Shortages Explained

[TXGunNut]

Our current shortage is easily explained but may be difficult to avoid in the future. Awhile back our mfrs borrowed a Japanese idea (actually, they originally borrowed it from us. We just couldn't make it work at first). The concept is called "Just in Time" or JIT. The objective is to have materials or components arrive shortly before they are needed for production, often just a matter of days, even hours. Product is also shipped soon after assembly, both reduce warehouse and carrying expense. A manufactured item sitting on the shelf today may have been raw material just a few weeks ago. JIT is part of a philosophy that is dependent on accurate forecasting, reliable component and raw material supply and a constant level of demand. That's where things usually start to unravel.
Inventory is often reduced even further near the end of the year for tax purposes. From the consumers' point of view the JIT philosophy is flawed during panic situations. With a minimal amount of inventory available and a huge implulsive demand supply simply cannot keep up with demand. JIT is still working for component and ammo mfrs, they're still selling all they can make and keeping costs down. They may shed a crocodile tear or two for our benefit.
I realize a few MBA's around here understand the concept better than I but I had to dumb it down so I could understand it. My solution is the well-known JIC philosophy, "Just In Case". We know there will be ammo and component shortages in the future, this wasn't the first, hopefully it won't be the last. We also know how long these shortages generally last and can figure out pretty close how much ammo we really need to get by for that period of time. Having a few too many pounds of powder or a few too many sleeves of primers won't hurt, they'll outlast most of us if stored properly.
I don't agree with hoarding, it's silly. I do believe in being prepared, Just In Case.

[Finster101]

Well, this JIT is a real pain to deal with.

[btroj]

It may be a pain but it also helps keep costs down. It also provides for steady employ,ent for the people who make components.
Big inventories means there are times when things aren't needed, that leads to layoffs.
Big inventories mean someone has money tied up in that inventory. That means price increases to cover that cost.

Business is geared towards a "normal" situation. Huge increases, or decreases, in demand cause problems.

This is all just basic business economics. it will get better, we just need to be patient. Anger, frustration, and fear don't help. It isn't a conspiracy, it is sound business.

[Ed Barrett]

Many "fool proof" methods work 100 percent of the time on blackboards, so people think they should work in the real world. They do work perfectly, until something goes wrong, then they just can't understand it.

[scarry scarney]

I know all about those "fool proof systems." The kind designed by power point engineers. Works every time, on the board. Just like "tiger teams" can always fix a problem by putting more people against it. Just like how you can get 9 pregnant ladies together, and get a baby in one month!

[rexherring]

JIT might explain it but with Obummer being elected the second time, and everyone knowing what he had planned, I would call JIT Just Imbecilic Thinking on their part.

[SlippShodd]

I worked for a large corporation small-box company as a store manager for over 30 years. The man who saved and promoted the company was wise in the ways of business and made it flourish. However, after he died, the corporation became cannon fodder for a string of foresighted MBAs who ignored the basic tenets of business that had made the company so successful, for their's was a vision of enlightened change. Instead, they incorporated all their education without experience into the business format, one part of which was the implementation of Just In Time replenishment of inventory to the stores. Selling from bare shelves is a really good trick that I never got the hang of. That coupled with a hierarchy of corporate raiders with nothing to lose and golden parachutes awaiting has caused the wheels to come off of a very profitable and productive company. I became a pariah in the company because I was "so evidently averse to change," so I exited to retain what was left of my sanity.
Just In Time is a buzzword much beloved by those with no business being in business.
I suppose it's too obvious who I didn't vote for last year...

mike

[41 mag fan]

JITI is something i worked with for 11 yrs as a supervisor in the shipping and testing dept of my former job before going to the coal mines.
It was also for a Japanese owned corp....Minebea.

The JITI system is so flawed it's ridiculous. All of our parts were American made, and most were made in the factory. The JITI system or Just In Time Inventory system, has been used by American companies for 20 yrs or better. One major thing the JITI system has done is caused a poor product to be produced at an optimum price with quality as the sacrifice.
I cant tell you how many times as the shipping/receiving and testing supervisor, we'd have our weekly order to Honeywell for 135k of synchronous motors, and on Wed we'd find out parts were out of spec and had been tagged. We'd still be 40,50, 60k and up short on the order to ship on Friday morning.
Miraculously those "out of spec parts" became "in spec" and used, because it would take days to produce the amount of parts needed.
And every quarter, we'd get a huge reject shipment, sent back to us not just from Honeywell, but our other customers from all over the world.
The one thing the Japanese did perfect out of the JITI system, was how to make their employees works like dogs for them. They have just as much trouble with JITI as any other company, and are no more streamlined than any other company.
Lord knows i know this for a fact, as my wife has worked in the staffing field and now the quality assurance field for the past 6 yrs, working with Toyota and it's suppliers.

[10x]

Combine that with the economics of big batch production where a small batch of 10,000 units may cost 2x to 4x the expense of 100,000 units.
I get 15 mm flare gun adapters run off at a local machine shop. If I get 10 run off my price is $20.00 per unit. If I get 100 run my price drops to under $8.00, if I get 10,000 run, I can get them for about $4.00 a unit. The JIT concept raises the price of supplies.
Currently in some countries the cost of real estate is the driving factor. It simply costs too much for the space to store a large volume, and the interest paid over six months or a year on both real estate, and the raw materials are also a factor. If I borrow the money to run off 100,000 flare gun adapters and take 5 years to sell them I have to factor in interest on the purchase and manufacture costs, plus the costs of storage (real estate costs) over that five years.

[kbstenberg]

Slippshod exactly explained why JIT is bad for the customer oriented business. Why would you do repeat business with a company that only sold products under the JIT system. They may carry a wide array of reloading components but every time you went to shop there they only had half of what you wanted. The other half was in rout.
The good outlet has some of everything available NOW. It may only be 1 or 2 but they are there. Kevin

[kbstenberg]

Slippshodd exactly explained why JIT is bad for the customer oriented business. Why would you do repeat business with a company that only sold products under the JIT system. They may carry a wide array of reloading components but every time you went to shop there they only had half of what you wanted. The other half was in rout.
The good outlet has some of everything available NOW. It may only be 1 or 2 but they are there. Kevin

[cloakndagger]

I worked in quality assurance for a water bottling company during college that tried to implement JIT, had big meetings and posters and gave a week of vacation to most of the plant so it could be implemented. Everyone got to work the next monday and in short order ran the warehouse out of bottle caps. JIT managemrnt had predicted by their weekly average sheets that we could produce x pallets of x product a day.. realy we could run xx palets of x product a day and six times the average per week IF we didnt have to setup for new runs. This went on for three weeks and finaly our raw materials manager flew to corporate with HIS production tables and busted into a board meeting to present the practical side of the story. Needless to say, three weeks later two mba's were out of work, the raw materials manager was production manager, and we were off the JIT system. Looks good on a poster, looks bad on the floor.

[Charlie Two Tracks]

It happens all over the place. I just ordered a pressure washer from Menards. They had a sale online and I ordered one. Turns out, they have to have it shipped in and the expected delivery date to the store is April 1st. It probably isn't even made yet. I don't think there is a hording on pressure washers, yet I have to wait almost three weeks to get it. That sounds like a "Order it and then make it" type of deal.

[Boz330]

Our current shortage is easily explained but may be difficult to avoid in the future. Awhile back our mfrs borrowed a Japanese idea (actually, they originally borrowed it from us. We just couldn't make it work at first). The concept is called "Just in Time" or JIT. The objective is to have materials or components arrive shortly before they are needed for production, often just a matter of days, even hours. Product is also shipped soon after assembly, both reduce warehouse and carrying expense. A manufactured item sitting on the shelf today may have been raw material just a few weeks ago. JIT is part of a philosophy that is dependent on accurate forecasting, reliable component and raw material supply and a constant level of demand. That's where things usually start to unravel.
Inventory is often reduced even further near the end of the year for tax purposes. From the consumers' point of view the JIT philosophy is flawed during panic situations. With a minimal amount of inventory available and a huge implulsive demand supply simply cannot keep up with demand. JIT is still working for component and ammo mfrs, they're still selling all they can make and keeping costs down. They may shed a crocodile tear or two for our benefit.
I realize a few MBA's around here understand the concept better than I but I had to dumb it down so I could understand it. My solution is the well-known JIC philosophy, "Just In Case". We know there will be ammo and component shortages in the future, this wasn't the first, hopefully it won't be the last. We also know how long these shortages generally last and can figure out pretty close how much ammo we really need to get by for that period of time. Having a few too many pounds of powder or a few too many sleeves of primers won't hurt, they'll outlast most of us if stored properly.
I don't agree with hoarding, it's silly. I do believe in being prepared, Just In Case.

Our parents and grandparents didn't have the luxury of being able to get something from the store in a couple minutes and they had to stock up when things were available for the lean times. Think canning in the summer. I learned during the primer shortage in the 90s not to get short on them. Anyone else ever notice that primer and powder shortages only seem to happen during Democratic administrations.

Bob

[41 mag fan]

Our parents and grandparents didn't have the luxury of being able to get something from the store in a couple minutes and they had to stock up when things were available for the lean times. Think canning in the summer. I learned during the primer shortage in the 90s not to get short on them. Anyone else ever notice that primer and powder shortages only seem to happen during Democratic administrations.

Bob

Told that one to my FIL about 5 yrs ago, he told me to pull my head out of my as*. I told him, to wipe the sh*t out of his eyes and see what this *** tried to do in IL and is now POTUS, and why theres always a shortage or influx of shooting and gun sales during a democrat controlled gov't.

[Doc Highwall]

I worked for the aircraft industry and just got laid off last November with 39+ years service and have seen first hand a lot of changes.
When I first started there some machines were set up to do only one job/operation and never changed.
Then the first CNC/tape machines came out and manual machines started to disappear and time standards were lowered.
The ware house was full of castings, forgings and bar stock. The company could buy a whole production/contract run of material for a price break.

Then along came the government tax auditors who started to tax the manufactures on their raw material each year, and with say 10 years of raw material on hand for a particular contract found out they were losing money.

This is one of the things I see that lead to JIT. We as the worker’s were at fault for not delivering on time even though we received the raw material 2 –3 weeks late. Then we would have to go like hell to make the shipping schedule and because we made it, we were punished by management shorting the lead time and the machine time. Now we had a time variance as to what it took to make the product verse their time standard. They even went as far as lying to the customer about lowering the cost of the product by just arbitrarily lowering the time standards with out any change in the process, then turn around and blame us for not working efficiently.

It all came down to one thing CORPORATE GREED!

[Triggernosis]

It may be a pain but it also helps keep costs down. It also provides for steady employ,ent for the people who make components.
Big inventories means there are times when things aren't needed, that leads to layoffs.
Big inventories mean someone has money tied up in that inventory. That means price increases to cover that cost.

Business is geared towards a "normal" situation. Huge increases, or decreases, in demand cause problems.

This is all just basic business economics. it will get better, we just need to be patient. Anger, frustration, and fear don't help. It isn't a conspiracy, it is sound business.
You're spot-on, sir!

[Iowa Fox]

I remember the JITI concept coming to life very well. In the late 70s, the Jimmy Carter days, interest rates were nearing 20 percent and the economy was starting to take a real nose dive slowing down. Manufacturers were paying a heavy price for interest cost in raw material inventory and heavy taxes on finished products waiting to ship to dealers and distributors. The company I worked for those two costs amounted to millions and millions of dollars so they were forced to do something. It didn't take us long to figure out that that rolling inventories in the trucks going up and down the highway had some real financial advantages back then. Then the early 80s and the farm crisis here really ground everything to a halt. Slowly after that it has been a progression of new corporate managers having greed without consience or compassion for fellow man. Now technology is changing so fast that you don't want to have a lot of old inventory to sell when the customers know you have a new improved item. About 20 years ago I was at one of our customers for business. One of his customers was and still is John Deere. His property was full of brand new John Deere tractors so I asked what the heck. He told me that its inventory time at John Deere and as long as the machinery is off their property in transit they don't have to pay tax on it. Every year since at tax time I see the rail yards and trucking companies full of John Deeres. We can't blame high interest rates these days but taxes are strangling this country. Shortages are nothing new. I remember very well my grandparents and uncles telling of rationing cards and just how difficult certain items were to come by during the WW11 days. My uncle was a reloader back then and told me components were impossible to come by but he had the foresight to stock up before hand and kept shooting when others couldn't. As a kid I remembered their words well. The scary thing is the grocery stores in this country operate on one of the tightest JITI I have ever seen. Thank God I'm a country boy.

[MtGun44]

JIT is a REACTION to the government increasing taxes on inventory. In a really free market,
with low taxes, it would not happen. In addition, zoning and other land use regulations also
make warehousing more expensive.

Most really stupid business, finance and other processes are a DIRECT response to a tax or
a tax credit. Most problems can be traced back to government.

[Recluse]

The ware house was full of castings, forgings and bar stock. The company could buy a whole production/contract run of material for a price break.

Then along came the government tax auditors who started to tax the manufactures on their raw material each year, and with say 10 years of raw material on hand for a particular contract found out they were losing money.

It all came down to one thing CORPORATE GREED!

Actually, it all came down to one thing: Profit. There are only two entities in a free-market that can exist and survive without making a profit: Charities are one, the stinking government is the other.

The corporate suits were simply responding to the draconian chains the government put on you via the taxation of raw goods/materials in your warehouse.

When a business fails, there is a lot more at stake as to the economic harm it causes aside from just the immediate workers. You have peripheral businesses that suffer (gas stations, grocery stores, shopping centers, car dealers, etc), you have service industries that suffer (doctors, plumbers, contractors, etc) and then of course, the local township or municipality suffers from tax loss due to the business' loss of revenue.

It's not always corporate greed. The liberals and the media and especially the government like to play the class-envy and class-warfare card at every opportunity.


JIT is a REACTION to the government increasing taxes on inventory. In a really free market, with low taxes, it would not happen. In addition, zoning and other land use regulations also make warehousing more expensive.

Most really stupid business, finance and other processes are a DIRECT response to a tax or a tax credit. Most problems can be traced back to government.

One of THE most nefarious things to come down the pike, which originated in California and New York and has now spread to almost every state in the union, has been the inclusion of inventory in the overall property value of businesses for tax appraisal purposes.

A typical convenience store, if it keeps ample inventory for a standard fourteen-day supply and sales cycle, will pay more in property taxes in Texas than it would if it only kept a three-day supply.

I know a number of store directors at big box retailers like Walmart and Target and Sears, and they've shown me the difference between utilizing JIT inventory and order fulfillment versus keeping ample on-hand stock as it pertains to their property taxes, and the difference is mind-boggling.

What's perhaps even more mind-boggling, however, is the fact that we have not taken every single stinking politician--bar none--and tossed their butts in the drink the same as when the Bostonians tossed the tea in the harbor.

Taxation without representation? Just look around you and try to find something that hasn't been taxed or that doesn't have an ongoing tax or a future tax (death-penalty/inheritance tax) or that is subject to a floating tax rate (property appraisals, etc).

A lot of businesses could be run better, no doubt. But I'm 100% in Bill's corner here: The government is at the root of virtually every single problem we have in this nation.

:coffee:

[historicfirearms]

Why is it every time I go to the grocery store or Walmart they have about 3 checkout lines open? Law of averages say that I will be at the store at the busiest time, after all, it's busy because the most people are shopping at that time. I understand that the stores have slow periods and don't want to have all the checkouts open all the time. But why the heck don't they open up more lanes when things get busy?

This is similar to the component manufacturers not ramping up production during times of high demand. They really have no incentive to do so. Prices can just be raised so that demand comes down, but they still make the same amount of money.

[dakotashooter2]

Why is it every time I go to the grocery store or Walmart they have about 3 checkout lines open? Law of averages say that I will be at the store at the busiest time, after all, it's busy because the most people are shopping at that time. I understand that the stores have slow periods and don't want to have all the checkouts open all the time. But why the heck don't they open up more lanes when things get busy?

The probem with Chinamart isn't the number of checkout it is the layout of the checkout stands. The way they are set up they are only efficient for small orders maybe 10 items or less. The "bag as you ring" method of processing orders is the least efficent way of processing them. With space on the end of the checkout for piling goods prior to bagging a good checkout ringing off an advancing belt should be able to ring 45-60 items per minute. When the first scanners came out I was working in a grocery store. Our benchmark for checkouts was 60 items per minute and most checker could meet that. Scanners and UPC codes are much better now and 60 items a minute should be a breeze. A good bagger can probably bag 25-45 items per minute. I have timed them at WalMart. The average time to ring and bag an item is around 15 seconds. A good checker ringing all the items first and bagging after could probably cut that to 3-4 second per item. The checkout layout will not allow them to do that. In most a cases they have plenty of time to bag while your check or CC clears the system. They need to copy grocery store checkouts.

These days it's all about cash flow. In most cases raw materials and supplies are only a couple of days away so there is no need to inventory large quantities of materials and tie up a lot of money. The problem is it makes for a fragile supply chain............

[shooter93]

I won't call it JIT but rather keeping the wolves at bay. It strikes every business large or small sooner or later. I've run a small business forever and it's really quite simple. If I'm swamped or backed up with orders I have no problem stocking plenty of lumber etc as it gets used soon. Now when things get slow....think Obama here.....it's foolish of me to put 50K in hardwoods that I'll be taxed on as profits and may not get used for years.....think Obama here again. The 50K is much handier to be used to stay open and hopefully offset some hours the guys might lose. I've learned two things about the American consumer in all these years......Most times the people who complain about how a business is run have never run a business and everyone in America is underpaid but everone they want to hire....charges too much.

[Alvarez Kelly]

I've learned two things about the American consumer in all these years......Most times the people who complain about how a business is run have never run a business and everyone in America is underpaid but everone they want to hire....charges too much.

I want to use this! I've run a business for years and I run into this mentality all the time. "Since you own the business, you must be rich, so why don't you do my job for free..."

Profits are not a bad thing. Without a profit, I wouldn't be in business for long.

As for inventories... I constantly balance purchasing discounts with carrying costs... I have zero stock on hand for many jobs, buying it only when needed. But I have as much as a 10 year supply of other items... when I could buy them for pennies on the dollar.

[TXGunNut]

Some companies have made JIT work. For example it seems Ford and GM have both made it work on the production side but I can assure you it's been a miserable failure on the service parts side. I wish I had a dollar for every part with the notation of "demand exceeded forecast".
JIT manufacturers have the cooperation of their suppliers, in many cases. They'll contract to buy 100,000 widgets to take advantage of the economy of scale but will specify delivery in truckload or other quantities convenient to the process. Wal-Mart is an interesting JIT study. I'm close to three, maybe four stores and since I only plan on shopping twice a month I find empty shelves disappointing. One store is doing quite well with JIT, even does pretty well keeping expired items off the shelf. The others...oh well.

[selmerfan]

I've read through both of these shortages threads - thank you to you small business owners here that are making it work! I have to toss this somewhat random thought out there. As a pastor, nothing aggravates me more at a church council meeting than when we need a small job done - drywall at the parsonage, electrical or plumbing problems, etc. - and some council member pipes up, "So and so (congregation member) is an electrician, he can come take care of it." With the implication that they will do it for free. I always tell them that we should definitely approach them about helping out, but we need to expect to pay them what they would charge anyone else. Grrrrr.....

[Boz330]

My business is mostly service but I do have to supply parts for some of those jobs. Because it is aircraft related the parts are unbelievably expensive. Many of the parts are standard industry stuff marked up 3 to 5 times what they cost the manufacturer, but they have to go through a paperwork nightmare to be called aircraft parts, not to mention possible liability insurance concerns. Some things I have to stock, but I do my level best to reduce that inventory at the end of the year because I get taxed on it, not to mention the pure PIA of counting it since my accountant will only accept a printed list. The discount I get is 15% but then I have to do paperwork on it as well since everything has to be traceable for the Feds. By the time I hassle with all of that plus the sales tax on it there isn't any profit left to speak of. Then I get to listen to the customer complain because they can't believe how expensive that little part is.

Bob

[DCM]

I've read through both of these shortages threads - thank you to you small business owners here that are making it work! I have to toss this somewhat random thought out there. As a pastor, nothing aggravates me more at a church council meeting than when we need a small job done - drywall at the parsonage, electrical or plumbing problems, etc. - and some council member pipes up, "So and so (congregation member) is an electrician, he can come take care of it." With the implication that they will do it for free. I always tell them that we should definitely approach them about helping out, but we need to expect to pay them what they would charge anyone else. Grrrrr.....

Thank you!!

I work in the construction industry, I took me 7 years and a lot of sacrifice to complete the needed training to get my masters license to do my job, I have bought tons of tools to do my job, I must complete many CEUs to maintain my license, I usually spend 40-60+ hours a week doing my job which can be Very Dangerous in Many Many ways.
And regardless of all this I always get people that EXPECT me to work on their stuff for free!
Now I do Sometimes do that but never for those that expect it including my own sister who only calls me when she needs my help!
And yes I have done work for my church free of labor charge but attitude is everything there too and somethings are way more complex than others.
Some folks just don't get it, thankfully some do.
I have also noticed that those who do seem to appreciate the help MUCH more even when they are paying for it!


Recluse has a thread in off topic that explains part of the supply problem also.

+1 on the inventory tax being part of the problem.

[cajun shooter]

The inventory tax has been around for many years and we still were able to purchase the needed items. The entire over all picture is much more than just that. It has to do with greed as the main culprit. Look at the bean counters for wally world. they have now started many check out aisles that are "Do IT YOURSELF".
I had 4 items that was a Honey Do run. The entire store had only three cashiers working at 3:30 pm. The less than 20 items were closed. 5 other isles were closed so that they could be converted to the self check out style. This eliminates employees and puts more funds in the pockets of the already super rich.
I had a friend who decided to open a small sporting goods store that had for the most part a big catalog system. You picked out what you needed and he would place their order. This worked for a while as his friends and word of mouth customers went along. He finally had to close shop as every-one became feed up with his no stock system.
I believe that any business that resorts to this type of selling is doomed for failure.
You don't want to see a picture of a certain car, you want to put your hands on it and give it a drive.
This depression that we have lived in since 2007 for our Drafting business has a lot to do with what is going on also. Stores cut back on inventory as it was not being purchased at the normal rate. When the I'm going to take your guns Obama came to office, they were caught with their pants down on available inventory for the second time in his leadership. I use that word very loosely.
I feel this time will be much harder to recover from as the people who have now went through this thing will buy components as soon as they hit the shelves for months to come.
A good example is the Cabela's that is about 30 miles from my home. The clerk who was stocking the shelves was having them emptied as soon as he put something down. It will be a while before this panic buying stops.
I will have to say that I saw a local ad in our newspaper with a guy trying to sell about 50,000 primers. I hope he chokes on them. Later David

[popper]

JIT isn't new, been around for 50 or more years. It works well when proper sales forecasts are done. Unfortunately, MBA's want big forecasts so the salesmen are happy to comply. Remember when car manufacturing was done on an order basis? Now we have huge lots of clone vehicles on a lot waiting to be sold. It isn't JIT, it's the economy, politics and production capacity.