Exploring the Consequences of a Semiconductor Shortage on Gummy Bear Supplies

The past two years have taught us that disruptions to the global economy can have strange and unexpected consequences.

"We've had to change from a 'just in time' to a 'just in case' inventory system," he said. "And I'm not the only one grappling with these issues."

I recently heard a phrase at a seminar that really resonated with me: "just in case" inventory. The seminar was at a Baker's convention, and the presenter was from Grupo Bimbo, the largest bakery in Mexico and the United States. They supply a lot of grocery stores and such. They're facing the same problems we are. And he too said that they are doing a ‘just in case’ inventory, as opposed to a just in time. One of the people in the audience said, ‘Well hey, you know, if you're getting it just in case, I'm screwed because now I can't get it at all.’ He didn't deny that. But yeah, we all recognize that, you know, we have to do it.

He told a story about gelatin that was quite interesting. They were having a hard time getting gelatin in Mexico and he explained why. He said that it's because they're not slaughtering as many hogs. And the reason they're not slaughtering as many hogs is because they don't need as many hides from the hogs to make cars. And they don't need as many hides because they're not making as many cars. Why aren't they making as many cars? Because they can't get the chips from Taiwan. He finished by saying that one of the biggest users in the world of gelatin is the company that makes gummy bears. So, it turns out that you can't buy gummy bears because of the lack of chips from Taiwan.

This is not the first time that we have seen an unexpected relationship exposed by a major disruption. The bursting of the housing bubble in 2008 led to a collapse in new home construction, which in turn led to less sawdust being produced as a byproduct of lumber construction. This, in turn, meant that farmers didn’t have as much sawdust to bed their cows, which led to less milk production and higher dairy prices.

In 2008 or 2020, few people would have predicted that there would be a connection between housing and milk, or between semiconductors and gummy bears. However, major turmoil in the global economy has a way of exposing relationships that are more hidden during normal times. Interlinkages can be difficult to pinpoint and substitution effects tough to predict.

Jarosch emphasizes that the supply chain is not just a linear process, but rather a complex web of interconnected industries and businesses. He notes that the ripple effect of one industry on the others is far-reaching and often unpredictable.

As the world economy continues to grow, the demand for natural resources is also increasing. This can lead to supply shortages and higher prices for these resources.