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The Coming Storm
I tend to do what I do best, procrastinate. Well, to feel better about myself, I like to think I am prioritizing. Either way, I have felt compelled to write about this supply chain crisis since White House Press Secretary Jen Psaki claimed President Joe Biden saved Christmas on Dec. 22. Nothing gets my blood boiling more than utter lies thrown in my face. How can someone say something so stupid, and how can so many people actually believe it? We have all seen the empty shelves for randomly illogical items, starting with toilet paper and now cat food.
With a very small engineering firm, there is a larger supply chain crisis that will be coming to a head in three to six months. We can’t get parts. I could go off on tangents, but let’s focus on just one major device. A PLC, or programmable logic controller, is a computer that runs actual stuff. Not things like a washer and dryer but how about the water that comes into your house, the water that leaves, the drawbridge that needs to go up, the MRI you desperately need. Almost everything you touch that is manmade uses one of these controllers at some point in the process.
To fulfill orders, my competition and I have been looking for other sources and substituting wherever we can. This is from sketchy suppliers to used parts on eBay. Now these people jacked the price up tenfold, and they are running out. New bids, which are mostly municipal, are getting a huge surcharge because we have no idea what something is going to cost or even if we can fulfill it. Many parts now have a six-month lead time. That means we won’t deliver, but we will be glad to take your money.
My medical controls experience is limited to a heart catheter surgical kit. It isn’t much, but I can’t change a fuse on the machine without a trail of paperwork, and don’t even try substituting anything. Major production companies will start slowing or shutting down because they are unable to get spare parts.
In the wastewater industry, most communities have 20-year-old equipment and older. That’s like 105 human years. Should one piece of this system fail, they may find replacement parts are just not available. When this happens, all you’ll hear on the news is there was a water main break. Here is an insider secret. It is almost never a water main break. It’s usually someone like me who hit the wrong key.
Other machines and systems are not so dramatic. But the problems are starting to add up and will soon hurt you in ways you will never know. Perhaps they are a product of these random shortages we are seeing. Toilet paper and cat food use the same controller. The terrible thing is we have a lot of work pending and are about to lay off workers that have nothing to do because we just can’t get parts. I have never seen anything like this, so I can’t even speculate.
Published in General
At some point, hopefully the wider profit margins and lack of availability elsewhere will motivate some companies to bring back/restart production of some of these items in the US. Some older facilities could be re-opened/re-purposed since a lot of the chips involved are earlier/simpler designs that don’t require the very latest production technology.
It’s already started.
Exclusive: Intel Reveals Plans for Massive New Ohio Factory, Fighting the Chip Shortage Stateside
One of the companies I represent is an aluminum foundry in Quebec. They really are a fine, near state of the art company. They have been crippled by the government, in a series of Lemony Snicket cascading unfortunate events. It started last Summer with Covid tracing shutdowns. Very few were sick, but their mandatory phone tracing apps, caused rolling shutdowns in production. It started in third shift foundry, then second shift machining, and subsequently first shift finishing, and round and round. Each week, another department would be shut down for 2 weeks, because “someone” either had covid or was in proximity to someone who was. The government paid for people to stay home.
The company became progressively more and more backed up in production and deliveries. Then the OhMyGawd variant showed up. Long term immigrant workers with key production positions left Canada over scheduled holiday shutdowns to visit with family in their home countries, which they had not seen in three years. While away, rules changed and they were banned from reentering Canada. The rest of the work force has been calling in either sick, or under strict contact tracing rules at the rate of 50%. The factory frequently has days where they can not splice together a full team to run any part of their operations. If workers do not comply with the quarantine rules, they are subject to arrest, and the company subject to massive fines. You must quarantine if you either test positive or if you have been “traced” to someone who was positive.
I send out blind emails to my customers, telling them, no production this week, no promise for when production will resume. Pray and hope. That is all I suggest. One of the owners of the foundry tells me, he has guys that want to work, but are banned from showing up because of contact tracing. He has many other seasoned workers who just gave up and retired early. He has other workers who quit and go other places for a dollar more per hour, because there is a chronic worker shortage. When he hires new guys, for 2 dollars more, they have no experience and suck up other production staff getting trained. inflation? 10% pffft. if we escape with 50% inflation I will consider it a blessing.
If you wanted to bankrupt a company, would you do anything differently?
FJB
oooh, and FJT too. black face jerk
I will be retired by the time chip companies come back to the US. Old chip machines are in the closet next to the tube machines.
There is no extra profit for us because we pump up bids and prices rise faster so we still loose. It is near the point now that cost doesn’t matter. When a million dollar machine is down if I can get a $75 part for $900 I’ll pay it. It’s not all about backed up cargo containers and lack of truck drivers.
Taxpayers (us) and consumers (us) are going to be the ones paying the bill.
Sure they can build new facilities if they want, but I suspect that most of the chips involved could be made just fine in locations that have been “retired” because they’re not quite new enough to make i9 CPUs etc.
I’m in the systems integration business myself, but mostly software, fortunately. Interestingly, my book value is noticably rising due to the value of the variety of PLC hardware in my lab.
Yeah, the Toyota Production System is breaking down all over, isn’t it? So far, our factory is doing pretty well, but there is a “phenolic sleeve” that used to have a 4-week lead time, but now has a 16-week lead time. Shortage of the plastic itself. Then there’s the seal, whose price has increased by a factor of 10. We are actually benefiting from raw material orders that were pushed out from 2020 when the aerospace industry collapsed-our supplier kept the stock, and we can take delivery now. Everyone is happy.
The big shortage is workers. Machinists who can run a CNC metal-working machine are in short supply. My one-month temp job is now at 6 months with no end in sight. I’m not complaining, either!
Just got done this afternoon commissioning one on a paint booth. I’m able to use all manner of “sketchy” (I.e., not the big names) sources, so I’ve been able to fulfill, but you have to deal with half the usual inventory choices, and of course we’re nowhere near as mission-critical as some of these other applications. Still, business is on fire. It’s eerie.
That would depend on the business climate where the old fabs were. How much nonsense would Intel have to go through to open up old facilities?
In most places, probably not much. In hellholes like the People’s Republic of California, I’ve already read stories about companies that bought old facilities from Intel and others because it was impossible to build a new one under current regulations.
Here’s what frosts me, FJB…
What you have just written is a rock-solid news story. A perfect “Profile of A Company In Crisis” type of thing. The type of thing an honest press would be all over. But we are stuck with network news types and big dailies who have decided their civic duty is to act as government propaganda organs. So your story never gets told. G-d help us.
Media delenda est.
Yikes!!
Very interesting stories brought to light here. To my mind, this goes back to the original catastrophic decisions to shut down the country and the economy. The arrogance of our worldwide governmental and business leaders showed in thinking they could “Reset” and “Build Back Better!” without even knowing of or factoring in the hundreds of thousands, millions of businesses, trades, manufacturers… acting as though it would be like resetting a circuit breaker.
This whole thing has given the Soviet Central Planners competition for the most idiotic economic and business theory in history.
Just be glad that Michael Osterholm didn’t get his way. He’s one of Biden’s covid advisors now, but his ideas for shutdowns would make the current crew look like Gadsen Flag wavers in comparison. He had to back off some of his ideas after joining the Biden team. I don’t watch the news so wouldn’t have known about him except for a couple of people who listened to him far too much.
Nobody is going to build a fab where there are earthquakes. Cheap land, cheap energy, easy permits, and no natural disasters. There is a reason fabs are built in Arizona and Texas. Ohio also qualifies if they can tornado proof the building. Also, old buildings are not suitable for modern fab equipment. The vast majority of the cost (90%) in a $20B fab is the equipment. I read they will have two $10B fabs to start. One tool (lithography) costs $340M. Each fab might need two. cha-ching!
Yes, and those $10B fabs are for producing Intel’s LATEST CUTTING-EDGE CHIPS. Not quite what is needed for producing PLC chips from designs that might have been around for years or even decades.
Back in the 1980s when I was doing consulting for Intel, the cost of building a fab facility was $1,000+ per sqft (not including land or equipment, of course). I can’t imagine what that building cost would be at today’s costs.
Back in the ’90s I spent a few years worried about a breakdown in society. I trawled around various survivalist web sites, bought some supplies (MREs and such), stockpiled some ammo, etc.
What worried me wasn’t that the Clinton administration would declare martial law at the first opportunity, or that the Russians or Chinese were going to invade, or any of the usual things that get the paranoid fringe spun up. It was that it occurred to me how reliant our society is on everything “working”. So many interdependent pieces, parts, players — what if a few key things went wrong and caused a failure cascade?
By the time Y2K arrived, I was pretty confident that everything would be OK, but there was still this nagging fear at the back of my mind. After a few months of tension following 9/11, I took to heart the old saying that, “There’s a lot of ruin in a county,” and moved on. I had a new daughter and more immediate concerns to keep me occupied.
Now I’m starting to get that old twitchy feeling again. It seems like there’s more interdependence than ever. Systems seem more tightly coupled, and cracks are starting to form.
And I don’t know where my ammo can of 20ga. buckshot has gotten to. I have the 12ga, 308, 357, and 9mm, but still. It’s gotta be around here somewhere. Maybe in the attic…
I am having supply problems also. My supplier is having workforce issues and can’t run their production lines because on any given day about 30% of employees are out.
This means we can’t get chocolate. With two big sales events coming we are scrambling to find alternet sorses. Like distributors that may still have a few hundred pounds. So far we have cleaned out two! We have enough for Valentines, but I sure hope they can turn it around in time for Easter.
I sell construction tools – and parts for those tools. I get about six calls per day; for at least four of those calls I say ; availability is about two weeks. Same as the two weeks to flatten the curve …
We are all running out of our alternate sources. These sources are naturally built into our system to protect against supply issues that always come up. It’s not sustainable forever.
I visited a factory yesterday and had to take a covid test just to get past the front desk. That’s new. How many people of that 30% do you think are actually sick? I’m not saying they are not sick. I just wonder how many operators would take advantage of the sick time available. It doesn’t look good for your Easter chocolate.
In my layperson opinion this aspect is what is unsustainable (to use a trendy word) with a virus that is rapidly becoming ubiquitous and that has such a low rate of serious consequences. The cascading levels of tracing that take out people who might have had contact with the virus multiplies the effect of an infection to remove from society a number of people who are most probably healthy.
The multiplier effect of taking so many healthy people out of society leaves that society constantly stumbling. A stumbling society that fails to produce the goods and services on which the society has come to rely. Which as outlined in the original post creates risks. Risks that include public health risks. What happens when a water treatment or a sewage treatment plant fails and can’t be repaired? When electrical power is out because a transformer can’t be replaced? Risks that may be much larger than the risks of the disease itself.
Beautifully stated. This regime of testing and tracing is madness. We should be testing no one. No one except sick people who need to be hospitalized, so we can decide whether to give them sotrovimab for Wu flu or oseltamivir (Tamiflu) for the old variety.
Great post.
Great comments.
44 likes
This should be on the Main Feed.
Boy, did I pick the wrong morning to start listening to One Second After, (William Forstchen), the novel about the world after an EMP goes off over America with no warning.
By just chapter two it was already so disturbing that I had to take a break and read some Ricochet. This post is not helping.
I keep hearing that this company or that is going to “build a new factory to ramp up production of X”, so don’t worry.
I am in medium-big construction. Hotels. It takes a year to build one, with a year of civil planning and site work before that. And I don’t know how long before that to do the architectural design and line up all the permits. How is anyone going to build a factory, staff and train workers, and get production rolling in time to help any of us with the things mentioned in these comments above? A water main PLC, chocolate, all of it – we need it now.
Oh, and how exactly is this new factory going to get built? There are a million moving parts to a construction project, a thousand critical to keep moving forward. If a plumber can’t get any 2” PVC fittings, the project stops. If I can’t get something as simple as outlet boxes (and many are currently in short supply), it stops. This, across all the trades, times 100.
How is this mythical new factory going to find all the parts it needs, so it can start manufacturing just one of the scarce parts (two years from now)? And if it did somehow, who is going to transport them through the supply chain to eventually get it to me?
At least in the book (One Second After), it happens all at once – everything electronic stops. So the people all figure out quickly how screwed they are. With our current insanity, the screwing is happening subtly, and people are only now slowly starting to sense something’s wrong.
Our doom is going to happen, I fear, just like the guy going bankrupt: slowly, then all at once.
That is an absolute MUST READ. There are three books in that series. One Year After and The Final Day are the other two. The last two are only for entertainment because there are too many variables. I am not comfortable enough to discuss EMP’s at this point. It would be the end for most of us.
So excited for the first deliveries in 2028!
Maybe 2031.
No later than 2034. Probably…