Friday, 27 January 2017

07:22 – Barbara is due back sometime this afternoon. Colin and I will be doing our happy dance.

She was going to make a Costco run on her way down yesterday. I asked her to pick up a few items, including a couple 12- or 13-pound bags of baking soda, a 50-pound bag each of flour and sugar, two 10-pound boxes of oatmeal, some more herbs and spices, and bulk packs of toilet paper and paper towels. She made no serious objection to any of these, merely noting that we already had a lot of flour and sugar.

The more Barbara reads and hears the news and watches what’s going on in our country, the more on-board she is with prepping. I’m still the more radical prepper of the two of us, but she’s definitely more of a prepper than she was a couple of years ago. She recognizes now that very bad things can not only happen, but are happening now. She now often comes home from shopping with extra stuff for the pantry, a week or two ago she told me she really wanted to test our wood stove, which was still sitting untouched a year after we’d had it installed, and just the other day she told me that I needed to get on the ball to make sure we were prepared for a power failure.

In other words, I’m very lucky. I get email all the time from people who are serious preppers but have spouses who are actually anti-prepping. That’s probably 30% to 40% of the people I hear from. There’s another contingent, probably about the same percentage, in which one spouse is a serious prepper and the other isn’t actively involved but makes no objections to his/her spouse’s prepping activities. The smallest contingent is the one with both spouses actively pursuing prepping. I’d say we’re in the second group, tending toward the third.

I was thinking more about Dan’s email yesterday, in which he said that fears of a societal collapse are ridiculous. I don’t think such fears are even slightly unrealistic. The reason (eventual) collapse is not just possible but probable is one factor that I believe Dan may not be taking into account.

It probably wasn’t the first time I heard about the concept, but it was while I was in MBA school in 1983 that it first struck me how dangerous the then-new concept of just-in-time delivery was. We had several case studies about JIT, and what struck me even then, when few businesses had yet to jump aboard the JIT train, was that JIT provided an ideal environment for cascading failures.

The benefit was touted as reducing inventory costs by essentially eliminating inventory. If you implemented JIT, you’d no longer have to pay for warehouse space to store all those widgets, nor the cost of money needed to carry a large inventory. But the downside that none of the JIT advocates considered, or at least dismissed lightly, was the potential costs that would be incurred if JIT failed. If your widget factory, for example, required a particular bolt to build a widget and your JIT deliveries of those bolts failed, you were out of business. In the pre-JIT days, you might have kept a week’s or a month’s supply of those bolts on hand, but with JIT your actual on-site inventory might be a couple days’ or even a couple hours’ supply. When what you had on-site was consumed, your entire plant was down, but many of your variable costs continued accruing. You could no longer continue shipping product to your downstream customers, and would often be liable for non-performance penalties owed to them. In short, JIT was and is a cascading-failure catastrophe just waiting to happen.

Nowadays, the potential for disaster is much, much greater than it was when JIT started to become popular. Now, all of your upstream suppliers and downstream customers are also using JIT. There’s no buffer anywhere in the chain. And nowadays, it’s not just widget factories that are under threat of a cascading failure. It’s essentially all consumer goods, from food to medications to infrastructure elements like electric power, water supplies, sewage, and so on.

Some time ago, I exchanged email with a guy about my age, who’d graduated from pharmacy school back in the late 70’s. He spent the first ten years or so of his career working in a small family-owned pharmacy before going to work for a large pharmacy chain. And he’s watched the whole time what JIT deliveries have done to inventory levels at pharmacies.

When he started out, they kept drug inventories in paper ledgers. They re-ordered manually every week and got the bulk of their inventory in weekly deliveries, with an occasional overnight delivery when they’d run out of something critical. They managed expiration dates manually as well. Each time he opened a new bottle of something, he’d check how many unopened bottles they still had in stock and when they expired. They’d do a manual physical inventory once or twice a year, when they’d discard drugs that were nearing expiration.

Nowadays, they don’t do any manual ordering or physical inventories, other than those required by law for Scheduled drugs. They don’t need to worry about discarding old drugs, because they never HAVE any old drugs. Their inventory turns have increased so much that they worry more about running out of drugs. They get deliveries every day, often more than once a day. The deliveries are made up of items that the computer decided they needed, and the computer is not infallible.

In the old days, he told me, they threw out a lot of aging drugs, but they also kept enough of everything on hand that if a weekly delivery didn’t arrive they’d be able to continue filling prescriptions for at least a week and for many drugs for literally several months. Nowadays, if a daily delivery doesn’t arrive, they may run out of some drugs that day or the next day. And that’s assuming there hasn’t been some kind of emergency that leads people to rush out and refill their prescriptions. If that happens, they may run out of many key drugs within an hour of the announcement.

The same is true of supermarkets and grocery stores, which typically have enough stock to hold them for two to three days, assuming normal demand. In any kind of emergency, even just a snow storm, people flock to the supermarket to buy eggs, milk, and bread (presumably to make French toast). In a serious emergency, their shelves empty of anything edible in hours.

The story is the same for just about everything. Water-treatment plants, for example, used to keep large inventories of the chemicals they needed to purify municipal water. No longer. I exchanged email with a guy who runs a water-treatment plant, who told me that they keep at most a couple weeks’ worth of treatment chemicals. If deliveries fail, the water coming out of people’s taps will no longer be safe to drink. Similarly, a guy who works in the natural gas industry told me how the EPA was destroying the resilience of the natural gas delivery systems. Formerly, pipeline pumping stations all had natural gas driven backup generators to drive the pumps. If the electric power failed, they could continue pumping gas by burning the product they were pumping. But the EPA decided that was environmentally unacceptable, so now if the electric power fails, so does the natural gas.

And it goes on and on. JIT and Rube Goldberg systems now dominate industry and commerce. The failure, if (when) it comes may be epic.