, you get it.
Enterprises earned less, so they started to fire people. Since USA and Europe don't produce much stuff any more, Banks have took the habit to earn money by making bubbles -the last one beeing real estate- they saw with horror that many people can't pay back their mortgage any more and enterprises are doing less profits.
But Banks itselves have to pay mortgage to other. They had to transform as quick as possible real estate in real money for payback. The only problem is as they massively sell houses and people getting poorer, it is impossible to retrieve the virtual value of each house, as real estate supply is not at all in adequation with demand.
Here we have the real estate crash.

Now that Banks/Assurances can't get their money back, they can't payback to each other, while knowing each other can't pay back them. The system can be totally blocked, whatever bailout is "injected" by FED or ECB.

Shipping thousands tons of funny stuff from China requires a lot of money... which can be translated as a lot of credits. As cheap credits are things of the past, they can't keep the shipping going on.
This is huge. We actually live on stocks.

[pup55]

JIT on the other hand is a cause of some of the volatility and some of the amplification of the pricing swings.

I was involved for awhile with a 12,000 mile (halfway around the world) supply chain for a popular commodity. We were having a lot of problems for awhile because the available spots on these container ships were booked in advance by exporters that wanted to get their cheap crap from Asia to the US.

I would imagine that temporarily, the current situation will be a big opportunity for people that still have a supply chain like this. There will be more available spaces, the shipping rates will be cheaper because the owners of these freighters will be delighted to fill up their spots rather than send their ships half loaded, and also (important) there will be less chaos at the ports. In other words, there will be available capacity in the shipping business, and the rates will be low.

In the long run, though, people will start scrapping out these ships, capacity will get reduced to the point where they can make money again, and the situation will get back to some equilibrium.

Once it gets over here to the port, the rail or trucking systems will have to get the product to where you need it. In the trucking world right now, the big common carriers (like JB Hunt and YBF) are doing fine. They spent a lot of effort passing fuel cost increases to their customers in the form of "temporary" fuel surcharges, in both cases they recently announced increases in hauling revenues, and they can use their efficiency advantages to continue to squeeze out the smaller and independent truck lines, who are struggling, as they have been for decades.


YRC

JB Hunt

The so-called "economic crisis" will not affect them as badly since they are leasing a lot of the vehicles in their fleets, and if the going gets tough, all they need to do is walk away and let GE Capital hold the bag. So, they can pretty easily decrease their capacity if the situation turns around. It might be, however, that the effects have not hit them yet. We will see. But, these businesses are a lot different from what they were a few years ago, since they reduced their capital requirements by leasing their fleets (they don't own their trucks anymore).

That gets us all the way to the retail level. We know that the Wally mart and Target are both OK at the moment because they are the most efficient and lowest cost suppliers.

Wally mart was up about 5% in September (it will be interesting to see what happens after October and through the christmas season). Target is up about 2.5% in September.

Wally Mart

Target

Obviously the ramifications of all of the October meltdown have not been felt in the numbers yet, but you have to say that if you are really efficient, and can provide your stuff to the customers at the lowest price possible, you could, as of October 1, still make money. If you are inefficient in doing this, you will eventually lose. You might or might not lose anyway, depending on what happens from here on out with stuff like the credit card issues, and mass layoffs.

I think probably it's going to be an even tougher situation for the little guys and the people that cannot take advantage of what is happening right now. Example: Delphi Automotive, "Linens and Things", Bennigans. We still have not seen the layoffs work their way back through the system to the big retailers.

I think we are in mid-crisis on this and the effects will not be measurable for another couple of months, unless some other shoe drops between now and then.

[cube]

Every decision is a trade off. You sacrifice A to receive B.
It's been said many times that JIT is more "efficient".
I totally disagree.
A more accurate statement would be JIT is more "Time efficient" at the expense of being "Energy efficiency". --> sacrifice A to receive B

Here's an example I once asked a truck driver, "how fast can you go from California to New York?"
The driver responded, "If you have 2 drivers: one drives while the other sleeps you can go (coast to coast) 3,000 miles in 2.5 days!...or maybe 3 days if you don't want to push it too hard."
I think that's amazing.

How long would a "hub and spoke" system take:
Truck --> Load onto a train --> stop at each railroad station along the way to load/unload extra cargo --> unload onto a truck --> finish journey on truck
1 week or maybe 2 weeks?...I'm guessing here.
However that's not also including time wasted by having inventory sit in a warehouse.

The advantage of JIT is speed, speed, and more speed.
There is no time wasted sitting in a warehouse. There is no warehouse.
The truck literally becomes a "warehouse on wheels" as what they like to call it.
I may be shooting from the hip here but without JIT the entire supply chain would probably take quadruple the amount of time to transport something from pt A to pt B.

What would the world look like?
Anything that gets rotten in 2 weeks or basically anything that's highly perishable would become a luxury.
Once JIT collapses, I expect people to be eating a lot less fresh fruits.

[Snowrunner]

The advantage of JIT is speed, speed, and more speed.
There is no time wasted sitting in a warehouse. There is no warehouse.
The truck literally becomes a "warehouse on wheels" as what they like to call it.
I may be shooting from the hip here but without JIT the entire supply chain would probably take quadruple the amount of time to transport something from pt A to pt B.

JIT isn't so much about time efficiency, it's about money efficiency.

The reason why it is so popular is because it allows you to keep stocks low, reduce warehouse space etc. Which in turn "frees up money".

All of this comes at a price though of less redundancy. 30 years ago if a ship was late or a truck broke down nothing really bad happened, there was always spares on hand.

These days? Some plants are so thightly scheduled that if the train with the bumpers is five minutes late it causes a ripple effect down the stream which could lead to shutdowns.

In a non-JIT future, people will still eat fresh fruit, I remember having Mandarins and Oranges in winter, when they were in season, and cherries etc. in the summer.

So yeah, there won't be anymore "I feel like having strawberries" in the middle of January and being able to just buy them at the supermarket, but it won't be the end of fresh fruits.

What concerns me way more is an "external event" that would bring the current JIT system to a grinding halt without any prior warning, e.g. no more oil / gas etc. This way within two days most people would be reduced to eating whatever they have in their non-existant pantry.

[patience]

We take many things for granted regarding our JIT paradigm. One that bothers me is the money, skills, and available parts for maintenance of our systems. The failure of a comparatively small part can shut down a truck, or a crucial plant operation. Then, you can easily get to "for lack of a horseshoe nail, a horse was lost, for lack of a horse, a battle was lost, for lack of a victory, a kingdom was lost."

As our systems degrade from lack of money, so will the reliability we are accustomed to having. It's the sort of thing I read about recently, from a couple math experts who predict grave consequences to our economies due to over complexity and lack of redundancy. Thus, JIT spells big trouble.

[JJ]

someone emailed me this:

http://www.businessspectator.com.au/bs. ... 6src%3Dsph


"......Which is why global shipping has collapsed: it is the harbinger of the end of the era of trade, in which third-world labour costs kept first world inflation down and allowed interest rates to fall and stay low and debt to be increased to an historic degree....."



http://tinyurl.com/6q5eqg

Commentary
7:22 AM, 31 Oct 2008

Alan Kohler
The end of deflationary trade
The global shipping crash continues to get worse and this morning’s GDP data shows the US recession is already deeper than 2001 and probably 1990-91 as well.

Meanwhile the International Monetary Fund seems determined to make the whole thing worse by imposing the most ruinous strictures on supplicant nations.

Yesterday the Baltic Dry freight rate index fell below 1000 for the first time in six years and last night it fell another 40 points to 885. In June the index was 11,900, so it has fallen 93 per cent in a few months – a crash far worse than anything ever seen in the stockmarket.

[oiless]

JIT tends to be a pain.
I maintain industrial machinery in a plant for a living and we have to keep a large selection of spares because you cannot count on being able to get spares in any reasonable length of time if something breaks. The reason for that is that the suppliers that carry the spare parts use JIT so that they don't have to carry inventory.

For instance I recently had to replace 3 V-belts, these ones:
CC120
I replaced them with ones I had in stock. Then I called my supplier and ordered three more for my stock. They were able to find two in Canada, one in Alberta, one in Ontario. The third had to come from the states. JIT my butt.

[cube]

We take many things for granted regarding our JIT paradigm. One that bothers me is the money, skills, and available parts for maintenance of our systems. The failure of a comparatively small part can shut down a truck, or a crucial plant operation. Then, you can easily get to "for lack of a horseshoe nail, a horse was lost, for lack of a horse, a battle was lost, for lack of a victory, a kingdom was lost."

As our systems degrade from lack of money, so will the reliability we are accustomed to having. It's the sort of thing I read about recently, from a couple math experts who predict grave consequences to our economies due to over complexity and lack of redundancy. Thus, JIT spells big trouble.

I used to work at a food warehouse in California.
I remember one truck driver who was upset that the Lumpers (people who load / unload truck trailers) were "late".
Basically the plan was to deliver a load of strawberries from California to New York. The truck driver needed to leave the warehouse early so he could beat afternoon rush hour traffic. The Lumpers were "late" by 2 hours.
That was enough to throw a monkey wrench into his plans and the entire operation had to be called off. The truck driver simply just parked his truck overnight and waited for his dispatcher to give him another load the next day.
That's how "tight" the system is.

We live in a world where if 1 person screws up in California then 6 people in New York have to rearrange their plans.
Sounds like an example of: lose a horseshoe --> lose a war, over optimization, cascading system failure......makes great doomer porn.

[Snowrunner]

JIT tends to be a pain.
I maintain industrial machinery in a plant for a living and we have to keep a large selection of spares because you cannot count on being able to get spares in any reasonable length of time if something breaks. The reason for that is that the suppliers that carry the spare parts use JIT so that they don't have to carry inventory.

For instance I recently had to replace 3 V-belts, these ones:
CC120
I replaced them with ones I had in stock. Then I called my supplier and ordered three more for my stock. They were able to find two in Canada, one in Alberta, one in Ontario. The third had to come from the states. JIT my butt.

You make the mistake of thinking that JIT is for you, the customer and that it allows you to get everything you want and need it.

Not so. JIT is for the seller / user who does not need to have any inventory and capital outlay because he gets the parts (he has planned for for a while) just when he needs it.

[oiless]

You make the mistake of thinking that JIT is for you, the customer and that it allows you to get everything you want and need it.

Not at all, I am not stupid, I know what the game is.
Just an anecdotal story of how JIT doesn't work if you actually need to get something done.

The last time I had anything to do with them, which was some years ago, the Canadian military was moving toward a JIT supply model. I thought it was possibly the stupidest idea I'd ever heard.

[galacticsurfer]

All this scientific management stuff started with time and Motion studies to make peoplelike robots on Ford assemlby lines and went through to JIT and Statistical Quality Management and ended with GEs Six Sigma programme.

http://en.wikipedia.org/wiki/Six_Sigma

One Sigma = 690,000 DPMO = 31% efficiency
Two Sigma = 308,000 DPMO = 69.2% efficiency
Three Sigma = 66,800 DPMO = 93.32% efficiency
Four Sigma = 6,210 DPMO = 99.379% efficiency
Five Sigma = 230 DPMO = 99.977% efficiency
Six Sigma = 3.4 DPMO = 99.9997% efficiency

Taleeb was talking exactly about this type of BS. The more efficient a system gets, the less redundancies, the more likely it is to collapse. So we see that the whole management ideas from assembly lines to everything else based on linear math and try to squeeze everything out of the system using a simplistic mathematical model. They do the same on Wall Street which is why we are where we are. I bet the computers work great on this stuff. Maybe thy should get Taleb and Mandelbrot managing the economy with some new economic and computer models that incorporate fractal structures and redundancies and a few unexpected occurrences more than once in a billion gazillion years.

Anyway I do import/export from China to Europe mostly so I know that from first order to delivery it can take several months. Suppose the Chinese are missing a part from, say Japan, and then we have problems with bank payment, and then the ship gets slowed down by a storm and the end customer has his assembly line waiting for us? What does this incredibly efficient global network really help anybody then? It just broke.

[Snowrunner]

You make the mistake of thinking that JIT is for you, the customer and that it allows you to get everything you want and need it.

Not at all, I am not stupid, I know what the game is.
Just an anecdotal story of how JIT doesn't work if you actually need to get something done.

It works if you're part of the JIT chain As a customer you are "random" and as such not part of said chain

The last time I had anything to do with them, which was some years ago, the Canadian military was moving toward a JIT supply model. I thought it was possibly the stupidest idea I'd ever heard.

Oh, you mean like the US Army outsourcing all the support functions?

Hey, all for efficiency darn any redundancy.

[oiless]

Oh, you mean like the US Army outsourcing all the support functions?

Hey, all for efficiency darn any redundancy.

No I was thinking more in line of not warehousing any spares. They had some heavy trucks, designed by Steyr of Austria and built under license by UTDC in Kingston, Ontario, if I remember right. It was taking literally months to get some parts for them.