Bean Counters

[BatUtilityBelt]

Remember when every retailer had big regional warehouses, and bean counters said with better supply chain management they would not need those warehouses? Yeah, this world-event driven supply chain anti-pattern is why the bean counters were horrifically wrong. They failed to consider worst case scenarios, preferring to worry only about each new quarter. We pay the price for corporate profiteering.

[Houblues]

In my experience, the adage "Knows the cost of everything and the value of nothing" is the perfect description of accountants. Why they are ascribed to have sound business judgement is beyond me. I've generally seen them to be extremely short sighted.

[golem]

https://en.wikipedia.org/wiki/Lean_manufacturing

I don't want to say that's the only production movement that touted this way of thinking, but it's the one I like and empathize with the most out of all the ones that do this.

I do think that industries that are the most critical to the functioning of our society should work harder to be more resilient to supply chain issues we're experiencing during COVID. I also think that, in general, our society suffers from far too many people being profit driven and thinking short term.

[MichaelR]

We are beginning to pay the price for offshoring almost everything. I can remember reading about the massive stockpiles of corn and other foodstuffs when I was a young man here in America but then we went to a just in time supply chain and look where we are now. I need to get out and buy seeds for next season before they are all bought out. I think next year may be pretty lean once the panic really sets in and people buy up every damn thing they can, I hope I'm wrong.

[honyock]

The problem is everything was going good for like 50 years, the system was building and building towards globalization, then we started getting all these issues. The world economy was like a train rolling down the track, can't really stop it and then backup and go down another track that you passed on the other side of the mountain...

We lost so much manufacturing people over the past 30+ years. Hardly anyone one is training to be tool makers because in China they do it almost free in comparison due to governmental support, if not for medical or aerospace basically forcing made in America to remain a thing, I doubt there would be much more than large hard to transport injection molding left in the US...I doubt COVID fixes that.

I would drift into something political if I go any further. The divide in the country is why we will continue down the wrong track, no engineer on the train at this point.


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[Houblues]

.... I also think that, in general, our society suffers from far too many people being profit driven and thinking short term.

Agree. We've drifted into extremely simplistic thinking - focused on maximizing everything to fit an assumed set of circumstances, without consideration of how those circumstances could change. As the world has gotten more complex, our business and social design strategies have in many ways regressed.

[uwmcscott]

.... I also think that, in general, our society suffers from far too many people being profit driven and thinking short term.

Agree. We've drifted into extremely simplistic thinking - focused on maximizing everything to fit an assumed set of circumstances, without consideration of how those circumstances could change. As the world has gotten more complex, our business and social design strategies have in many ways regressed.

I think there is plenty of blame on the consumer side of the fence too. It could certainly be confirmation bias, but for the most part we have become "fat and happy" as consumers. We want it all, we want it now, we want it cheap and we want to put forth minimum effort/thought obtaining whatever "IT" is. And now that we can't have it all any more we are very quick to complain. By we I mean the general public of course.

[ID10t]

.... I also think that, in general, our society suffers from far too many people being profit driven and thinking short term.

Agree. We've drifted into extremely simplistic thinking - focused on maximizing everything to fit an assumed set of circumstances, without consideration of how those circumstances could change. As the world has gotten more complex, our business and social design strategies have in many ways regressed.

I think there is plenty of blame on the consumer side of the fence too. It could certainly be confirmation bias, but for the most part we have become "fat and happy" as consumers. We want it all, we want it now, we want it cheap and we want to put forth minimum effort/thought obtaining whatever "IT" is. And now that we can't have it all any more we are very quick to complain. By we I mean the general public of course.

You are correct sir.
I try to remember, but not always successfully, the saying in Real estate and construction.
Nice, cheap, or fast? You can generally pick only one of those options.

[eicca]

I’ve worked for bean counters, and I’ve worked for leaders who only cared about doing a quality job.

Guess which companies were better financially.

[Mossman]

.... I also think that, in general, our society suffers from far too many people being profit driven and thinking short term.

Agree. We've drifted into extremely simplistic thinking - focused on maximizing everything to fit an assumed set of circumstances, without consideration of how those circumstances could change. As the world has gotten more complex, our business and social design strategies have in many ways regressed.

I think there is plenty of blame on the consumer side of the fence too. It could certainly be confirmation bias, but for the most part we have become "fat and happy" as consumers. We want it all, we want it now, we want it cheap and we want to put forth minimum effort/thought obtaining whatever "IT" is. And now that we can't have it all any more we are very quick to complain. By we I mean the general public of course.

I agree... The late 20th and early 21st centuries are a text-book study in consumerism gone rampant. It disgusts me. But our consumption-driven culture wasn't created by consumers, it was carefully crafted by those who manufacture and market that which is consumed. Consumers aren't born, they're made.

[uwmcscott]

Consumers aren't born, they're made.

6 of one, half a dozen of the other I know plenty of people who are very saavy, conservative and frugal with their money despite all the "big evil companies" out there. Certainly there are those who are more easily molded, but it's still their responsibility to make informed decisions.

[andrewsrea]

I feel like I may be opening myself up to be a punching bag with this thread. But thought I'd weigh in, considering in the career I recently retired from where I was the Chief Financial Officer of Supply Chain for the Defense segment of a major aerospace company for 2 years:

- There are few real just-in-time (JIT) supply chains and IMHO, JIT is not the current problem. Warehouses and buffers are still employed in most industries.
- For non-consumable or commercial parts, my group was responsible for about 8K suppliers ($16B annually) of complex, high tech parts from around the globe. To sell products to other countries governments, they want 'industrial participation,' which means they want part of the product produced in their country. Some of our parts needed to be USA and others came from our allies.
- Based on the little info we had in February 2020, we set up a task force and did critical assessment of things which would create a jig-lock (critical line stoppage).
- By the time I left in June 2020, we were accurately tracking the affect of Covid on our suppliers, had twice-weekly Skype meetings with them and were modeling the changes to our vastly different product lines (fighter jets, transportation and surveillance jets, helicopters, missiles, space vehicles, etc.)
- As of three weeks ago, my friends who are still working there say there have been relatively few surprises, few work arounds and no jig-locks.

The moral of my story is:
- As of today, the Department of Transportation and major companies have had almost 43 months to create a system which mitigates this. I am perplexed why they seem to be a square one.
- More government intervention will create more problems. Regulation is one of the major reasons California has a jam. For example, only trucks biult after a certain year can haul in California. And having directly worked with US bureaucrats and politicians for 35 years, they are not at all efficient, nor effective. They are not the people to be giving more power to.
- Greed is typically a short-term contributor, but capitalism strives for equilibrium. Wages and numbers of workers applied to the job will be applied. Port owners get paid for throughput, which is not happening. So if they are greedy, they will spend money to increase throughput.
- The conspiracy part of me thinks that part of this could have been a publicity stunt, gone wrong. It is to the political benefit of some to get the infrastructure bill through - which includes spending on ports. We just happen to have a federal infrastructure bill that is stuck, is contentious and some parties don't want to concede on a single element. The current supply chain condition helps creates the impetus to pass the bill as-is.

This can be resolved, but California is going to have to relax some of its current regulations to get things flowing. Government can help by enabling predictive modeling and large-company task forces. I am also in favor of reevaluating what needs to be bought back in-country for manufacture. Pharmaceuticals and energy is high on my list.

[BatUtilityBelt]

I feel like I may be opening myself up to be a punching bag with this thread.

I don't see any need for punching anyone, and the points you make seem quite valid to me. I think your perspective is atypical, as you retired from an industry that has to consider these things much more critically. I get that, having worked well over a decade in DOD R&D. It sounds like you also had to look at things from many perspectives and consider possible failures as I had throughout my career. I have a strong appreciation for the thoroughness with which well run government programs handle such things (and now I'm a punching bag too).

When I moved from DOD to private sector R&D, I had a lot more issues with the bean counters trying to cut corners I saw as really bad moves, and that was rampant at more than a couple of companies. It is also happening in the cloud with stream-based processing of transactional stuff that really should not be handled that way, but that's another thread entirely. I agree with you that the issue is more complicated than I laid out in the original post, but found it an appropriate example of cutting too much for the bottom line.

[ID10t]

I feel like I may be opening myself up to be a punching bag with this thread.

I don't see any need for punching anyone, and the points you make seem quite valid to me. I think your perspective is atypical, as you retired from an industry that has to consider these things much more critically. I get that, having worked well over a decade in DOD R&D. It sounds like you also had to look at things from many perspectives and consider possible failures as I had throughout my career. I have a strong appreciation for the thoroughness with which well run government programs handle such things (and now I'm a punching bag too).

When I moved from DOD to private sector R&D, I had a lot more issues with the bean counters trying to cut corners I saw as really bad moves, and that was rampant at more than a couple of companies. It is also happening in the cloud with stream-based processing of transactional stuff that really should not be handled that way, but that's another thread entirely. I agree with you that the issue is more complicated than I laid out in the original post, but found it an appropriate example of cutting too much for the bottom line.

Sorry for the hijack, but my favorite email signature from before it was even a thing came from an R&D department person.
It was "We waste time so you don't have to."
I now return to you regularly scheduled thread.

[Chocol8]

We all benefited from the lower costs that came from getting rid of all that extra inventory, storage etc. Now we are temporarily paying higher prices. Soon, we will go back to benefiting again.

It hurts now, but on average over the last 30 years and the next 30, consumers are coming out ahead.

[BatUtilityBelt]

We all benefited from the lower costs that came from getting rid of all that extra inventory, storage etc.

I sincerely doubt consumers saw much, if any of that savings.

[andrewsrea]

I feel like I may be opening myself up to be a punching bag with this thread.

I don't see any need for punching anyone, and the points you make seem quite valid to me. I think your perspective is atypical, as you retired from an industry that has to consider these things much more critically. I get that, having worked well over a decade in DOD R&D. It sounds like you also had to look at things from many perspectives and consider possible failures as I had throughout my career. I have a strong appreciation for the thoroughness with which well run government programs handle such things (and now I'm a punching bag too).

When I moved from DOD to private sector R&D, I had a lot more issues with the bean counters trying to cut corners I saw as really bad moves, and that was rampant at more than a couple of companies. It is also happening in the cloud with stream-based processing of transactional stuff that really should not be handled that way, but that's another thread entirely. I agree with you that the issue is more complicated than I laid out in the original post, but found it an appropriate example of cutting too much for the bottom line.

Sorry for the hijack, but my favorite email signature from before it was even a thing came from an R&D department person.
It was "We waste time so you don't have to."
I now return to you regularly scheduled thread.

Lol. From what I experienced, you can add that signature tag to almost everyone who works in a government bureau.

[andrewsrea]

We all benefited from the lower costs that came from getting rid of all that extra inventory, storage etc. Now we are temporarily paying higher prices. Soon, we will go back to benefiting again.

It hurts now, but on average over the last 30 years and the next 30, consumers are coming out ahead.

I agree with your idea of this getting resolved, but from what I know of inflation (was a big and current topic of discussion in my Economics minor undergrad in the early 80's), the supply-chain caused inflation will not 'deflate.' The best that will happen is some people will overcome with wage inflation, which will maintain their standard of living. For those of us on fixed incomes, COLA does not keep up and most pensions are fixed. So we get a reduced standard of living.

The only thing that is known to overcome this would be sustained high GDP, which historically is derived primarily through pro-American business policy and US ingenuity.

[Chocol8]

We all benefited from the lower costs that came from getting rid of all that extra inventory, storage etc.

I sincerely doubt consumers saw much, if any of that savings.

Then you have no idea how a market economy works and why once a few companies did it, the rest had to follow.

[Chocol8]

We all benefited from the lower costs that came from getting rid of all that extra inventory, storage etc. Now we are temporarily paying higher prices. Soon, we will go back to benefiting again.

It hurts now, but on average over the last 30 years and the next 30, consumers are coming out ahead.

I agree with your idea of this getting resolved, but from what I know of inflation (was a big and current topic of discussion in my Economics minor undergrad in the early 80's), the supply-chain caused inflation will not 'deflate.' The best that will happen is some people will overcome with wage inflation, which will maintain their standard of living. For those of us on fixed incomes, COLA does not keep up and most pensions are fixed. So we get a reduced standard of living.

The only thing that is known to overcome this would be sustained high GDP, which historically is derived primarily through pro-American business policy and US ingenuity.

The temporary supply constraints will ease, but that’s not the only thing driving inflation, by a long shot. This current wave of inflation is a massive tax on the working class. Wages are not and will not keep up with price increases, so workers get screwed. Anyone on fixed income gets royally screwed. The wealthy who hold assets which are appreciating will come out even or ahead and the wealth gap will increase significantly. Luckily for the politicians driving this, most voters don’t understand what’s causing it or how much they will be hurt. But hey, we all got free checks! Yeah!

Want to hear a scary stat? More than 40% of all dollars that exist today were created between April 2020 and May of this year. There’s no way to print money like that and give it all away without inflation reducing the buying power of all those dollars. Oooops.

[BatUtilityBelt]

We all benefited from the lower costs that came from getting rid of all that extra inventory, storage etc.

I sincerely doubt consumers saw much, if any of that savings.

Then you have no idea how a market economy works and why once a few companies did it, the rest had to follow.

You could try to have a reasonable conversation without insulting the intelligence or experience of people you don't even know. I lived through it professionally as much as anyone. I'll let my stance stay as is, thanks anyway.

On top of that, consider in that same time frame, the ratio of CEO to laborer pay has changed dramatically, giving the CEO about a 10x raise. That's where those savings went - to top management, after each good quarter (bottom line). So yeah, the consumers got shafted (as I said), and the labor got shafted. And greed like that is a pretty good part of why the 1 percenters are richer than ever.

[dabbler]

There is a lot of truth in this thread and Andresrea had made a major contribution "... the issue is more complicated than I laid out in the original post...'

And yes, there certainly IS blame on all sides. And a part of that is the human tendency to want the "most" and "best" for ME, the individual. The truth is moderation is most often the best course and taking others' interests, (gasp!) into account. Yeah it doesn't sound wise, but if you really follow through the reality of it, it really is a better way.

[Chocol8]

On top of that, consider in that same time frame, the ratio of CEO to laborer pay has changed dramatically, giving the CEO about a 10x raise. That's where those savings went - to top management, after each good quarter (bottom line). So yeah, the consumers got shafted (as I said), and the labor got shafted. And greed like that is a pretty good part of why the 1 percenters are richer than ever.

It might feel good to blame the CEO’s and the 1% ers but the math doesn’t add up. Each CEO made a lot of money but there are very few of them. All CEO pay combined is a tiny drop in the bucket. There is a reason average inflation had stubbornly stayed below Fed targets for more than 20 years. It’s because a lot of cost savings and efficiency was being passed on to consumers due to competition. The Internet made comparison shopping so easy, people will buy the cheaper product from the cheaper supplier to save $1 on a $100 purchase. Consumer behavior drove the businesses to do what they had to do to survive, and for most it has been compete on price, price, and price. Outside of tech companies and a few other industries, margins went down not up, including margins before CEO pay.

So yeah, we all saw lower prices from just in time supply chains and importing products, components, and materials from cheaper Asian countries just like we demanded. We are seeing higher prices and delays now, but it is still way less than what we all saved over the last 20+ years. I am sorry if that doesn’t fit everyone’s political narratives, but reality rarely does.

[mickey]

It might feel good to blame the CEO’s and the 1% ers but the math doesn’t add up. Each CEO made a lot of money but there are very few of them. All CEO pay combined is a tiny drop in the bucket. There is a reason average inflation had stubbornly stayed below Fed targets for more than 20 years. It’s because a lot of cost savings and efficiency was being passed on to consumers due to competition. The Internet made comparison shopping so easy, people will buy the cheaper product from the cheaper supplier to save $1 on a $100 purchase. Consumer behavior drove the businesses to do what they had to do to survive, and for most it has been compete on price, price, and price. Outside of tech companies and a few other industries, margins went down not up, including margins before CEO pay.

So yeah, we all saw lower prices from just in time supply chains and importing products, components, and materials from cheaper Asian countries just like we demanded. We are seeing higher prices and delays now, but it is still way less than what we all saved over the last 20+ years. I am sorry if that doesn’t fit everyone’s political narratives, but reality rarely does.

Yes, but, who doesn't resent it when you read your CEO is making 38,000 times what you are?

[Chocol8]

Yes, but, who doesn't resent it when you read your CEO is making 38,000 times what you are?

The easy solution to that is to not work for a big company. The CEO of my company isn’t making that much more than the average employee. Adjusted for age and experience, it’s less than 2x similar people in non-executive roles and about 10x the youngest guys we just hired. I wouldn’t want his hours and stress for the money he is making.