FTC Orders Major Retailers to Document Supply Chain Disruptions

[Convicted One]

Don't the contracts include provisions for surcharges? Unforseen circumstances, fuel cost hikes,...things of that nature?

[greyhounds]

If any of you are really interested enough, I’ll suggest and recommend the book “Universal Economics” by Armen A. Alchain and William R. Allen. It’s available as an eTextbook from Amazon for $8.99 if you download it to their free Kindle app.

 

It’s pretty readable for an economics textbook.  It explains the whole pricing thing very well.

 

Or you can listen to the rants and raves of Convicted One.

 

Or you can just ignore the whole thing.

[Electroliner 1935]

What? You expect.. posters to be rational? Thank goodness most are but those few.....

[Convicted One]

A very real hazard to textbook explanations of anything, is that most assume that everyone is going to play by the rules.

So, you absorb your indoctrination with a priority geared towards pleasing your professors. You get your degree. And then, once out in the wild, are  blindsided by the stark reality that many feel no compulsion to play by the  rules.

[diningcar]

[quote user="Convicted One"]So, you absorb your indoctrination with a priority geared towards pleasing your professors. You get your degree. And then, once out in the wild, are  blindsided by the stark reality that many feel no compulsion to play by the  rules.

And no one has common sense or has leaned by observing what to avoid??

[Convicted One]

diningcar

And no one has common sense or has leaned by observing what to avo

You know what they say, trying to separate a good ol' boy from his dogma can be a stubborn disappointment.

[charlie hebdo]

greyhounds

If any of you are really interested enough, I’ll suggest and recommend the book “Universal Economics” by Armen A. Alchain and William R. Allen. It’s available as an eTextbook from Amazon for $8.99 if you download it to their free Kindle app.

 

It’s pretty readable for an economics textbook.  It explains the whole pricing thing very well.

 

Or you can listen to the rants and raves of Convicted One.

 

Or you can just ignore the whole thing.

 

I concur wholeheartedly. The anti-academic, anti-expert atmosphere in some places is palpable. Return to the "Dark Ages" or more recently those crazy days of Mao's "Great Cultural Revolution"?

[Euclid]

MidlandMike

 

 

Euclid

 

 

Convicted One

 

 

Euclid

I don't believe container shipment has inflated over the norm by ten times.

 

 

I thought Murphy Siding said the cost to send a container full of doors across the ocean went up to like $20,000 from previously  $1,500-$2,000?  I didn't write the figure down at the time, but that's about what I thought he was saying, so when Midland Mike made a similar claim, it appeared to "track" with what I thought others were claiming.

 

 

 

 

I have seen that claim reported in many different sources.  It may or may not be true.  I have no way to verify it to be true or false.  But I choose to have the opinion that it is not true.  Others are welcome to believe whatever they want, but until they prove it, it is only an opinion.    

 

To me, it seems improbable because it is a 1000% price increase seemingly within a very short period of time.  That does not make sense to me.  I understand that a 1000% increase on shipping price does not mean there will be a 1000% increase on product price to cover the shipping increase. 

 

But shipping is likely to be a very large component of product cost, and a 1000% increase in shipping seems like it would trigger massive public reaction in the business community as well as the consumer market for the goods affected.  The lack of that reaction makes me suspicious of the claim. 

 

Also, it does not make sense that the shipping industry would suddenly launch a 1000% price increase.  Typically a business that contemplates a price increase does not want to draw unnecessary attention to it, so they move forward with measure and restraint.  And even in cases where a significant increase is needed because of inflation, companies are careful to move in moderation and offer clear explanations that the cause is something they have no control over.  So they strive to stay in the favor of their customers despite the hardship their cost increase will have on the customers. 

 

 

 

 

The rise in shipping costs were statistics compiled by tracking companies which shippers pay to make informed decisions.  The figures were also quoted by shippers who had to pay the rates that jumped an order of magnitude.  These are not opinions but facts.  You can dispute facts if you find conflicting facts, but you can't dispute them merely with uninformed opinion.  

Also, if you tuned into any mainstream news, you would see that there has been massive reaction by the businesses that are affected by this.  You would also find out that those businesses report that shipping costs will have varying, but sometimes much smaller effects on final sale price.

 

You are free to have the opinion that my opinion is uninformed and your opinion is pure truth, but you have not proven anything by claiming to know of statistics which verify your opinion to be true.  

 

In my opinion, the broad claim that all shipping container loads have been increased in price by ten times seems suspiciously vague and generalized because it is so broad and completely uniform.  It sounds like it has been rounded off to make it a better slogan. 

 

To me, it seems logical that prices in this supposed increase would vary widely according to the type of container, the weight of the load, the type of load cargo, the risks associated with the cargo, the type of ship, the labor cost variations, the operating cost of the ship, the route length, the location of the route, the shipping risk of the route, and the speed of the route.

 

My opinion is that this “supply chain crisis” is a smokescreen to shift the blame for inflation away from bad fiscal policy, and onto supply chain problems.  It works like this:

 

https://news.fiu.edu/2021/why-are-prices-so-high-blame-the-supply-chain-and-thats-the-reason-inflation-is-here-tostay

[greyhounds]

OK, since we’re on economics I’ll recommend two more books. I do not have an economics degree, but I have taken some graduate level econ courses. I became interested in economics because of my interest in railroads. Transportation is, after all, an economic activity.

 

1)      “Basic Economics” by Thomas Sowell. Sowell is a PhD economist who has observed that economists tend to write for other economists. He believes that they need to learn to write in a manner that non economists can readily understand. To that end he produced “Basic Economics.” It’s billed as: “Basic Economics is a citizen's guide to economics, written for those who want to understand how the economy works but have no interest in jargon or equations.”  It’s available from Amazon as an eTextbook for $25.99 and in hardcover for $22.99.

 

2)      “American Railroads: Decline and Renaissance in the Twentieth Century” by Robert E. Gallamore and John R. Meyer. This one is a favorite of mine. It’s focused on the economics of railroading. A favorite line is: “Setting a railroad rate is more of an art than a science.”  Having done rail pricing in the past, I pretty much agree with that.  Gallamore and Meyer are both PhD economists. (Meyer died with the book unfinished. Gallamore took it over and finished it.)  It’s available as an eBook from Amazon for $15.04 and in paperback for $30.00.

 

There’s a whole lot of good information available.  Written by knowledgeable people. Or, you can listen to someone rant and rave.  Or, you can not listen at all.  It's up to you.

 

    "Our only options are to be informed, uninformed, or misinformed, when making our choices on issues and candidates. Basic Economics is intended to make it easier to be informed."

 

Sowell, Thomas. Basic Economics . Basic Books. Kindle Edition.    

 

 

 

[MidlandMike]

Euclid

You are free to have the opinion that my opinion is uninformed and your opinion is pure truth, but you have not proven anything by claiming to know of statistics which verify your opinion to be true.

I only say it appears uninformed because you don't supply any references.  I didn't make a claim, I provided a reference so anyone could check it out for themselves.

Euclid

In my opinion, the broad claim that all shipping container loads have been increased in price by ten times seems suspiciously vague and generalized because it is so broad and completely uniform.  It sounds like it has been rounded off to make it a better slogan.    To me, it seems logical that prices in this supposed increase would vary widely according to the type of container, the weight of the load, the type of load cargo, the risks associated with the cargo, the type of ship, the labor cost variations, the operating cost of the ship, the route length, the location of the route, the shipping risk of the route, and the speed of the route.

What you are assuming is just your stream of consciousness.  What I reported was from shipping professionals who make their living at it.

Euclid

My opinion is that this “supply chain crisis” is a smokescreen to shift the blame for inflation away from bad fiscal policy, and onto supply chain problems.  It works like this:   https://news.fiu.edu/2021/why-are-prices-so-high-blame-the-supply-chain-and-thats-the-reason-inflation-is-here-tostay

I'm not sure why you included the reference.  It seems to reinforce the supply chain as a significant source of supply/demand inflation, he just believes it will take a longer time to moderate.

 

[Euclid]

Midland Mike:

 

I am evaluating the news and forming my best opinion based on my intuition, judgement, and common sense.  Hard facts and statistics would be wonderful if they were true, but plenty are not and there is no way to know for sure.  Nevertheless, I will certainly consider what is presented as fact. 

 

On the face of it, news sources make their money by collecting and offering the news that interests the public.  Sometimes, however, rather than honestly informing the public, they act on a motive to deceive the public by slanting the news in a way that serves some special interest.   For instance, investment companies may falsely report that the economy is booming in order to inspire confidence in investing. 

 

Today, the public opinion has become strongly polarized, so for almost every issue, there are two diametrically opposed viewpoints.  Both sides claim they are right and there is news and statistics offered that support each side. So, this is where I think intuition, wisdom, and common sense are a better indication of the truth than trusting statistics and what each side of the argument are claiming to be their supporting facts.  There is a lot to be said for the ring of truth.  In this environment, I cannot actually prove anything.

 

So I listen to both sides and make my best judgement.  Some might say it is better to just tune out.  However, I think that in these times, it is best to apply maximum scrutiny to hearing the news.  It may be hard to know what to believe, but the more people that try, the better off we all are. 

 

This polarized atmosphere has led to the popularity of so-called “Fact Checking.”  But it strikes me as being incredibly naïve to think that there is some ultimate authority that can eliminate the confusion in a polarized discourse by pronouncing a judgement that is somehow certified to be true.  And it is downright silly to expect that such a fact check pronouncement will satisfy the party that it goes against.

 

To the point about the supply chain, I would certainly look at the statistics that you provided about the ten-fold price increase on the ocean transport shipping containers.  I did not know that you actually posted it, and I thought you were actually making that claim and merely saying that it was backed up by sources.  But if you did post the source, please let me know where, and I will look at it. 

 

On page 2 of this thread, I find this comment by you.  You did not cite a source in this post.  You said this:

 

“Stimulus packages started almost 2 years ago, and yet there was no inflation at that time.  As a mater of fact some prices crashed along with demand.  The JIT/PSR supply chain reacted by scraping ships/laying off railroad crews/cutting back oil production.  Then when things got more back to normal this year, ocean shiping rates rose tenfold, railroads could not train&qualify crews fast enough, and OPEC kept production low, so the supply could not ramp up fast enough, ergo tight supply price hikes caused inflation.”

 

 

Out of curiosity, I Googled the following searches:

 

Is supply chain causing inflation?

Is fiscal policy causing inflation?

Are supply chain shipping prices rising or falling?

 

The majority of hits claimed that the supply chain was causing most to nearly all of the inflation.

 

The majority of the hits claimed that fiscal policy was not causing any inflation.

 

As to whether supply chain shipping prices were rising or falling, there seems be a roughly equal amount of hits for each diametrically opposed premise.

 

The reason I posted the reference in my preceding comment is that it is an example of people who conclude that the supply chain is causing nearly all (approx. 99%) of the inflation, and fiscal policy is causing very little (approx. 1%) of the inflation we are seeing.  Indeed, supporters of this position often seem to be saying that there is no downside to unlimited government spending.  They offer very technical but terse and incomprehensible explanations to support that view.

 

I have concluded that the supply chain is contributing to the inflation along with pandemic caused demand spike, but the majority of inflation is being caused by fiscal policy. 

 

I do not believe the supply chain worries about the idea that it is creating some inflation, but I do think the masters of fiscal policy do not want to be thought responsible for causing inflation.  I also think they want to continue spending without limit, so they do not want the premise that unlimited spending is a fundamental cause of inflation.  So they are actively shifting blame for inflation onto the supply chain.  If you read the article I posted, you can notice the continuous excitement of author who is over-anxious to create the impression that it is the supply chain that is causing inflation, and not fiscal policy.  Like a fast talking used car salesman, the author sounds disingenuous.  So that is what that reference means to me. 

[BaltACD]

Euclid

.

 

Best Euclid post ever!

[Euclid]

BaltACD

 Best Euclid post ever!

 

Thanks

[diningcar]

Very well-presented Euclid.

[MidlandMike]

MidlandMike

 

 

blue streak 1

The one inflation item that is obvious is the ocean rates per container.  Those rates have risen by how much ?  2 to 3 times base?

 

 

 

 

See the linked article graph.  The rates went from $2,000 to $20,000 per container.  Sounds like 10x to me.

https://www.bloomberg.com/news/newsletters/2021-10-11/supply-chain-latest-container-shipping-rates-are-drifting-lower

 

 

Euclid, here is the original post with the reference to shipping article.  It's from Dec 5, 9:43 PM.  It's late and I will have to reply to the rest of your post some other day.

[Convicted One]

Meanwhile, despite the  malfunction,  despite the disruption, and despite the opportunism, the port of LA expects to handle an all-time record volume of cargo:

 

https://abcnews.go.com/Business/wireStory/la-port-sees-record-2021-imports-supply-chain-81779704

[BaltACD]

Convicted One

Meanwhile, despite the  malfunction,  despite the disruption, and despite the opportunism, the port of LA expects to handle an all-time record volume of cargo: 

https://abcnews.go.com/Business/wireStory/la-port-sees-record-2021-imports-supply-chain-81779704

Overmaxed stresses generally tend to set handling records - were the overall operation to have been fluid during the period of overmax stress - the records would be even higher.

[tree68]

Euclid

This polarized atmosphere has led to the popularity of so-called “Fact Checking.”

And now we're hearing what many expected all along - the "fact checkers" were merely expressing opinions, not actually verifying the facts in question...

[Convicted One]

Well, at least some credentialed officials recognize the supply chain problem as no mirage.

 

https://abcnews.go.com/Politics/lawmakers-propose-bipartisan-committee-supply-chain-issues/story?id=81789719

[Euclid]

Convicted One

Well, at least some credentialed officials recognize the supply chain problem as no mirage.

 

https://abcnews.go.com/Politics/lawmakers-propose-bipartisan-committee-supply-chain-issues/story?id=81789719

 

The mirage is that the supply chain problem is the main cause of inflation, as these credentialed officials contend.  

[Convicted One]

BaltACD

So - if the price of a box went fron $2K to $20K - how does the increased transporation costs affect the price of the individual door.  How many door are in a box?  100?  1000? Is Murphy going to increase his selling price to 10 times the old price based only on transportation costs?

 

I was a little off in my memory. Murphy Siding's container full of doors went from $4,800 to "$20,000 headed to $30,000" according to this post. 

 https://cs.trains.com/trn/f/111/t/289874.aspx?page=1

 (probably have to copy and paste the link into your browser's address box, the forum software seems to balk at local links)

So, the $20k figure was correct, but the base figure was wrong, meaning I was wrong about the 10 fold increase.

But, if his projection "proves out" we are talking a 4 to 6 fold increase

[jeffhergert]

Here's an article from August.  

China-U.S. container shipping rates sail past $20,000 to record | Reuters

Jeff

[York1]

There will soon be the ability to handle more containers coming through the Port of New Orleans.  These new cranes are being installed this month:

[Shadow the Cats owner]

That plus the shipping companies are realizing that there's more ports than LA and Long Beach to unload in.  

[BaltACD]

Don't know that I agree with this assessment of the situation.

https://www.youtube.com/watch?v=P5fpIKDt59w

[PNWRMNM]

He pointed out something I had not thought of, which is that an export load will take longer in the US than a return empty.

He also does a credible job on the government mandated COVID shutdowns both there and here and resultant volume decline, followed by surging US demand.

He implies, but did not clearly state, that the ocean carriers do not want to spend the time in port to fill out with empty containers, thus contributing to excess of empty containers in port. He mentions not being willing to take all westbound loads, and I have seen other articles to the effect that US ag exporters are having trouble getting empty boxes. There should be a surplus of empty containers out there, but ocean carriers want to clear port ASAP, and they seem to be willing to let loads and empties sit on the dock.

In ocean carrier's defense they are wasting multiple ship days laying out of the ports so they want to get out ASAP. One hopes that as inbound delays diminish, carriers will fill out with ag exports and empty boxes. 

Mac

[Euclid]

BaltACD

Don't know that I agree with this assessment of the situation.

https://www.youtube.com/watch?v=P5fpIKDt59w

 

It sounds like we are all going to be living in shipping container houses.  His logistics analysis may be correct, but his explanation is impossible to follow.  He piles up too much information leading up to his point.  The big Legos are not helping, but the point they make should be quite easy to explain; if he would just start with the conclusion, and then fill in the supporting details behind it. 

 

But if containers are piling up here because more arrive than leave, that seems easy to understand.  So my next question is:  Why not just do what it takes to ship back the empties?  I assume that answer is that it does not pay to ship empties back if containers can be built fast enough to keep up with the loaded traffic coming to us. 

 

If that is the case, the logical and lowest cost solution is to cut up the empties here and ship the scrap steel, minus the volume bulk, back to Asia and sell it to them as scrap steel.  Otherwise they have to raise the price of shipping to cover the empty container return cost.

[tree68]

I believe it was suggested earlier in the thread to establish some outlying storage areas for empty containers.  While this would entail extra handling of said containers, at least they wouldn't be taking up the valuable real estate in the port facilities.

And if there are massive piles of empty containers, and there are people having trouble getting the empty containers they need, perhaps someone should be taking it upon themselves to get all those excess containers where they are needed...

[Euclid]

If they could reduce the bulk of empty containers, It may be cost effective to return them and save the cost of manufacturing new ones.  I mentioned cutting them up here to reduce the bulk and return them for their scrap value.  But I suspect high labor cost to cut them up would eat up the scrap value. So instead, maybe the containers could be made with their panels lock-pinned together in a way that they could be quickly collapsed into the smallest possible volume to fill a ship to its maximum weight capacity. 

Then upon return to Asia, the containers could be reset to their full volume size. 

[tree68]

Euclid

I mentioned cutting them up here to reduce the bulk and return them for their scrap value.

I have no doubt that if a crusher capable of reducing them to a few cubic feet doesn't already exist, one could easily be built...