Not exactly what Bill Joel was singing about, but this week we had some interesting trouble in the Suez Canal with a boat being stuck there for days.
According to a Forbes article here, the crisis is way overblown. While I agree that it is overblown in it’s hype and the disruption to the global supply chain, I have beef with the math presented.
Using the estimated daily disruption of 9.6billion dollars and the annual European-China Trade 2020 quantity of 170billion – that comes out to be 5.6%. The author uses the example of $100 and references the 0.08 cents which actually would be 0.08%. Correcting his math, if he wants to use the annual 170 billion as an annual amount, the easy math conversion is actually losing, drumroll please…
$5.60 / day. So if you make $100 in 1 year, and you lose $5.60 / day for a few days, it might not feel like the worst. But let’s scale up to meaningful numbers. If your annual salary is $50,000, that’s a loss of $2,800 a day. If your annual salary is $75,000, that loss is now $4,200. $100k salary? $5,600.
Does that feel like it’s no big deal anymore? Uh… heads are going to roll. People are going to lose their jobs, take pay cuts, it’s a big deal.
It’s just not a big deal for the rest of the world. I agree that the ramifications to the global supply chain is a drop in the bucket.
Having worked in logistics and manufacturing for almost two decades, I’ve had enough exposure and knowledge to know that the end customer is largely shielded from disruptions and cost increases to the supply chain.
There are a LOT of steps and in each link of the supply chain, suppliers will always try to pass on cost increases to the buyer, and the buyer will always try to force it back on the supplier. Most of the time, someone gives in, in the chain and the cost is absorbed by one of the companies. That is why the end customer rarely feels it. Say what you will about “corporate greed” but the reasons companies can stay in business is having enough margins to absorb disruptions and business downturns.
Most people don’t understand this because they cannot even manage their own personal finances and are stuck in debt. That’s a different discussion for another time.
The point is, is this a big deal? Yes, to some. No, to most.
But it makes great news. And memes.