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Whammy and Double Whammy…

A little while ago, I blogged about the very real threat of supply chain shocks primarily originating from the drama in the credit markets – Are you ready for the Supply Chain Shock?. While those risks remain, there is a lot more to think about now – It’s time for the next whammy – Demand shock. This article reported in the International Herald Tribune – A sea of unwanted auto imports is symptomatic of the problem. What is recounted in the article,

In the 150-acre terminal where Toyotas are unloaded, there is a sea of Corollas, Camrys and RAV4s. The mere presence of so many cars is not unusual, given that Toyota brings in 250,000 cars a year in biweekly shipments. But in a sign that something is amiss, dozens of tractor-trailers that transport new cars to dealers sat empty last week amid the rows of Toyotas.
Kurt Golledge, 48, was one of just two truckers loading his green, 75-foot-long hauler with cars lastweek. Golledge said eight of his colleagues were laid off this month because Toyota dealers did not want more deliveries.
"I was dropping cars in Henderson, Nevada, about a month ago and the dealer told me: ’Take ’em somewhere else and dump ’em,’ " said Golledge, who works for a company called Allied Systems. "All the dealers are telling us the same thing."

and,

It is more unusual to see a lot at the California port filled with thousands of unsold Mercedeses, most of them gathering dirt on the plastic white film that protects their hoods and trunks. Some appeared to have been stashed at the port for several months.

smacks of demand shock. This glut of cars which is but one product attests to the emptying of the pipeline inventory and WIP that existed as most of these firms have cut back their production. Multiply this picture across the spectrum of imported goods and you begin to see the scale of the problem. Now, not only is it difficult to fund operations for a factory/firm, there is less demand for those products as well as consumers cut back. That points to the obvious, as there is less need for production – more layoffs to come. And this downward spiral reinforces itself.

I leave you with a question of the times – Do you really think that the Keynsians of the incoming administration are about to do any better than the departing one? And, if so, Why?

It is as they say of second marriages – "The triumph of hope over experience."

Update: Some more evidence of Demand shock rippling through the Supply Chain: Workers riot at Chinese toy factory

Tags: Demand Shock, Toyotas at Ports, Pipeline Inventory

Category: Supply Chain Management

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