By Rosalind Horrobin
As the Canadian trucker protests are shuddering to a halt, and copycat protests threaten to go international, the economic consequences of the protests have become more evident. This is due to the unstable nature of the current industrial ‘just-in-time’ (JIT) international supply chains.
The Canadian trucker protests – or ‘Freedom Convoys’ – first gained national attention on January 29th when protestors gathered on Parliament Hill in Ottawa. Official police estimates put the number of protestors that day at approximately 18,000. This first weekend of protests received widespread condemnation from the left-wing media, with Vice News reporting on the ‘lowlights’ of the convoy protests which included: public defecation; stealing food from food kitchens; the displaying of numerous swastikas; and the desecration of the Tomb of the Unknown Soldier. Whilst these crimes are sensational, reprehensible, and currently under investigation, the majority of the protests were peaceful. Even still, the political and economic aftershocks of these convoys are indicative of larger supply chain issues.
The just-in-time (JIT) supply chain was pioneered in the 1950’s by Taiichi Ohno who worked at Toyota. The JIT system “aligns raw-material orders from suppliers directly with production schedules.” Essentially, instead of letting stock pile up in warehouses, companies forecast the demand of their product and order it just-in-time for the customers. This system reduces waste and increases efficiency and has been adopted by Western suppliers. However, problems are inherent in a system that relies on delivering projects at speed with little margin for error. The JIT system means that one hiccup – no matter how insignificant – in the supply chain can result in no final product being created. This can be evidenced by the Canadian trucker protests, where the blockade of infrastructure resulted in the closure of several manufacturing factories for weeks.
For example, Ambassadors Bridge – which connects Detroit, USA to Ontario, Canada – is the busiest international border crossing in North America with 30% of US-Canadian trade passing through it. Over 150,000 jobs in Detroit and Windsor (the Canadian city on the other side of the bridge) are dependent on this crossing, with 10,000 trucks carrying $323 million worth of goods crossing daily. Due to the location of this border crossing, there are 11 car assembly plants in Detroit and at least 6 in Windsor, all of which use the JIT inventory management system. Therefore, the blockade of the Ambassadors Bridge by trucker protests was disproportionately harmful for the industries in the area, despite the blockade itself lasting less than a week. All six automotive plants were shut down in Windsor for over a week due to the blockade, and all production halted completely due to a shortage of parts. Less than one day into the protests the plants closed because they did not have surplus parts that would last them over a day or two of production.
Additionally, this highlights the issue that complex international trade is funnelled through a small number of routes to promote efficiency. This can also be seen in the amount of international trade that passes through the Suez Canal (12%). The downfalls of this concentration of trade routes can be seen in the blockages of the Suez Canal which crippled global trade. When the Ever Given got wedged across the canal and blocked the passage of all ships for six days, it blocked an estimated $9.6 billion USD worth of trade. This issue of concentrated trade routes is not as easy to solve as that of JIT systems.
Issues surrounding the efficacy of the JIT supply chain made international headlines starting in September 2021, when Toyota announced that due to supply chain issues with computer chips they were cutting vehicle production by 40%. The causes of the global chip shortage are much more complex than a simple bridge blockage. Multiple factors including the pandemic, Chinese sanctions, a fire at a facility, and severe weather issues all contributed to the shortage. But the effects would not have been nearly as deleterious for industries if they were not employing the JIT system. Indeed, the President of the European Commission Ursula von der Leyen said that “the pandemic has also painfully exposed the vulnerability of its [computer chips] supply chains.” The US similarly considered a report on the wider supply chain and its national security implications and issued an Executive Order recognising that the “The United States need resilient, diverse, and secure supply chains to ensure our economic prosperity and national security.” Western nations are deciding that for important keystone products like computer chips, JIT supply chains are not viable. As analyst Per Hong put it: “we are moving from just-in-time to just-in-case.”
Overall, the Canadian trucker protests serve to highlight the importance of diverse supply chains and show a shift in popular thinking away from JIT inventory management.
The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.