AR Sponsor
Posted: 5/15/2012 6:54:27 PM EDT
| I'm finding there is great difficulty in finding parts and many firearms in general are difficult to keep in stock. Having a background in manufacturing management, I don't understand why more firearm manufacturing facilities are adding additional shifts to accommodate the demand. I can understand not wanting to invest capital equipment for short term results, but why not increase production when there is record unemployment? E.g., a well respected manufacturer on the west coast is operating 14 hour shifts at 4 days a week. None of this makes sense. |
|
I understand your point with unemployment and whatnot. But personally, I don't want them to bring in John Smith off the street to make high precision gun parts that I'm dropping a pile of money on just so they can meet demand. The best gunsmiths have years of training that wouldn't be worth trying to cram into a person that might only be there for the election year surge. I would imagine if it was that easy to do, all kinds of machine shops would have jumped on the band wagon to manufacture firearm components. Just my opinion...
|
| From the outside looking in, one might think it'd be more of a 'supply and demand" issue, wherein they'd rise prices up for the sought after goods. But not the case here, prices generally stay the same (except on ammo when a democratic president is voted in lol), so it's more of a..."not really giving a shit" kind of approach? I dunno. |
|
My dad is an economist, and in talking about when to buy my first AR a few months ago, this topic actually came up and here is more or less what he said, and you can take it or leave it:
Supply and demand is great when both are high, but the fact is that this will die down soon enough. If they hired more people and increased production, sure, they would make profit now, but they would lose it again in a few months when things return to normal. By backordering, they make people panic and scramble, and as a result, the companies make lots of money, and only push out as much as demand calls for, even if it takes awhile. Like look at RRA, i hear they are like 10 weeks behind on production...think of how much money they are making on those backorders! And they didn't have to hire more people or buy more machines. Food for thought. |
|
that is bad business planning. i understand what your dad is saying, but a smart business should always aim for the opportunity to sell and gain advantage over the market. so a smart business would have enough staff and resources to build inventory to take advantage when demand is high. they can certainly raise prices of these times (we may not like it, that's how capitalism works) to increases their profit margin. not only is increased revenue important, but margin is important as well.
i think what's happening in gun industry is that alot of these businesses are ran by 'gun' people and not so much 'business people'. so they are slow to react to demands. in addition, alot of the established gun related business people rely on high profit government contracts that runs for years, and that aspect of the business motivate a business very little to be swift toward civilian customers. Quoted:
My dad is an economist, and in talking about when to buy my first AR a few months ago, this topic actually came up and here is more or less what he said, and you can take it or leave it: Supply and demand is great when both are high, but the fact is that this will die down soon enough. If they hired more people and increased production, sure, they would make profit now, but they would lose it again in a few months when things return to normal. By backordering, they make people panic and scramble, and as a result, the companies make lots of money, and only push out as much as demand calls for, even if it takes awhile. Like look at RRA, i hear they are like 10 weeks behind on production...think of how much money they are making on those backorders! And they didn't have to hire more people or buy more machines. Food for thought. |
|
They want to capitalize on current demand, but are being more cautious this time. Compound that with the fact that much of the AR-15 industry uses the same sub-contractors for components, and you get a production log jam. Just remember; some of the demand manufactures saw in the post-2008 election was false because consumers were placing multiple back orders for the same item with different companies. Then when the first guy shipped it, they cancelled the other orders. Many companies got caught with HUGE inventory at the end of 2009 because sales dropped off the cliff in June of that year. We finally sold off the last of that 2009 AK receiver inventory earlier this year. |
|
ARs are assembled from steel parts in an assembly line. This isn't a handcrafted Luciano Bosis shotgun made by a lifetime master gunsmith in Italy, so find experienced labor should not be a problem. If there is a demand issue, ramp up the supply. We all agree that this is probably short-term, so adding a shift that can be laid-off makes more sense than investing in capital equipment that would require a 10 or 20 year pay-off.
I think dogbutter had the best answer that the gun industry is run by gun people, not business people. It sounds over simplified, but I've seen many examples to support this. I only wish someone from the industry could chime in so the rest of us would quit speculating. Meanwhile, last night while we were enjoying our evening, all of the AR manufacturing lines were silent while orders were piling up on someones desk...go figure. |
|
Many have already added shifts, employees, etc., but most 'expansion' stays within the context of what they (the individual mfr) perceive to be the limits of their resources or goals.
There are exceptions at a few companies, but many that have a stable business may not want to struggle with wrestling market share from competitors as the market softens in the future -whenever that inevitably happens (think musical chairs). Market size will remain larger even after the softening IMO, but everyone that gambles will be vulnerable to the extent that their 'expansion' investment leveraged their debt, overhead costs, etc.. Its hard to spend sales and marketing dollars in a soft market to maintain your position. Many companies choose to be conservative and not risk losing that fight in the future - and someone will lose. Another issue is that many of the components needed for our industry are produced by contracted mfrs. These machine shops, finishers, etc. only produce what customers (the brands you know) order. They are often not as aware of market conditions and simply fill the orders that are in front of them (with no eye to the future). While their customer (the brands you may know) assumes the risk and is responsible for paying the machine shop, finisher etc. A visionary machine shop, finisher, etc. with knowledge, money and confidence could build a great business right now. No doubt about it. Quoted:
I'm finding there is great difficulty in finding parts and many firearms in general are difficult to keep in stock. Having a background in manufacturing management, I don't understand why more firearm manufacturing facilities are adding additional shifts to accommodate the demand. I can understand not wanting to invest capital equipment for short term results, but why not increase production when there is record unemployment? E.g., a well respected manufacturer on the west coast is operating 14 hour shifts at 4 days a week. None of this makes sense. |
|
Quoted:
I can understand not wanting to invest capital equipment for short term results, but why not increase production when there is record unemployment? E.g., a well respected manufacturer on the west coast is operating 14 hour shifts at 4 days a week. None of this makes sense. I agree. These threads always in end with people defending the gun companies by saying that demand is going to eventually drop, so they shouldn't produce more. But that still doesn't justify the 4-6 month backlog from some manufacturers. There are dozens of ways to boost production with minimum fixed costs. For example, I have a hard time believing that a company as big as Ruger can't find a way to produce more guns without halting orders for 3 months. If they truly are running at 100% capacity and are still 3 months behind, then maybe it really is time for some capital investment. If they're really that overwhelmed with orders, it sure seems like they could remain profitable with some capital investment, even if demand falls 20-30% next year. Firearms is not the only cyclical industry in the world. Everyone else seems to have a pretty good grasp on managing their supply chain, so I don't understand why gun companies can't do it. |
|
Quoted: The firearms industry cycle is driven by the political cycle which may or may not increase demand. It's all about who may or may not get elected and the type of legislation (pro or anti-gun) that's in the pipeline. Firearms is not the only cyclical industry in the world. Everyone else seems to have a pretty good grasp on managing their supply chain, so I don't understand why gun companies can't do it. |
|
Quoted:
Quoted:
The firearms industry cycle is driven by the political cycle which may or may not increase demand. It's all about who may or may not get elected and the type of legislation (pro or anti-gun) that's in the pipeline.
Firearms is not the only cyclical industry in the world. Everyone else seems to have a pretty good grasp on managing their supply chain, so I don't understand why gun companies can't do it. To a degree, sure. But there are a lot of other factors that influence the cyclical nature of the firearms industry. And even then, it doesn't change the fact that it's still a cyclical industry and companies have to manage the fluctuations in supply and demand. Similar industries have the same issues and seem to be able to get a handle on it. There's no reason the gun industry can't. Quoted:
Have you considered that they are already working at max capacity? If you look around, that seems to be the case. Look at Ruger, they even had to publicly announce that they would not take any more orders because they were so swamped. Read the rest of the thread. If Ruger is really running at max capacity, and they're still not meeting at least 25% of the annual demand (by cutting out orders for an entire quarter), then they should easily be able to support some additional capital investment and expansion, even when demand softens. Even if they expand to meet current orders, and the demand for guns falls in 1/2, they could still be running at 75%+ capacity. It just doesn't make sense that a company could fall this far behind and not be able to find a cost-effective way to boost production. |
|
Here's a theory: The premiss is Demand Sells. In a perfect world a product is launched that meets 90% of demand, thereby leaving 10% empty handed and wanting what they can't have. Observers look at the market and think, I don't need the product, I can't get the product, so now I better get it since everyone wants it (inflated demand). Have you noticed when a well run night club opens, they only open a small part of the bar until a line forms outside. Then they continue opening section by section, but slow enough as to never allow the line outside to dissipate, again an inflated demand.
I think it is plausible that gun manufacturers would want to create an inflated demand and run this through the election. What else would explain manufacturing equipment sitting idle while the orders pile up? Yes, I'll take someone's word that Ruger is at capacity (even though I doubt they're running 24/7), but I know for a fact most are not and that equipment is sitting idle write now while I type. What I find most deplorable is, to my knowledge, none of the writers in the gun world are writing about this. Then again, I quit subscribing to shooting magazines 15 years ago because none of them would ever utter a critical word about the gun manufacturers for fear of loosing a sponsor. What I would give to find an up and coming journalist conduct a hard ball interview and do some old school shoe leather journalism. I hope some struggling blogger takes note. |
|
Quoted:
Quoted:
Quoted:
The firearms industry cycle is driven by the political cycle which may or may not increase demand. It's all about who may or may not get elected and the type of legislation (pro or anti-gun) that's in the pipeline.
Firearms is not the only cyclical industry in the world. Everyone else seems to have a pretty good grasp on managing their supply chain, so I don't understand why gun companies can't do it. To a degree, sure. But there are a lot of other factors that influence the cyclical nature of the firearms industry. And even then, it doesn't change the fact that it's still a cyclical industry and companies have to manage the fluctuations in supply and demand. Similar industries have the same issues and seem to be able to get a handle on it. There's no reason the gun industry can't. Quoted:
Have you considered that they are already working at max capacity? If you look around, that seems to be the case. Look at Ruger, they even had to publicly announce that they would not take any more orders because they were so swamped. Read the rest of the thread. If Ruger is really running at max capacity, and they're still not meeting at least 25% of the annual demand (by cutting out orders for an entire quarter), then they should easily be able to support some additional capital investment and expansion, even when demand softens. Even if they expand to meet current orders, and the demand for guns falls in 1/2, they could still be running at 75%+ capacity. It just doesn't make sense that a company could fall this far behind and not be able to find a cost-effective way to boost production. I read the whole thread and saw nothing but a bunch of surmising about what is really going on. Ruger did state, if I recall correctly, that they were spending $3 million on upgrades for their 1911 manufacturing capacity alone. In addition to an increased demand in firearms, some of those firearms require certain types of materials to make them at all in some cases, and to make them well in others. If you look around, there is a great demand for certain grades of steel and aluminum, copper, brass, and tungsten, and those just happen to be the same materials the gun and ammo makers are vying for. I am willing to bet that if they are not running 24/7, it is only to pace the work load with their ability to get materials. Otherwise, they would work their people to death and then have no work for them at all until they could get more material. |
ITT: People who think they know more about the inner workings of certain businesses than the people who actually run those businesses. 
ETA: Completely unrelated to my post but related to the topic at hand, I had to go to about seven different BIG vendors last night before I finally found a gas tube in stock. A friggin gas tube.
|
|
Quoted:
Here's a theory: The premiss is Demand Sells. In a perfect world a product is launched that meets 90% of demand, thereby leaving 10% empty handed and wanting what they can't have. Observers look at the market and think, I don't need the product, I can't get the product, so now I better get it since everyone wants it (inflated demand). Have you noticed when a well run night club opens, they only open a small part of the bar until a line forms outside. Then they continue opening section by section, but slow enough as to never allow the line outside to dissipate, again an inflated demand. I think it is plausible that gun manufacturers would want to create an inflated demand and run this through the election. What else would explain manufacturing equipment sitting idle while the orders pile up? Yes, I'll take someone's word that Ruger is at capacity (even though I doubt they're running 24/7), but I know for a fact most are not and that equipment is sitting idle write now while I type. What I find most deplorable is, to my knowledge, none of the writers in the gun world are writing about this. Then again, I quit subscribing to shooting magazines 15 years ago because none of them would ever utter a critical word about the gun manufacturers for fear of loosing a sponsor. What I would give to find an up and coming journalist conduct a hard ball interview and do some old school shoe leather journalism. I hope some struggling blogger takes note. Do some research. Just about every gun and ammo company has been running full bore pretty much since the last election. Their main downfall is the ability to get all the materials they need, and even if you hire more people to work round the clock, you still have take into consideration that running machines that much harder will cost them even more in the long run in maintenance and repair costs. There is a lot more to it than just meeting demand. |
|
I did my research prior to posting because I found most were not running 24/7, in fact, in my OP I stated a major manufacturer on the west coast is running 14 hour shifts 4 days a week. You stated materials are in short supply, but did you research that (as you suggested I do)? Because World Steel stated at their annual meeting on 23 Apr 2012 in Kiev, Ukraine that current US usage is flat (auto industry is recovering but it is offset by a sluggish construction industry), in other words, steel availability is just as open now as it has been in recent years.
You mentioned running equipment increases maintenance cost for the business. With all due respect H53Expert, you are grossly misinformed. Equipment sitting idle isn't making a dime for the business, my teenage son and his lawn mowing business can vouch for that. Are you really suggesting maintenance cost exceeds the output revenue for that equipment? Really, how are they still in business? |
|
The US is not the only one competing for materials and steel is only one component of firearms.
When you are stamping, grinding, and milling stuff, yes, continuous use takes its toll. In addition to parts wearing out, you still have to stop and inspect and/or maintain machinery, not to mention your consumables cost goes up because you are using more cooling fluid, grease, hydraulic fluid, etc... I spent several years analyzing machinery usage and am well versed in mean time between failures, mean time between corrective actions, overhaul requirements, cost of opportunity, labor calculations, and most importantly quality control and assurance. I'm pretty sure I am a bit more informed about the issue than you are. |
|
I read the whole thread and saw nothing but a bunch of surmising about what is really going on. Ruger did state, if I recall correctly, that they were spending $3 million on upgrades for their 1911 manufacturing capacity alone. In addition to an increased demand in firearms, some of those firearms require certain types of materials to make them at all in some cases, and to make them well in others. If you look around, there is a great demand for certain grades of steel and aluminum, copper, brass, and tungsten, and those just happen to be the same materials the gun and ammo makers are vying for. I am willing to bet that if they are not running 24/7, it is only to pace the work load with their ability to get materials. Otherwise, they would work their people to death and then have no work for them at all until they could get more material. As you know, operations management is about managing to the bottleneck. In this case, the supply chain complicates the ability to add production capacity, because very few of the manufacturers are vertically integrated anymore. There's just no point to adding another shift when you can't get enough [pick a part] from your supplier/subcontractor. You can lean on them to get you more, but every other manufacturer who is competing with you is doing the same. Maybe it might make some sense for the supplier to add some production capacity too, but their decision might be different because the margin profile vs cap ex for making gas tubes probably looks a lot different than it does for you to be able to ship more rifles out the door. Especially because while there might be 200 manufacturers of rifles who can exploit supply shortages if they get more inventory out the door today, there are not 200 makers of gas tubes. Hence, when demand dies down, it dies down across all of your customers, and all you did was exploit volume slack from 2-5 competitors. Even if you had a fully efficient supply chain, with everybody concluding they should ramp up production, you cannot synchronize how quickly those corporate decisions are made across the board. So you can only ramp up as fast as the slowest guy to decide. For me, the interesting observation isn't that inventory is short or that production isn't ramping faster... it's that even with demand clearly outstripping supply, price has not moved up appreciably. Say what you want about that being a customer relations-driven decision, but check the EE. You'd expect to see sellers who have no need to worry about keeping customers happy long-term to jack the price a bit. It perplexes me... it's hard to find a Colt 6920 in stock at a major dealer, and ones that come on EE or other sites get snapped up immediately. But no one is asking $1200+ for their used 6920. Makes me scratch my head. |
|
Quoted:
ITT: People who think they know more about the inner workings of certain businesses than the people who actually run those businesses. Yes, because the people who run a business always do it in the most efficient way possible. It's not like businesses fail all the time due to inefficiency and poor management, so outside opinions couldn't possibly have any value.....
When you break it down to pure fundamentals, 99% of businesses are all the same. It's pretty easy to see when a business does something unconventional and evaluate those decisions, even if you're not working for the company. For what it's worth, I've worked in the firearms industry for all my life. Quoted:
When you are stamping, grinding, and milling stuff, yes, continuous use takes its toll. In addition to parts wearing out, you still have to stop and inspect and/or maintain machinery, not to mention your consumables cost goes up because you are using more cooling fluid, grease, hydraulic fluid, etc... I spent several years analyzing machinery usage and am well versed in mean time between failures, mean time between corrective actions, overhaul requirements, cost of opportunity, labor calculations, and most importantly quality control and assurance. I'm pretty sure I am a bit more informed about the issue than you are. Sure, but you're ignoring the fact that those machines are still producing goods and products. It's not like they're running them nonstop without generating any revenue. There's no way for marginal cost to outweigh marginal benefit unless the machine "gets tired" and produces less over time. That doesn't happen. Sure maintenance can become more frequent and increase overall expenses, but you're still generating the same product as you would if you spaced it out over a longer period of time. It doesn't change your marginal cost to produce any more units. If it does change your marginal cost to outweigh the marginal benefit of producing another unit, then the machine is completely inefficient (worn out) to begin with and needs to be replaced. |
| I would also look at if you're working say 5 12 hour shifts a week. Yes you could hire more people and add an extra shift(s) or work around the clock etc. Machinery is going to break and need maintenance with increased usage meaning backing up production. Yes you could invest hundreds of thousands to millions of dollars in new additional machinery, but when the market declines suddenly you have all this machinery that's not making you any money. |
|
H53Expert, I get it, you know how to turn a wrench. Everything you mentioned falls under the category of maintenance. The maintenance on a piece of machinery does not, can not, will NEVER exceed the value of revenue produced. If so, it would have been replaced long before that point. While I don't question your ability to turn a wrench, your statements indicate a significant lack of understanding regarding equivalent annual cost of machinery and how it relates to capital budgeting.
Again, according to World Steel, US demand is overall flat...steel is available in the US. Can you name another steel product with the backlog of availability that we're seeing in the gun market, especially parts? H53Expert, you seem trigger happy to get into a urinating contest over the minutia, my OP was a puzzling lack of supply for our demand. |
|
Quoted:
Here's a theory: The premiss is Demand Sells. In a perfect world a product is launched that meets 90% of demand, thereby leaving 10% empty handed and wanting what they can't have. Observers look at the market and think, I don't need the product, I can't get the product, so now I better get it since everyone wants it (inflated demand). Have you noticed when a well run night club opens, they only open a small part of the bar until a line forms outside. Then they continue opening section by section, but slow enough as to never allow the line outside to dissipate, again an inflated demand. Wow, do you really think that there's an industry-wide conspiracy to drive up long term demand by manipulating perception of demand and desirability? Forget for a moment that there are literally hundreds of manufacturers. You can't get a dozen-country cartel like OPEC to respect their quotas, much less a highly fragmented industry like the firearms business. Do you really expect Windham to hobble their new business so that maybe the perception of shortages will help drive their volumes in 18 months? Who would holding off their production help? Them? No, they get disproportionately hurt. Bushmaster, who they hate, would disproportionately benefit. You think some little AR maker like PSA wouldn't exploit the opportunity this creates? |
|
Quoted:
Quoted:
ITT: People who think they know more about the inner workings of certain businesses than the people who actually run those businesses. Yes, because the people who run a business always do it in the most efficient way possible. It's not like businesses fail all the time due to inefficiency and poor management, so outside opinions couldn't possibly have any value.....
When you break it down to pure fundamentals, 99% of businesses are all the same. It's pretty easy to see when a business does something unconventional and evaluate those decisions, even if you're not working for the company. For what it's worth, I've worked in the firearms industry for all my life. Quoted:
When you are stamping, grinding, and milling stuff, yes, continuous use takes its toll. In addition to parts wearing out, you still have to stop and inspect and/or maintain machinery, not to mention your consumables cost goes up because you are using more cooling fluid, grease, hydraulic fluid, etc... I spent several years analyzing machinery usage and am well versed in mean time between failures, mean time between corrective actions, overhaul requirements, cost of opportunity, labor calculations, and most importantly quality control and assurance. I'm pretty sure I am a bit more informed about the issue than you are. Sure, but you're ignoring the fact that those machines are still producing goods and products. It's not like they're running them nonstop without generating any revenue. There's no way for marginal cost to outweigh marginal benefit unless the machine "gets tired" and produces less over time. That doesn't happen. Sure maintenance can become more frequent and increase overall expenses, but you're still generating the same product as you would if you spaced it out over a longer period of time. It doesn't change your marginal cost to produce any more units. If it does change your marginal cost to outweigh the marginal benefit of producing another unit, then the machine is completely inefficient (worn out) to begin with and needs to be replaced. The answer is not always to run everything 24/7. The machines can be running perfectly, but still be eating up consumables, and begin producing sub-par products. At that point, they are not generating revenue, they are generating problems. Then they have to stop anyway, and that stoppage could be for longer than if they had just went at a measured pace to begin with. On top of everything else, when these companies order stuff in the bulk amounts they do, they have to do so with weeks and sometimes months of advance notice. When they don't get it right, they are stuck waiting in line like everyone else. But that is better than over-ordering, have the bottom drop out from under their demand, then being stuck with a bunch of material that they can't use in a timely manner ( and paying for storage on top of that), and possibly being stuck with material that they paid much more for, than they could currently get it for. There also comes a point where material becomes plentiful but the prices go through the roof and it becomes more beneficial to wait it out. Running a gun shop is nothing like making guns. If you think 99% business are the same, you definitely don't grasp what is happening. |
|
Quoted:
H53Expert, I get it, you know how to turn a wrench. Everything you mentioned falls under the category of maintenance. The maintenance on a piece of machinery does not, can not, will NEVER exceed the value of revenue produced. If so, it would have been replaced long before that point. While I don't question your ability to turn a wrench, your statements indicate a significant lack of understanding regarding equivalent annual cost of machinery and how it relates to capital budgeting. Again, according to World Steel, US demand is overall flat...steel is available in the US. Can you name another steel product with the backlog of availability that we're seeing in the gun market, especially parts? H53Expert, you seem trigger happy to get into a urinating contest over the minutia, my OP was a puzzling lack of supply for our demand. That is where you fail again. I don't just have experience turning wrenches. But you on the other hand, are looking at it from a purely theoretical perspective. Everyone that knows anything about real life knows that application and theory are two different beasts. The only thing you have done is put forth some kind of conspiracy theory. The rest of us that know better, and actually have experience on both sides of the house, see the bigger picture of real world economics at work. |
|
Quoted:
Quoted:
Here's a theory: The premiss is Demand Sells. In a perfect world a product is launched that meets 90% of demand, thereby leaving 10% empty handed and wanting what they can't have. Observers look at the market and think, I don't need the product, I can't get the product, so now I better get it since everyone wants it (inflated demand). Have you noticed when a well run night club opens, they only open a small part of the bar until a line forms outside. Then they continue opening section by section, but slow enough as to never allow the line outside to dissipate, again an inflated demand. Wow, do you really think that there's an industry-wide conspiracy to drive up long term demand by manipulating perception of demand and desirability? Forget for a moment that there are literally hundreds of manufacturers. You can't get a dozen-country cartel like OPEC to respect their quotas, much less a highly fragmented industry like the firearms business. Do you really expect Windham to hobble their new business so that maybe the perception of shortages will help drive their volumes in 18 months? Who would holding off their production help? Them? No, they get disproportionately hurt. Bushmaster, who they hate, would disproportionately benefit. You think some little AR maker like PSA wouldn't exploit the opportunity this creates? Proconsul, did I say I thought that? No I did not, I floated a theory. Theory comes from the Greek word theoria, to contemplate, an intellectual discussion, NOT a position statement. I don't disagree with your position either. However, explain to me why there has been an extended shortage of gun parts and manufacturing facilities don't increase production with existing equipment. |
|
Quoted:
that is bad business planning. i understand what your dad is saying, but a smart business should always aim for the opportunity to sell and gain advantage over the market. so a smart business would have enough staff and resources to build inventory to take advantage when demand is high. they can certainly raise prices of these times (we may not like it, that's how capitalism works) to increases their profit margin. not only is increased revenue important, but margin is important as well. i think what's happening in gun industry is that alot of these businesses are ran by 'gun' people and not so much 'business people'. so they are slow to react to demands. in addition, alot of the established gun related business people rely on high profit government contracts that runs for years, and that aspect of the business motivate a business very little to be swift toward civilian customers. Quoted:
My dad is an economist, and in talking about when to buy my first AR a few months ago, this topic actually came up and here is more or less what he said, and you can take it or leave it: Supply and demand is great when both are high, but the fact is that this will die down soon enough. If they hired more people and increased production, sure, they would make profit now, but they would lose it again in a few months when things return to normal. By backordering, they make people panic and scramble, and as a result, the companies make lots of money, and only push out as much as demand calls for, even if it takes awhile. Like look at RRA, i hear they are like 10 weeks behind on production...think of how much money they are making on those backorders! And they didn't have to hire more people or buy more machines. Food for thought. There is no guarantee that the increase in sales will last beyond next month. the cost of new employees, training, tools & etc. is high. You do not hire a 2nd shift due to a 10 week backlog. Once you hit full capacity you sit tight until you know more about the future. Right now the future is more foggy then it has been in decades. |
|
Quoted:
Quoted:
H53Expert, I get it, you know how to turn a wrench. Everything you mentioned falls under the category of maintenance. The maintenance on a piece of machinery does not, can not, will NEVER exceed the value of revenue produced. If so, it would have been replaced long before that point. While I don't question your ability to turn a wrench, your statements indicate a significant lack of understanding regarding equivalent annual cost of machinery and how it relates to capital budgeting. Again, according to World Steel, US demand is overall flat...steel is available in the US. Can you name another steel product with the backlog of availability that we're seeing in the gun market, especially parts? H53Expert, you seem trigger happy to get into a urinating contest over the minutia, my OP was a puzzling lack of supply for our demand. That is where you fail again. I don't just have experience turning wrenches. But you on the other hand, are looking at it from a purely theoretical perspective. Everyone that knows anything about real life knows that application and theory are two different beasts. The only thing you have done is put forth some kind of conspiracy theory. The rest of us that know better, and actually have experience on both sides of the house, see the bigger picture of real world economics at work. Again, H53––minutia. I have experience in manufacturing management, but is actually irrelevant here. I'm citing a fact, equivalent annual cost, and how that equipment is budgeted. EAC is a simple formula used in ALL manufacturing, including your former employers. Simple put, you stated maintenance cost would be greater than the revenue generated from that production, I reread your post. That assertion is woefully incorrect. I also have to kindly disagree with your statement that I've only put forth a conspiracy theory. My OP was that gun and gun part manufactures temporarily increase production as any other manufacturer would do when demand is this high and has remained so for an extended amount of time. |
I can tell you the little parts is whats going to kill folks this time around. Everyone wants to make lowers and uppers, but nobody seems to think about the pins, springs, port doors, bolts, carriers, gas keys, cam pins, detents, firing pins, gas tubes, barrel nuts, reciever extensions, castle nuts..... All the not cool parts. 
You have a non functioning, and non sell-able product without the little parts above. Getting your machines dialed in on tool wear and setting redundant tooling groups can keep a good machine running 24 hours no problem by itself with zero issues on part specs. I have also seen machines run overnight with broken tooling. (not good) only to find a pile of half done parts in the catcher bin  That gets expensive fast. Using load sensing on the modern machines to check cut operations before going to the next sync code can stop that from happening. It may add a few seconds to cycle time, but it can save your butt on tool destruction.
Creating a false demand is just silly. But having vendors pass huge amounts of orders back and forth to each other is just as silly. Vendors learned this lesson the last go around, and are treading lightly on the mass purchases is my guess. |
|
there is always risk in business.. those who take the calculated risk can be have great success.
Quoted:
Quoted:
that is bad business planning. i understand what your dad is saying, but a smart business should always aim for the opportunity to sell and gain advantage over the market. so a smart business would have enough staff and resources to build inventory to take advantage when demand is high. they can certainly raise prices of these times (we may not like it, that's how capitalism works) to increases their profit margin. not only is increased revenue important, but margin is important as well. i think what's happening in gun industry is that alot of these businesses are ran by 'gun' people and not so much 'business people'. so they are slow to react to demands. in addition, alot of the established gun related business people rely on high profit government contracts that runs for years, and that aspect of the business motivate a business very little to be swift toward civilian customers. Quoted:
My dad is an economist, and in talking about when to buy my first AR a few months ago, this topic actually came up and here is more or less what he said, and you can take it or leave it: Supply and demand is great when both are high, but the fact is that this will die down soon enough. If they hired more people and increased production, sure, they would make profit now, but they would lose it again in a few months when things return to normal. By backordering, they make people panic and scramble, and as a result, the companies make lots of money, and only push out as much as demand calls for, even if it takes awhile. Like look at RRA, i hear they are like 10 weeks behind on production...think of how much money they are making on those backorders! And they didn't have to hire more people or buy more machines. Food for thought. There is no guarantee that the increase in sales will last beyond next month. the cost of new employees, training, tools & etc. is high. You do not hire a 2nd shift due to a 10 week backlog. Once you hit full capacity you sit tight until you know more about the future. Right now the future is more foggy then it has been in decades. |
|
There seems to be a lot of short term memory loss in this thread.
When the market went flat in summer of 09 many companies were stuck with tons of inventory and had to have fire sales from July to October to stay alive. Hell, you could buy complete Ak's for $329 very easy. And Daniel Defense had to trim back big time. http://www.ar15.com/forums/t_1_5/906835__ARCHIVED_THREAD____Daniel_Defense_furloughs_employees.html&page=1 |
|
Sorry. No conspiracies, secret cabals, or anything else sinister.
Demand drives production. When demand is relatively stable, so are inventory and the orders to vendors to sustain it (whether those are vendors of raw materials, machined parts, complete OEM accessories...whatever). A sudden (or even rapid) upsurge in demand requires a like upsurge in production....and for the most part, the demand is a two tiered demand...retail customer seeks product, dealer orders product. Simple, clean, and easy. Now that the order is placed, it has to be fit into a production schedule. The more orders that come in, the more have to be fit into the schedule. The schedule may expand by adding people, adding shifts, adding extra hours to existing shifts, etc...but it is limited by the ability to make those additions productive. Having the facilities and people (not always easy or quick to add either) is meaningless if the component parts necessary to build th efinished product are in short supply or either tewmporarily or chronically out of supply. even starting from a great inventory position, you can only maintain incrased production for so long if your vendors and their vendors cannot keep up, or are having to also add people and capacity... Multi-fold increases in demand over a few weeks doesn't allow the ability to ramp up to meet that increased demand. It isn't like fast-food where you know that you're going to get nailed at noon every day and you schedule more people to work the fryer and the counter. That's predictable and can be planned for daily. When demand has a sudden spike in the world of manufactured "hard goods", there is always a lull before the manufacturers can fully respond to it.. Then they have to fight a battle over how much inventory to bring in and maintain (if you can get it), knowing that at any time the faucet can turn off and that increased demand all but disappears. Look at any numbert of new companies came into the industry in 2009, to take care of that surge, brought in huge inventories, and then went belly up when the demand dropped tremendously as fast or faster than it peaked. They were sitting on millions in unsellable (due to a glutted market) inventory bought with leveraged or borrowed money that they couldn't pay back...they were returning as much of it as their vendors would take, laying off everyone they could, downsizing...and in some cases, closing the doors and turning off the lights entirely. Some of that excess inventory is still being sold off by either their creditors (including owners who loaned their businesses money out of pocket to get more product in before collecting on what was due to them) or other companies that bought it for pennies on the dollar.. Adding personnel takes time to find decent people who both have a work ethic and can pass pre-employment screenings, and then more time to train them. if you're ethical you won't over-hire knowing that some or all of the newbies are going to be laid-off as soon as demand drops, so you add what you absolutely have to. You work everyone longer and harder. You can't just add imanufacturing capabilty either...whether it's in-house, at a contract shop, or wherever.Even if you're willing to part with the million to two million for each new maching center, getting it, getting it in place, and getting it going generally takes months (assuming all along that you have the physical space in which to situate it). Not trying to offer a sob story or anything else other than a little look inside the reality of the manufacturing side of this industry. Steve/RRA |
|
Quoted:
There seems to be a lot of short term memory loss in this thread. When the market went flat in summer of 09 many companies were stuck with tons of inventory and had to have fire sales from July to October to stay alive. Hell, you could buy complete Ak's for $329 very easy. And Daniel Defense had to trim back big time. http://www.ar15.com/forums/t_1_5/906835__ARCHIVED_THREAD____Daniel_Defense_furloughs_employees.html&page=1 It's cause we want our parts dammit! Then again I just ordered a complete, in stock LPK last week from a major vendor. Not sure what's in short supply... One of my favorite ammo vendors keeps reminding us of the same thing. Winter and spring seem to be the hot seller months then summer and beyond slows leaving them with excess. I spent a brief time at an Internet retail company and they told the same story. The "shortage" really is overblown. The only thing I'm truly annoyed about is the lack of ammo and the rapid price increases. Despite the higher prices, cases sell out in minutes, not hours. |
AR Sponsor