A Word on the Global Supply Chain

Getting my Kindle from Amazon at once provided a glimpse into what's right and what's wrong with the global supply chain.

First, what's right: obviously, that an order I place with an overseas retailer can make it to my doorstep with nary a hitch. 'Nuff said.

But then there's also what's wrong. Consider the circuitous route the Kindle had to take just to get to me: it was assembled in China, ultimately finding its way to a storage facility somewhere in Nevada (and we can safely presume it passed by several intermediate locations). Then I placed my order, with delivery serviced by DHL, prompting the unit to move from Nevada to San Francisco, then Cincinnati, then Hong Kong, then Taipei (DHL's Asia hub), ultimately making its way to the Philippines and into my hands.

In short: a product assembled in China had to go halfway around the world just to get to the Philippines – which is only hours away.

Economics dictates that the cost of all this movement is already built into whatever price I paid when I made my purchase. Perhaps. But economics also tells us that there are hidden costs (negative externalities) that aren't fully captured by what I paid, such as the environmental impact of the emissions from all the vehicles that took the package on its world tour, or the time I had to wait just to get my order, because there's no way to get the product shipped directly from its point of manufacture.

In other words, the sobering point is that the global supply chain, which is efficient on a grand scale, is actually rather inefficient at a micro level.

Amazing and screwy at the same time. Funny how the world works.