I wanted to highlight the Axios Macro newsletter, which discusses the ongoing economic challenges stemming from the pandemic, highlighting the “bullwhip effect” in supply chains that has led to significant fluctuations in output and inventory. It notes that companies are still adjusting to new demand levels, with recent layoffs not necessarily indicating a recession.
Here’s a quote. “In the aforementioned “beer game,” often used in business school operations classes (sometimes substituting a less intoxicating product like candy), different teams represent different points in the beer supply chain — retailers, distributors, manufacturers and so on.
- The upshot is that because each node on the chain seeks to maintain adequate inventories and has limited information on what is going on at other points in the chain, huge swings in supply occur until the teams figure out how to find a steady equilibrium.
- In the real-life economy, companies have spent decades learning those lessons and adopting technologies and practices to mitigate the bullwhip effect — but the pandemic blew them up.”
Why do we care?
I’m giving you a mini MBA lesson today. How often do we talk about the supply chain… but maybe don’t quite understand the problem? The balance of the supply chain is what is so critically important, and notably, those in IT have that supply chain too.
We have it both on hardware and software – there is only so much AI capacity right now, particularly when we consider GPUs on the backend. I wanted to share this for those, like me, who didn’t go to business school. This is a very tangible, understandable way to consider the supply chain in minature.