Econ 101: The supply web.

Consider the ball point pen. It’s cheap, it’s everywhere, it’s still useful despite the increased digitisation of our everyday lives. Millions are sold every day. Millions are discarded every day, too.

The earliest versions of the ballpoint pen date from the 1800s. They were unreliable. The ink usually blobbed and smeared, or dried out. The ball didn’t transport the ink reliably, so the pen skipped, and the writing felt rough. Its modern version was invented by Laszlo Biro, with the help of his brother Gyorgy and friend Juan Meyne. It’s a triumph of technology. Without modern applied chemistry and physics, the pen would be neither reliable nor cheap. Only pencils are cheaper. The vast majority of ballpoint pens are disposable. Even refillable ones are usually thrown out.

The simplest ball point pen is the Bic Cristal™. It has seven components:

1. Barrel: plastic. 2. Cap: plastic. 3. Plug: plastic. 4. Ink reservoir: plastic. 5. Ink: dyes, alcohols, fatty acids. 6. Ball: metal. 7. Ball socket: metal

All parts begin as ores and oil, raw materials which are refined to make feedstock (plastics, metals, ink) with which to make the parts of the pen. The pen is made by the thousands on machines that began as raw materials that were processed into parts for assembly. The pens are packaged, warehoused, and eventually shipped to the retail store. The packaging, warehousing, and transportation also began as raw materials.

The sequence from raw material to final product is called the supply chain. But it’s really a supply web. I have two observations about the supply web.

One, it’s fragile, because every member of it tries to reduce costs. A failure by any member to deliver what’s asked will ripple through the web, sometimes causing shortages of apparently unrelated products. Resilience requires excess capacity, but excess capacity is unused most of the time. That looks like unproductive cost to the accountant, so it’s reduced and even eliminated.

Two, we rely on people to do their work well at every step. The ballpoint pen has involved hundreds of people, from the producers of the ores and oil to the truckers that delivered the product to your local store,. Of these hundreds of people, the only one you deal with in person is the store clerk.

Edited for clarity 2023-10-25