Troubled Waters

Baking, construction, and manufacturing may sound like three very different things, but when you examine them at their core, you realize they have much in common. Specifically, each task requires combining multiple components to create something unique.

Take chocolate chip cookies, for example. Lots of things come together (e.g., milk, eggs, etc.) to make these tasty treats a reality. The same applies to construction (e.g., steel, cement, glass, etc.) and manufacturing (cars need tires, engines, wire harnesses, etc.). You get the drift.

In the early days of mankind, what food or items people could obtain were limited to things they could get within a small radius of where they lived. Fast forward to now, and the adoption of technologies (e.g., steam engines, refrigeration, planes, etc.) has allowed the import and export of goods from every corner of the world. Consequently, this has also stretched our supply chains all over the globe. Hence, the term globalization was born to explain this new economic model.

When everything is going well, the average person doesn’t give much thought to how their lives could be disrupted if supply chains were to snap. However, as we all learned during the past several years in this age of polycrisis, not everything goes as planned. As Peter Zeihan stated at a 2023 presentation at the Best Practices Forum, “The problem with globalization is that it assumes stability, and there is no stability in geopolitics.”

Need some convincing on this? No problem.

Let’s go to sea.

Don't Take Your Supply Chains for Granted

Right now, the arteries of global trade are congested, and the diagnosis paints a bleak picture. Two major chokepoints - the Panama Canal and the Red Sea - are experiencing simultaneous crises, throwing the intricate dance of international cargo transportation into disarray.

Panama Canal: Drought Shrinks Capacity, Swells Delays

The lifeblood of the Central American isthmus, the Panama Canal, faces a formidable foe: unrelenting drought. Water levels have dipped alarmingly, leading to restrictions on the size and draft of ships allowed to pass through. As reported by The Economist , “trade through the Panama Canal, the second-busiest man-made shipping lane, has dipped by 30% since November.”

This reduction in capacity is a significant blow, forcing some vessels to wait weeks for transit or choose longer alternative routes. The knock-on effect? Delayed deliveries, disrupted supply chains, and a growing backlog of stranded cargo.

Red Sea: Conflict Breeds Uncertainty, Insurance Costs Soar

Meanwhile, on the other side of the planet, the simmering conflict in Yemen has taken a turn for the worse, with Houthi rebels targeting commercial shipping in the Red Sea. According to The Economist , “trade volumes through the Suez Canal dropped by 40%.”

In addition, insurance companies, wary of these attacks, have responded by slapping on hefty war risk premiums. As recently reported by The New York Times , “marine war risk premiums have soared around fiftyfold since before the war, to as high as 1 percent of the value of the ship, although about 0.7 percent appears to be more common. For a ship carrying goods worth $100 million, that means an extra $700,000 for the few days necessary to go through the Red Sea area."

These additional costs are squeezing profit margins and consequently impacting consumer prices. In response, some shipping companies are rerouting vessels around the Cape of Good Hope, adding weeks to journeys and further straining already stretched resources. Additionally, these additional costs make some journeys economically unviable, further disrupting trade flows and adding fuel to the fire of rising prices.

Impact Felt Far and Wide: From Empty Shelves to Higher Prices

The combined impacts of these crises are being felt around the world. Consumers face potential shortages of goods, from everyday essentials to manufactured products. Delays translate to empty shelves and frustrated customers, while businesses grapple with rising costs and disrupted production schedules (go ask a construction project manager how long it takes to get a switchgear to a jobsite these days). The agricultural sector is particularly vulnerable, with potential disruptions to exports of food and other commodities.

A Glimpse into the Future: A Call for Cooperation and Innovation

The current situation highlights the fragility of interconnected global systems. As climate change intensifies and geopolitical tensions simmer, disruptions like these are likely to become more frequent and severe. The need for long-term solutions is paramount. Investing in water conservation projects in Panama, fostering diplomatic solutions in the Red Sea, and exploring alternative shipping routes are crucial steps. Additionally, embracing technological advancements in areas like autonomous ships and blockchain-based logistics management could offer greater resilience and transparency in the face of future challenges.

The current state of global cargo transportation is a stark reminder that smooth sailing cannot be taken for granted. The combined challenges of the Panama Canal drought and the Red Sea conflict present a formidable obstacle, but they also serve as a wake-up call. By fostering international cooperation, investing in infrastructure and innovation, and embracing adaptable solutions, the world can navigate these troubled waters and ensure the continued flow of goods that underpin our interconnected world.

As the old saying goes, “a chain is only as strong as its weakest link.” Right now, the Panama and Suez Canals are looking pretty feeble these days.

Et, al...

Review: 2023 Buick Envision ST

As you may recall, in the 36th edition of "Risk, et al…", I explained how the best car in the world is the one you've paid off and still drive. In my case, I still drive my 2013 Buick Regal GS, while my wife drives a 2013 Buick Enclave. She bought hers about six months after my purchase, and we both still enjoy our cars.

However, when the time comes to buy a new car, there is a good chance my wife and I will look at replacing our Buicks with new Buicks.

Why, you ask?

Because for the past ten years, our cars have been extremely reliable (I'm probably jinxing myself here by writing this). As a testament to the quality of this brand, in 2023 Buick was ranked the fourth most reliable brand by J.D. Power . Buick makes some solid cars.

So, while I enjoy driving my Buick, I do relish the opportunities when I get rental cars (for either work or fun) to test drive some newer models. On a recent trip to Central Texas, I had the chance to drive the 2023 Buick Envision ST . I picked up the car in Austin and made my way to San Antonio. Fortunately, I was actually headed north of San Antonio to the Hill Country, so my route avoided I-35 completely, and I spent most of the drive on the back roads of the Hill Country. Needless to say, it was an ideal route to check what this Buick had to offer.

From my firsthand experience, I can tell you that the Buick Envision ST presents several advantages that cater to drivers seeking a blend of performance and luxury. One notable pro is its potent powertrain, offering robust acceleration and responsiveness on the road. Equipped with a turbocharged engine and sport-tuned suspension, the Envision ST delivered a thrilling driving experience without sacrificing comfort. Additionally, it boasts upscale interior features, including premium materials and advanced infotainment technology (I do love CarPlay!), enhancing both comfort and convenience for each passenger.

However, there are some drawbacks to consider with the Buick Envision ST. One example is that while the sport-tuned suspension contributes to a more dynamic driving experience, it may result in a slightly firmer ride, which could be a consideration for those prioritizing comfort over performance.

And the Verdict is...

Overall, I was really impressed with the Buick Envision ST. It offers compelling performance and luxury features from a brand with a solid track record for reliability. You should definitely add it to your list.