A little OT "Logistics-dependant systems"

[Adirondack Jack, SASS #53440]

It seems to me one of the most worrisome byproducts of the information age is the current, world-wide use of "Just in time inventory", where systems rely on information technology and logistics apparatus to bring goods to the market. We're counting on the future to fill orders, and dreaming in our calculations that the supply chains will always be flawless.

 

There was a time, even in my short life, when producers of goods treated their inventory much the same way the homeowner treated his equity. Society placed a premium on "stocking up". Inventory was seen as equity, money in the bank, and served to keep work steady for workers when sales were slack, and capital sunk into stockpiles was a GOOD thing. Wareshouses of goods were everywhere. A gun maker might for example make barrels and barrels full of barrels, and eventually these would be fitted to guns and sold. Workers always had work, and the barrels of barrels were in fact an investment in future sales, serving to insulate the company and it's workers from any disruption. Sure, it took capital investment, and it took a visionary plan where one could safely invest in production of goods meant to be sold over a long period of time, perhaps several years. But like the paid-for house, that inventory was OWNED and could be used as an asset, even when leveraging money at the bank, etc.

 

Folks in those days were "in the business" of making whatever product they made, and could and did just keep making parts and pieces, and squirreled them away for the future.

 

But, somewhere along the line we changed tracks. Not only did information technology allow better tracking of what we had, but it allowed the reduction of stockpiles so that parts made today could be used tomrrow, often literally, and distributors and sellers very often had NO stockpiles, but instead counted on logistics systems to almost instantly replace sold goods. Makers were sold this line of reasoning that said "you can make just what you need, when you need it, and don't have to invest in stockpiles, but can keep money liquid, continually turning it as you need things.... You can have a robot machine "trained" (programmed) to be able to do 1000 different jobs, and the computers will tell it when to make a few parts for Joe in Seattle, or Moe in Phoenix, with no inventory costs. This line of reasoning paralleled the "liquidity over equity" tracks of ownership. Fixed assets like buildings and even individual homes could be "re-fi"ed continually, as market values went up, so that money could be kept OUT OF the assets, and instead be used as leverage or to fund future acquisitions and of course, to pay interest on debts....

 

So where does that lead us? it leads us to a precarious condition where we no longer have any accumulated stocks or accumulated equity, but are almost FORCED by tax codes etc to constantly "juggle chainsaws" to keep "instant" inventory supply lines moving, depending often on VERY LONG supply lines and intricatee webs of actors to keep that little bin filled with just a few bits. We're told this new efficiency reduces inventory costs, and in fact producers are taxed regressively on stockpiles to discourage the creaation of any insulation against supply line disruption, and since we not only have no inventory but also no equity, we entirely rely on these intricate systems to keep us alive all the time, as any disruption puts us at the mercy of our creditors, the very people who NOW control the wealth of the world.

 

There are no more barrels and barrels of barrels, nor is the building housing the robotic machine even OWNED, as it and the machine is almost certainly perpetually financed to "stay liquid", depleting equity along with inventory, and the wealth of the company is in the hands of WALL STREET, a series of 1's and 0's in a data stream somewhere instead of brick and steel assets one can literally bank on....

 

Note to owners of things. Tell your government it's high time to allow INVENTORY to be considered a good thing, to structure the tax code to encourage stockpiles and to encourage equity. it is high time to consider stockpiles of parts and the job stability that goes with that to be a good thing, and to discourage placing the entire wealth of any enterprize in the equity "markets", figments of the imagination that CAN and DO "burn down" in a few days or weeks of "market adjustment", returning instead to trusting in our own knowledge of our businesses, trusting in the fruits of our own labors, and amassing inventory as we build equity so we can meet fluctuating demands AND keep the workforce stable and able to actually buy things...... That way Joe in Boston has a job, and a tsunami or volcano halfway around the world doesn't empty shelves and idle workers in Alabama.....

 

Oh, yeah, how does any of this have a damned thing to do wiah CAS? I hear tell I am finally gonna have some Cowboy Carriers in a few weeks. it took fully a year and a half to get the "just in time" inventory system to make some of the replacement "stock" carriers we use as a base, after we depleted the stocks of the entire country in a matter of a year or so and they've been playing catch up ever since. The system doesn't understand the Cowboy Carrier was an additional product. It treats it as if the replacement part that we use as a base for the carrier is ONLY a replacement part, and they ONLY make a fixed number of em to correspond with the number of rifles they sell. Talking to the "system" has proved impossible, even when attempted by the parts distributor and a major US gun distributor. Why? because they don't HAVE any inventory. What they have is a robotic machine and a bunch of work tickets it performs over tme to meet needs arising all over the place, and it's no mean feat to get a few hours of machine time diverted from some other "just in time" project (that is likely also 18 mos behind).

 

Even when we did, the parts distributor got 1/3 of what they ordered, so in no time we'll be out of stock AGAIN..... No warehouse, no "banked" work, means lots of almost invisible lost sales and idled workers downstream, but NOPE, you can't tell em that, because they have been hooked into "instant" inventory and leveraged everything dependant on long supply lines and intricate webs of logistics...... I hope there isn't a mud slide in Mozambique, it'll probably cause a tooling shortage in toronto and no carriers cut in Milan......

[Loophole LaRue, SASS #51438]

Whew, Jack....put down the muscatel.....seems like you've been a fussin' over the dilemmas of a small manufacturer, and lost touch with the New Age.....

 

There's no going back, my friend. In the modern age, "inventory" is a dirty word. It represents over-production, capital sitting idle, excessive storage costs, and the depreciating value of outmoded goods. Yesterday's designs are replaced faster than you can spit, and when they are, your "inventory" is worth 1/2 of what it was, or less.

 

I'm afraid that banks, investors and stockholders view the risk of stockpiling to be too high, and do not count it as an asset. When a two man operation can turn out a finished, customized product via automation in minutes, there is no need to have parts stacked on shelves. (Have you seen the one-off wheels that custom bike builders create on computer controlled flow jet machines? Can you imagine how much inventory would need to be maintained to have every conceiveable design on-hand?)

 

I'm not saying it's better, or more satisfying...it is more efficient, and that's the buzz word these days.

 

LL

[Adirondack Jack, SASS #53440]

Whew, Jack....put down the muscatel.....seems like you've been a fussin' over the dilemmas of a small manufacturer, and lost touch with the New Age.....

 

There's no going back, my friend. In the modern age, "inventory" is a dirty word. It represents over-production, capital sitting idle, excessive storage costs, and the depreciating value of outmoded goods. Yesterday's designs are replaced faster than you can spit, and when they are, your "inventory" is worth 1/2 of what it was, or less.

 

I'm afraid that banks, investors and stockholders view the risk of stockpiling to be too high, and do not count it as an asset. When a two man operation can turn out a finished, customized product via automation in minutes, there is no need to have parts stacked on shelves. (Have you seen the one-off wheels that custom bike builders create on computer controlled flow jet machines? Can you imagine how much inventory would need to be maintained to have every conceiveable design on-hand?)

 

I'm not saying it's better, or more satisfying...it is more efficient, and that's the buzz word these days.

 

 

LL

 

Yep, efficient at doing exactly what it does SO LONG AS you have a machine ready for use exactly when the part is needed. Those machines are a million or two a pop. What REALLY happens is they use the same machine to make slides for semi auto guns, receivers for shotguns, and once every blue moon, between lunch and coffee break, IF the tray of brass blanks is handy, they make a few 1873 carriers. if the demand for slides for semis or the broken tool for shotgun receivers screws up the schedule, they CAN'T get Luigi to fire up the old bridgeport and make a few carriers. Luigi retired and the Bridgeport is long gone. And they darned sure can't send Paulo up to the third floor warehouse to get some they already made last year.....

 

Even yer custom wheel makers for yer bikes end up standing there watching the interest on their $2M loan on the machine rack up if the maker of the wheel blanks is out of 21" blanks and won't have HIS $2M machine free for a month.....

 

 

It's just silly. I use leather shoelaces, lots of em. I buy em at Walmart because they SELL em cheaper than I can buy em by the gross. They stock EXACTLY 8 pairs ar a time. I buy em ALL, and the hook stays empty until they get more (rinse and repeat). There is simply NO WAY to get a case of em from Walmart, nor can they adjust their inventory to account for the "unusual" demand I place on the system. The one store that actually DID adjust stock quantity, raising it from 8 pairs to 12, I missed em, and when I did go in, the peg for em was gone. When I asked, the gal said "we had em, they didn't sell, so we stopped selling em." FOUR WEEKS they didn't sell, so they stopped carrying em entirely......

 

Not only is inventory discouraged, it's TAXED at the same rate as a retail sale. You get caught with $2M in AR recivers at the end of the year, they wanna tax em at full retail value. That doesn't work if the demand tapers off and yer forced to sell em cheap...... They don't WANT us to stock anything, they don't WANT us to OWN anything (not even our homes). They want the money of the world in 1's and 0's they can manipulate and tax, deflate at will, etc. (Witness the $2.5 trillion "lost" in one day last week). The system simply ate the money. ya cant do that to a guy who actually has an asset he owns piled in a warehouse....)

 

Systemic change is needed. We need to retrench to the days when producers of things controlled the assets, not wall street and the government.

[DOCBRAZOS, SASS#18033L]

It's a change we can belive in.

another Happy Camper

[irish ike, SASS #43615]

The entire business community is a global system. Businesses are having a hard time managing to a profit because of the competition out there. Producing products to sit on selves takes money. Labor to produce, buy the materials, and space to store it which takes heating and cooling in some instances. Most businesses don't have that kind of cash reserve.

Technology changes make it unreasonable to manufacture additional components for something that will be obsolete in 6 months.

In your case a receiver for a 73 is a very small market. If there were 5,000,000 people out there needing carriers to repair rifles then maybe some additional parts would be needed. Let's be generous and say there is 150,000 Italian 73's out there. And how often does a carrier wear out.....almost never. So why build a stock of them up.

 

Supply and demand and what the market will bear rules the world. Not convenience for the potential customers unfortunately.

Ike

[Garrison Joe, SASS #60708]

When you base productions plans on the same mechanism that worked for producing early prototypes, sometimes you have problems. Sounds like an assumption was made that the supply of carriers from Uberti would never be a limiting factor to the growth of your small business. Well, now it seems that, due to all their JIT and minimal-stock-on-hand policies, which (usually) benefit them (Uberti, aka Beretta) as a company, your company has problems.

 

So, you have to consider some options that you may not have thought about during the prototype stage. What does your business plan project for your ramping up of production? Say, ramping up to 5,000 units per year? Now's (past) the time to consider getting parts made for you that might even cut down on the work you have to do - like finding a small die casting shop near you (in the good ol USA) that could cast brass carriers "near net shape" so you don't even have to machine them much. Your design is patented, right? Then you would not be infringing on any Italian design.

 

Sure it takes work. Maybe even some investment. But it might be better than having to live on the small number of carriers that you can try to "suck through their narrow and convoluted supply pipeline." Things just have to get done in a different way now that there are no longer large stockpiles of parts sitting in a Bannerman's warehouse on a rock in the Hudson River (which some folks used as parts inventory for lots of years).

 

Good luck, quite literally and seriously, GJ

[Adirondack Jack, SASS #53440]

The entire business community is a global system. Businesses are having a hard time managing to a profit because of the competition out there. Producing products to sit on selves takes money. Labor to produce, buy the materials, and space to store it which takes heating and cooling in some instances. Most businesses don't have that kind of cash reserve.

Technology changes make it unreasonable to manufacture additional components for something that will be obsolete in 6 months.

In your case a receiver for a 73 is a very small market. If there were 5,000,000 people out there needing carriers to repair rifles then maybe some additional parts would be needed. Let's be generous and say there is 150,000 Italian 73's out there. And how often does a carrier wear out.....almost never. So why build a stock of them up.

 

Supply and demand and what the market will bear rules the world. Not convenience for the potential customers unfortunately.

Ike

 

 

I hear ya Ike. But the system is supposed to be both "on time" and responsive, and it is neither. If four years ago, they were selling 100 replacement carriers a year, then the paradigm changed because I BOUGHT THAT MANY MYSELF in a year, depleting the stocks of the parts folks and a distributor, creating a backorder situation for the entire system, and in almost TWO YEARS, despite several contacts, they fail to adjust, only producing 1/3 of what their own parts folks ordered (not even enough to fill back orders throughout the system), it ain't working.

 

The good news is we got a few, but nowhere near enough to cover the lost sales (and potential additional rifle sales), let alone make up for the lost demand for brass, etc. A few parts "in the back" woulda helped.....

 

I look at whole countries defaulting or close (Italy is shakey at the moment) and every darned one of these outfits has put the system in a "100% of capacity" model, where they trim labor and schedule these smart machines months or years in advance, then THEY CRY when they can't make money and their distributors cry when they can't get product, and all they really care about is the low hanging fruit of defense contracts.....

 

I'm just one little guy, no they don't care about me. But I'm absolutely convinced this is a story repeated tens of thousands of times across the country and the world.

 

Even the major computer, communications, and auto makers were caught with no parts during the Japan crisis. The big outfits simply bankrolled placing facilities elsewhere (China) to get alternate sources for I-phone screens, etc, but the small or mid-sizeed outfit CAN'T BORROW MONEY since the '08 squeeze (banks won't lend to going concerns, let alone start-up), so who benefits? The tertiary subsidiary of some mega-outfit that has the cash and the stock market to work with. The old time companies that cranked out product, stocked stuff, and had stuff when ya need it are going or gone. I tried a while back to buy springs listed in a maker's catalog. They had FOUR in stock. They offered to make a special run, 100 minimum, if I paid a huge special run fee, but nope, they didn't have TWENTY springs in stock. Used to be a hardware would have that many in a bin..... I bought overlength springs elsewhere and cut em myself, which is laber intensive compared to using a machine, but that's what they force ya into.....

 

When we move from having real stocks of goods to having only 1's and 0's in a computer we call 'stock", when we have machines on lease instead of trained men, when we pay up front to get work done when and if they get around to it (which they often demand), it ain't a good model for stability....