Monday, 24 November 2008

Cars with nowhere to go

Today I have heard the news that there are Cars with nowhere to go in Long Beach harbor, California. Japanese ones! NYTimes.com NYTimes.com There are stories about ships all over the world stacking up in exporting countries, anchored, and not able to sail because they cannot get letters of credit for the shipments. Hong Kong was mentioned as having rows and rows of loaded but idled ships stuck there. The same goes for oil tankers, lines of them anchored even though they are full, with no buyers. There has been a screeching halt of shipping worldwide. Products are backing up in Asia. Many of you have heard about the collapse of the Baltic Dry index, a shipping index for containers. It has fallen from over 11,000 in July to around 800, in only a couple of months! I haven't yet seen anyone with any projections from here on in. So I will make some. I have some knowledge of how production lines, and 'just-in-time" stock keeping work. Most large production lines have been working on and honing just-in-time stock control for many years. The theory of just-in-time stock control is that goods arrive just before they are needed. This avoids holding large quantities of stock, thus reducing the required working capital. I have always wondered what might be the situation if a few essential components began to arrive "just-too-late'. It is obvious that the goods held on these ships are going to arrive too late. Let's take an example of building a car. We have a production line chugging along at the set speed, with all the components in the right place at the right time, and then suddenly, we run out of wheels. We can no longer roll the cars off the end of the line. The only thing we can do is to stop the line. Meanwhile, all the other components are still arriving as ordered, very soon all storage space is full, and there is no way to unload the trucks. So, like the boats, the trucks begin to line up. Now, there are insufficient trucks to carry other goods, so other factories begin to back-up their facilities until there is no longer anywhere for storage, and no alternative but to cease production. Within just two or three days, almost every factory will be at a standstill, with no foreseeable chance of reopening. And this includes factories with a healthy order book and cash customers. Many people are now spending the last money they will earn for a very long time. As soon as imported food is in short supply in the supermarkets, there will be an increased rate of purchasing of local fresh produce. But there is no way of speeding up growing times, so fresh produce will soon be in short supply, even if transport is available,. People will begin to go hungry. Civil disturbance and riots will break out. Martial law will be initiated, world wide. Cities will become filthy and disease ridden, Many people will die. Projected timescale - before Christmas - world wide!!! Do you get it yet? Best regards The ex-city dweller Now what do we do from here?
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