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The World as We Know It Ends If It Can’t Find Its Bearings – Watts Up With That?


From BOE REPORT

 Terry Etam

While growing up, I had the privilege of working at some manual labour/equipment operator type jobs. Now, I am aware that word “privilege” is currently a live grenade, when used by the “wrong people”, but I don’t care. The people I’d hate to offend are those that have no choice or path out of manual labour, and/or those whose work is under-appreciated by society as a whole.

A stint of manual/blue-collar labour teaches more than you might think, if not at the time then most definitely down the road. You might drive by one of them, someone driving a bulldozer, or repairing a road, or changing tires, and think wow that looks like a stress-free life or some such, how hard could that be.

And that perspective is true in a limited technical sense, as in no one says ‘wow look at that guy drive that forklift in a straight line – pure genius.’ 

But the benefit of time in those driver’s seats is that another world opens up – the world of getting stuff done, in a world where anything can be thrown at you at any time. Weather issues, health issues, equipment issues, personnel issues…any of these can derail a task that might look mundane but might be critical in a supply chain sense.

Spend time in those seats and these challenges become real, ones that don’t impact passersby directly but can indirectly, in huge ways. And the understanding of those challenges, even a few of them, gives the manual labour/blue collar participants a leg up on the laptop class that is critically important. Anything can be easy on paper, but can be another matter entirely out on the front line.

Here’s an example from a recent freight newsletter. U.S. railroads are facing labour shortages and workers are threatening to strike over conditions. One reason was that, in a bid to improve profitability and therefore impress Wall Street and therefore increase share prices and therefore increase value of stock options, some managements laid off a lot of workers in cost-cutting drives.

Some layoffs may have been necessary or worth it, I don’t know, but I did read an account of one engineer who summed up why no one wanted the job anymore. He recounted how trains now were much longer, more than a mile, and run with fewer staff. He spoke of what it was now like if there was a problem out in the middle of nowhere on one of the cars somewhere down the line, the guy said it was up to him to trudge up to a mile through snow or terrible conditions to check on a problem on a specific car, and then have fewer people available to deal with problems. And yet that engineer is responsible for getting the load there on time. Add those pressures together, and does it seem quite so easy to drive a train?

Another quick example and then on to one of those things that almost no one ever thinks about, or cannot live without, referenced in the title. In one of my “getting paid to drive something around” university summer jobs, I drove a swather for an alfalfa processing plant. Since the alfalfa was cut as close to peak greenery as possible (10 per cent bloom, to be precise) and then shipped to the drying facility as quickly as possible (for quick drying to achieve the best quality alfalfa pellets), time was of the essence, and breakdowns were a big deal.

The poor field mechanics would be driven half-crazy by a single component – bearings. They could be heard swearing half a mile away due to the shoddy quality of some bearings, if for whatever reason crappy ones had been installed due to either cost or availability issues (usually the latter). It was true that operating conditions were dusty and harsh, but that made better-quality components (and their availability) all that much more critical.

Bearings come in a staggering array of sizes and shapes, and without them, our whole world grinds to a halt (pretty much literally). Does anyone think of bearings at all, other than the small subset of a commercial enterprise that is responsible for dealing with the consequences directly if they don’t work?

Here’s a sobering story on the topic from a publication that may not earn space in your evening news hour – Bearing-News. A company called EZO Bearings supplies bearings for precision equipment including electric motors, power tools, flow meters, pumps, etc. According to an article in Bearing-News, a UK distributor of EZO’s bearings noted that, historically, bearings would arrive six to eight weeks after ordering. As of earlier this year, the distributor received a quote for delivery of 690 days – almost two years.

Getting back to the poor field mechanics that fixed the equipment that harsh conditions take a toll on: these mechanical magicians in a way became responsible for the day’s output. In a short growing season, every day’s output was critical. Alfalfa doesn’t spend much time at 10 percent bloom.

The mechanics’ stress level was immense, and they had choices to make that they didn’t want to. Wait for good parts? Or use the cheap stuff if that was all that was available? And what about how they had to race around the countryside – what happened when they got a flat tire or stuck on a bad road or whatever other issue can strike that no one can imagine unless they actually do this sort of thing?

Now, imagine their dilemma if they had to face a year-long wait for parts. There’s no good way to plan around that. How could you order parts for next year? Order duplicates of all of them, hundreds of them, and spend a fortune on inventory? Management frowns at those suggestions; they have their own issues that those further up the food chain deem critical.

Yes, all these issues should be in the domain of supply chain/procurement departments, whose job is to make sure everything is on hand. But all is not well there either, in a way which I suppose makes sense: “Furthermore, the hoarding fever is pushing the global supply chains to the edge of collapse,” reported a supply chain industry publication. Toilet paper and ball bearings…not interchangeable but so much in common.

In the Bearing-News article, one culprit of shortages is flagged as increasing energy prices. The skyrocketing cost of natural gas (and even coal, as the article notes) means that some of the critical input material supplies dry up, leading to either massive price spikes or sheer unavailability. In a way, high fuel/natural gas prices spawn a massive web of shortages through collateral damage.

Recently it was reported that a large aluminum smelter was cutting production by 22 percent due to soaring energy costs. You might think well that’s one facility, the world has many. And that’s true, except if the market is fairly balanced between supply and demand, who doesn’t get aluminum anymore? It’s not just a matter of price being bid up – something won’t get built that otherwise would have. Could it be bearings? Might be, or might be something else.

Maybe it’s alternator brackets, or engine parts, or who knows what. Hopefully, it is the peripheral stuff that gets cut – maybe huge TVs are significant consumers of the product, and life as we know it will carry on even if Best Buy is not stuffed with 8-foot screens. But we don’t know that that allocation will happen in an optimal way.

The point is that our world was built on a certain range of energy prices, and it only works in that range. Beyond that, systems break down. 

In the longer run, the industry will adapt – say over a 10 or 15-year period, chronically short aluminum supplies would lead to a rebalancing of demand and supply. Maybe cheap barbecues (or whatever) would no longer use aluminum, because more critical demand nodes (such as bearings) would step up to pay significantly more. 

That is how big structural changes can work, over time, and when price signals have had a chance to modify behaviour and/or consumption patterns.

Today’s global market is one of broken price signals, starting with energy. High oil/gas/coal prices mean the world is desperate for more, yet global production is being stifled by the class of people that have never sat in the driver’s seat of anything – yet ironically find themselves in the drivers’ seat of economies.

The world is in desperate need of increased supply of critical minerals and metals, while at the same time building a new mine becomes more and more challenging due to increasing regulatory and environmental constraints. That’s not saying environmental constraints are a bad thing, they may be a great thing from a habitat preservation perspective, but they are real impediments to new supply.

As society’s fortunes increase, succeeding generations become farther removed from where things really happen. People flock to cities, where food just appears in supermarkets, where fuel appears in gas stations, where power appears in sockets, where everything else is on Amazon and on the doorstep the next day. It’s a bit of an illusion. The appearance of all this stuff is not automatic.

Everyone’s job has deliverables, of some sort, and all are important in their own way. But many jobs, particularly at the manual labour/blue collar end, have a certain criticality to them that is not appreciated. A truck driver that crashes might delay a load of critical parts or supplies that can impact a production facility that can impact other production facilities. A cheap part used either to save money or because it was available can fail and cause similar cascading events.

The heat really is on front-line people in a way that other occupations don’t encounter. If a columnist fails to write a column in a given week, at the end of the day, who cares? If academic research gets delayed by a month or two, what happens in terms of a functioning society? If an analyst fails to analyze for a few weeks, it may impact the data flow into some economic model or economist’s musings, but there will be no supply chain impact.

A critical bearing failure, in a world that has to wait 690 days for a possible replacement, is an item worthy of our consideration.

A great gift to put under the tree to ward off holiday energy arguments. It works like a pacifier. Pick up “The End of Fossil Fuel Insanity” at Amazon.caIndigo.ca, or Amazon.com.  Thanks for the support. If you don’t buy the book, send some money to the good people of Ukraine and Iran who really need it. But one us for sure. Or both. Up to you. No pressure.

Read more insightful analysis from Terry Etam here, or email Terry here.


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