‘We’re asking a lot of these people’: how fragile is the global supply chain?

<span>A warehouse at Suning's East China Logistics Center in Nanjing, China, on 12 June 2024.</span><span>Photograph: Costfoto/NurPhoto/REX/Shutterstock</span>
A warehouse at Suning's East China Logistics Center in Nanjing, China, on 12 June 2024.Photograph: Costfoto/NurPhoto/REX/Shutterstock

We seem to live in a time of magic, when a slight movement of our fingers can get us anything we ever wanted on our doorstep. A toaster? Yours tomorrow. Cat food? It will be here by Thursday. The process from click to door is so easy, it doesn’t require a second thought.

In his book, How the World Ran Out of Everything, New York Times journalist Peter Goodman is out to change that. With the amount of exploitation in the supply chain, the ease of such transactions is not magic – it’s more magical thinking.

“I hope that readers will never again look at a package landing on their doorstep in the same way,” Goodman told the Guardian. “I hope that they will give a thought to all the people whose unseen labor went into bringing that things to their door and realize that we’re asking a lot of those people.”

Related: Globalisation, though not dead, is fading: ‘glocalisation’ is becoming the new mantra | Larry Elliott

Welcome to the story of the global supply chain. It was nearly invisible until March 2020, when Americans faced bare store shelves for the first time in modern history. The pandemic’s peak years contained a seemingly endless cycle of shortages. First it was toilet paper, then it was flour. Puzzles were in short supply as were office chairs. People were trying to build their new at-home lives and were often faced with “not in stock” messages and bare shelves.

Many of these shortages could have been prevented if companies had properly stocked inventories. And some were just lies. “A lot of these shortages were fake. They’re manipulated shortages. Because when things are short in supply, the price goes up. You don’t need a PhD in economics to understand that,” said Goodman, a longtime global economics reporter.

While it may seem like the supply chain breakdown has come and gone, think again. In many ways, the US’s economy is still reckoning with the impacts of the supply chain breakdown, especially its impact on inflation. Goodman unravels the knots in the supply chain by telling the story of a single 40ft shipping container and its journey across the world in 2021.

The container belonged to Hagan Walker, the founder of Glo, a two-employee company that sells plastic cubes that light up and turn into figurines when dunked in water. The container held the biggest order Glo had purchased to date after a breakthrough contract with Sesame Street. The order for the cubes was placed in December 2020, supposedly plenty of time before Christmas 2021.

But the container got caught in what Goodman deems the “Great Supply Chain Disruption”, when bottlenecks were seen at practically every step of the supply chain.

Goodman takes the reader from the factory in China where the cubes were produced to the hulking ship carrying the container that sat in a clog for weeks at the Port of Long Beach. Once it was unloaded onto the dock on 25 October 2021, more than 10 months after Walker had ordered it, Walker struggled to find an available truck driver to carry the container from Long Beach to Mississippi. The trucking companies were claiming there was a driver shortage while ignoring the high turnover rate in the industry.

It’s a harrowing journey, one that brings to mind the images of empty Chinese factories and giant shipping containers floating in the Pacific that were all over the news during the pandemic.

Though – spoiler alert – Walker’s container makes it in time for Christmas 2021, Goodman makes clear that things didn’t have to turn out this way. The supply chain was purposely built as a house of cards without resilience, what has been and will be a huge cost to the global economy should it unravel again.

“By early 2023, the worst disruptions of the pandemic years had subsided. The floating traffic jams had all but disappeared, shipping rates had plunged and product shortages had eased. Yet the same foundational perils remained, awaiting an inevitable future disturbance,” Goodman writes.

If the supply chain is a house of cards, at its base are two forces: a reliance on Chinese manufacturing and the “Just in Time” manufacturing model, which most businesses have adopted.

In the last 20th century, business execs in the west, especially those in the US, pushed for China to become the global manufacturing hub. They argued it would bring the morals of democracy to a country marred by a Communist uprising, but really, they had a lot to gain. With a large workforce and virtually no worker protections, labor in China was cheap. The value of China’s exports went from $272bn in 2001 to $3.5tn 20 years later.

While it may seem like US towns and workers paid a hefty price as industry left for the far east, Goodman emphasizes that there have been big winners in the US. Instead of factory towns, they’re in corporate board rooms.

Meanwhile, companies were trying to cut costs even more by adopting “Just in Time” manufacturing, also known as lean manufacturing – the practice of having just enough inventory to meet current demand. Lean cuts down on warehouse costs for companies, but increases the risk of shortages when, say, a global pandemic strikes.

Goodman traces Just in Time’s conception in Japan at a Toyato plant to being prosthelytized by US consultants as a way to maximize profits. Lean became the way that automakers, electronics producers, pharmaceutical companies, meatpackers and even hospitals began to operate.

The house of cards topples when the virus started to spread in Wuhan, a city in Hubei province, a particularly important link in the supply chain. Hubei is a direct supplier to 51,000 companies worldwide and supplied raw materials to around 5m businesses. Many workers moved back to their hometowns to be closer with family, and factories struggled to find workers.

Meanwhile, as the virus came to the US, business executives assumed consumer spending would drop as the virus spread. Lean inventories became leaner. Car manufacturers put in orders for less microchips, ocean carriers cancelled scheduled services along their busiest routes, Apple cut down orders for new parts, apparel brands ordered less from their factories in Asia.

But as people started adjusting to the pandemic, spending roared back. Instead of spending on vacations or restaurants, people were spending on TVs, kitchenware, basketball hoops, furniture for a home office.

When companies put in their orders to restock their inventories, they put in larger orders to buff up their inventory. Chinese manufacturers struggled to keep up with demand.

“‘Just in Time’ supply chains are built mostly for investor interest,” Goodman said. “Every company will tell you it’s all about consumer choice and low prices, and for companies that are involved in industries with real competition, that’s true. But there are a lot of industries that don’t have real competition.”

If a business, like Glo, was able to get their products produced in China, getting it across the ocean was nearly impossible.

Shipping costs had skyrocketed to almost 10 times their pre-pandemic prices, especially for smaller businesses that did not have favorable agreements with shipping conglomerates. Corporations like Amazon and Walmart could absorb the extra shipping costs. But smaller business owners like Walker were left with few options left.

Goodman writes of how the shipping industry, over the last few decades after deregulation, has prioritized shipping for larger companies, with “megaships” that carry massive amounts of goods from China to the US.

The shipping industry – in which there are only a small handful of major players – benefited heavily from increased prices during the pandemic, raking in $300bn in profits in 2021, up from $200bn the year before.

While the chaos around the shipping industry started at the factories in China, “the people who actually had power over the ports were benefiting from the continued chaos, challenging their motivation to ease the congestion,” Goodman writes.

The pandemic provided the perfect opportunity for conglomerates to tout excuses that could translate to profit. US deregulation allowed companies massive control over the supply of a product or service, in the case of shipping, allowing them vast control over the prices they charge to their consumers.

And the extra profits were not passed onto workers. In fact, workers are often seen as redundant in the “Just in Time” models. The less, the better.

As “Just in Time” has taken over, workers along the supply chain have seen cuts to job security and benefits. Goodman writes of truck drivers, dockworkers and railroad workers who have little power compared to the huge conglomerates that control their livelihood.

Goodman tells the story of Tin Aye, a refugee from Myanmar who was settled in Denver with her daughter in 2012.

Aye had been working at a meatpacking plant operated by JBS, the world’s largest meat manufacturer, when the virus started spreading in March 2020. Aye got Covid in April 2020, one of 300 workers who contracted the virus in the first four months of the pandemic. She would ultimately be one of at least five who died from Covid complications.

The Trump administration had deemed slaughterhouse workers like Aye as essential workers at the behest of the meat industry, who claimed that the meat section at many grocery stores were poorly stocked because of shortages.

“It is impossible to keep our grocery stores stocked if our plants are not running,” Smithfield, one of the country’s major meat suppliers, said in a statement at the time.

But instead of stocking grocery shelves, the company decided to expand their exports of pork to China while forcing workers to continue showing up at meatpacking plants. US meatpackers had 622m lbs of frozen pork in their inventories at the start of the pandemic.

“She was essentially killed for the sake of boosting profit margins for JBS,” Goodman said. “This woman and other slaughterhouse workers died not so the rest of us can eat, or even eat cheaper food, but so these corporate executives could pull in fatter margins.”

Goodman believes the pandemic has taught some lessons to corporations about lean manufacturing and a reliance on China. Some companies have started manufacturing in other countries in Asia, and in Mexico, and workers have gotten more leverage as they were deemed less expendable during the Great Supply Chain Disruption.

But only time will tell whether these changes will be permanent, and Goodman doesn’t seem optimistic. The power to make changes largely lies with shareholders and lawmakers who don’t have the incentive to drastically change the system.

“We cannot predict the details or timing of the next shock to the system, but we know it will come. And when it does, we are likely to be here again, watching the supply chain buckle, our productive capacities falling prey to our failure to ensure that people doing the work are motivated by the ultimate incentive,” Goodman writes. “A fair deal.”