Miranda Posted January 16, 2021 Share Posted January 16, 2021 (edited) how companies act (or react) in Supply and Demand Scenarios is a lot of fun to sort out. the more expensive the production machine, the more likely the machine is to run 24/7 and if you can decide what demand happens to be... you will only buy enough machines to meet that demand. for the most part the two ideas above are not related. They can be, however, the connections are variable. this connection is an exploration of the meaning of 'efficiency.' I usually think of supply and demand as labels on the same box. right now the ammo makers are looking at the demand and trying to decide if and how they might supply to the demand. my own personal conclusion is that they were at close to capacity before the recent uptick in demand. so now they are deciding how much capacity they want to add. this is things like automated machines to make ammo. the first one to order or start making those machines is taking a gamble on what will happen in terms of future demand. well, punk, do you feel lucky? miranda Edited January 16, 2021 by Miranda removed a redundant word Link to comment Share on other sites More sharing options...
ltdmstr Posted January 21, 2021 Author Share Posted January 21, 2021 (edited) On 1/16/2021 at 1:43 PM, Miranda said: how companies act (or react) in Supply and Demand Scenarios is a lot of fun to sort out. the more expensive the production machine, the more likely the machine is to run 24/7 and if you can decide what demand happens to be... you will only buy enough machines to meet that demand. for the most part the two ideas above are not related. They can be, however, the connections are variable. this connection is an exploration of the meaning of 'efficiency.' I usually think of supply and demand as labels on the same box. right now the ammo makers are looking at the demand and trying to decide if and how they might supply to the demand. my own personal conclusion is that they were at close to capacity before the recent uptick in demand. so now they are deciding how much capacity they want to add. this is things like automated machines to make ammo. the first one to order or start making those machines is taking a gamble on what will happen in terms of future demand. well, punk, do you feel lucky? miranda How much a machine is run doesn't have anything to do with how much it costs. Assuming constant demand, It's really determined by the mean time between failure. Things like repairs, routine maintenance, etc. that take the machine out of service. As for automated machines, they don't exist. It's not like the ammo companies can call 1-800-reloadingsupplies and order some up. The stuff is all custom made, which takes a lot of time and capital. Chances are, if they wanted to add significant additional capacity at this point, by the time that stuff is ready to go things will be back to "normal" and they'll be stuck with a bunch of idle equipment. So bottom line is, they're doing as much as they possibly can with available resources so they don't screw themselves over in the long run. Edited January 21, 2021 by ltdmstr Link to comment Share on other sites More sharing options...
Miranda Posted January 22, 2021 Share Posted January 22, 2021 ltdmstr, [edited to remove the artful comments that made me feel so much better...] don't make me put them back in. All that posturing aside. yep, ammo makers know the lead times and costs on new machines to make more ammo. (primers in particular) and so on. They also know what market demand they are willing to meet. They may choose to meet new demand or not as they please. is that not what I said? miranda Link to comment Share on other sites More sharing options...
ltdmstr Posted January 22, 2021 Author Share Posted January 22, 2021 I'm not exactly sure. But the statement that "they may choose to meet new demand or not as they please" isn't accurate. They're already at max capacity and can't meet demand. And there's no way for them to increase capacity in a reasonable time frame. So what are you suggesting they do? They can't just go to the store and buy more equipment, or hire more people when there aren't more machines to run. And adding more machines takes a lot of time, space, and capital. Yes, they're free to choose whether to add more capacity and increase supply in the long run. But that's not going to help the current situation and really has no impact on the new demand they're faced with now. Link to comment Share on other sites More sharing options...
Miranda Posted January 22, 2021 Share Posted January 22, 2021 ah that makes sense. I saw this shortage coming. My cousin didn't. and after the shortage went into 'full sucks' then he asks me for rifle stuff... the point here is multiple and is all to do with making money as an ammo manufacturer. I saw this shortage coming. to be clear it was easy to see and predict. if I can see it... ANYONE can (almost). If you want to make money, sell ammo now. how can you sell ammo now? about a year ago(when my crystal ball went clear...) order more equipment. If you need more lead time, I can't help you as easily the shortage in 2008 was interesting, as was 2012. buuuut that is a pattern. I can't state I know the amount of market supplied or the possible capacity of an ammo company. so I am stating they clearly didn't ramp up total capacity. you and I agree that we think they are at full capacity now. the options for the makers now? decide how much they want to supply the 7 million 'new' ammo buyers. I believe it was you who said prices on ammo is going up... If there is no reason to think the prices to the makers went up then the increase is profits or capital for new equipment. I am not in there making decisions. I am out here using all my skills of reason to be amused by what the companies that make ammo are going to do. at least this time it looks like the black marketeers won't make ALL the profits that were on the table barely. reloaders are a small segment I am told. If the ammo makers can't supply us primers they are limited by primer capacity. at least make more primers (or the machines yadayada) to start the increase in overall capacity. I think they will need to start somewhere. This shortage is about 1.5 years left in its run and then my ball is getting cloudy. (see previous pattern) I like efficiency. a market that surges like ammo is HARD to supply and run a factory/warehouse at peak efficiency. you will miss that peak. and all other options will cost somehow. my desires here are well past unlikely to influence any ammo maker. If reloaders are 1 percent of the ammo market...(make take some hair splitting to get accurate) at some point that 1 percent will have to buy 'real ammo' in place of getting ammo parts. so even that 1 percent is going to become more demand. If I were in the brass case biz... for obsolete cases that the ammo makers just don't. I would look seriously at making primers because 'no primers' will become no obsolete case purchases eventually. if the brass makers also made primers, that is still an overall increase in ammo capacity. just a question of who get the market or coin. do now? increase capacity at least some. the lost opportunities are there and might be big. they are however unknown. the cost of a new ammo machine is known. that makes the lack of purchasing them esay to understand. miranda Link to comment Share on other sites More sharing options...
ltdmstr Posted January 22, 2021 Author Share Posted January 22, 2021 (edited) 1. If the opportunity made sense they'd do it, don't you think? What would be their reason not to? Just to screw us over? Seems companies are making a decision that it's not cost effective or profitable in the long run to increase capacity to meet a spike in demand and then have that additional unused capacity when things return to normal, which they will. That's a perfectly reasonable business decision. 2. Prices go up for a lot of reasons. Some or all of an increase may be profit. That's their choice and they get to live with the benefits and consequences. But some or all may be due to increased costs, like increased labor/overtime cost, increased utility costs, increased maintenance on equipment, increased material costs, unusual costs like Covid related stuff, lots of things. 3. Yes, they must know what it costs to add capacity, and also know how long it takes. If it could be done in a reasonable time, that would be a factor in deciding whether to increase demand. You seem to think they have a big empty building somewhere or vacant space where they can put a bunch of machines and start cranking out more stuff. That's probably not true. Adding a facility, outfitting it with machines, and staffing it isn't going to happen in the year and a half you projected for this spike in demand. So, what they end up with is no additional sales and an idle facility plus a huge increase in cost. At that point, I'd guess you're not going to be CEO any more. Edited January 22, 2021 by ltdmstr Link to comment Share on other sites More sharing options...
Miranda Posted January 22, 2021 Share Posted January 22, 2021 ok... I have to tell you I am doing more laughing than you may realize. here we go... You may call me Mr. Huckinfries. I am speaking for the Ammo Plant the Devil Stories, Inc we call the company APDS and I am their advocate general. (the devil's advocate...) I have been instructed to speak the absolute truth with the full expectation you will not believe any of it. You asked... "If the opportunity made sense they'd do it, don't you think?" In this context I have to state I think you are setting a theme but to answer it a bit backwards I am an advocate and am not allowed to think. Thus I have to look at the rest, we at APDS did sense an opportunity. We also positively acted on it! (I have to butt in here. Itdmstr, this is far less of a joke than you may realize at this point) next question. "What would be their reason not to?" This question is hard to answer. You imply we are avoiding something. We are in Biz to make money. Souls are a hobby for the chairman? next:"Just to screw us over?" Again, we at APDS are in Biz to make money. While there are many businesses that feel max profitability is made near where the customer does feel they have paid dearly, We avoid that. we want you to like us. Questions done, I will finish out my statement. At APDS we have been through a number of supply ebb and flow cycles and have never felt the need to increase our production. if we actively do nothing other than make ammo at the same limits as ever, you the customers will willingly agree to raise prices and at the same time declare us the good guys and state that profits are good for our business. thank you. Mr. Huckinfries APDS Advocate. Ok...fantasy done... To be a little more serious I am trying hard to sort out what I have said that gets you to write the posts you are writing. here is a story I read a looooong time ago. is this glass half full or half empty? the efficiency expert looks it over and says you have too much glass. that story still makes me laugh... I will state there are a lot of things in this thread I'd like to know because I can site better examples. any ammo maker in this recent shortage should be considering how to meet such demand. they may decide as APDS did... no need to change. I find it a bit hard to believe. it is a lot of fun to watch in any case. miranda Link to comment Share on other sites More sharing options...
Bwenning Posted January 22, 2021 Share Posted January 22, 2021 11 hours ago, ltdmstr said: 1. If the opportunity made sense they'd do it, don't you think? What would be their reason not to? Just to screw us over? Seems companies are making a decision that it's not cost effective or profitable in the long run to increase capacity to meet a spike in demand and then have that additional unused capacity when things return to normal, which they will. That's a perfectly reasonable business decision. 2. Prices go up for a lot of reasons. Some or all of an increase may be profit. That's their choice and they get to live with the benefits and consequences. But some or all may be due to increased costs, like increased labor/overtime cost, increased utility costs, increased maintenance on equipment, increased material costs, unusual costs like Covid related stuff, lots of things. 3. Yes, they must know what it costs to add capacity, and also know how long it takes. If it could be done in a reasonable time, that would be a factor in deciding whether to increase demand. You seem to think they have a big empty building somewhere or vacant space where they can put a bunch of machines and start cranking out more stuff. That's probably not true. Adding a facility, outfitting it with machines, and staffing it isn't going to happen in the year and a half you projected for this spike in demand. So, what they end up with is no additional sales and an idle facility plus a huge increase in cost. At that point, I'd guess you're not going to be CEO any more. Well said ltdmstr, I don't believe that many people out side of manufacturing realize the cost and time to have an oem build a new line, this would be a 2-3 year process easily. If it was justified I believe they jump at the opportunity to increase production and profits. Just a year or so ago Winchester and Federal were both having to offer rebates on their primers, the only reason to do this is because you know that the market has a fixed amount of demand and you need to draw sales from your competitors. As much as I hate suffering thru this shortage, I don't think there is an easy answer or any way this isn't going to last for at least the next year, once the non-shooters stop hoarding ammo maybe there will be primers for us. Link to comment Share on other sites More sharing options...
Farmer Posted January 23, 2021 Share Posted January 23, 2021 You also have to figure in the fact that when all this started manufacturing all over was restricted or stopped. Hard to order new equipment when the places that manufacture it are shut down. Add in also that priming compound is highly regulated with permits, storage regulations, ect, ect, and we all know how fast the guys that hand those permit’s out operate. How do we know that their not adding new equipment right now? Link to comment Share on other sites More sharing options...
Miranda Posted January 24, 2021 Share Posted January 24, 2021 Hi Farmer, To answer your question accurately... we do not Know. we have to get answers by inference. There have been a few posts in this thread and other threads that have stated CLEARLY that new machinery into production is a 2 or more year endeavor. How they know this, I can't state. I am not thinking it is wrong, and like a lot of items I have read, sometimes important details get skipped. the lack of an example on this point is a good way to show why I say details get skipped. Lets agree 12 years ago there was a powder/primer shortage a couple of years later the primers and powder became available. It is consistent with the expressed notion that new production capacity takes two years to bring to bear. so we could infer that a new primer and powder machine was built. (you can also infer that an old one took a loooong time to repair and it caused the shortage...) there were rumors that a powder factory/handling facility blew up causing the powder shortage Depending on what you may have wanted, there were shortages in 2012... I recall 17hmr was tough to find for a couple of years in that time. and I did not notice the prices for any ammo falling or being rebated until... my memory is not clear here... lets say 2017 I never saw rebates on primers. never. The kinds of ammo I didn't use... yep rebates. again, proof may be presented, and that does not mean I saw them. I am going to use that rebate claim, however. You can assume, without much disagreement, that, in general, rebates infer that the rebating manufacturer wants to move stock. I would assume that the manufacturer is meeting demand for ammo or that they have created a cheaper way to make the items, even if they do not have much spare ammo in their warehouse. so in 2018 things look like supplies were meeting demand. stage set... lots of important details skipped. ten years have gone by since the last REAL shortage... some folks say they made new machines to meet new demand back then. It took over 6 years from 2008 to get back to normal. I was not able to buy WSP pistol primers until... 2013 that is my memory I had to use expensive federals( oh the horror!) I would infer that new facilities were not done in large amounts. if at all. or... it takes 4 years to build new and not much extra capacity when done. I read that there are 7 million new gun owners... that caused the shortage. the estimated number of gun owner in the US is? approx 40 percent of population or 136 million plus 7... wanna call that a 5 percent increase? so... I am not thinking the ammo manufacturers are going to add more capacity if they felt they were fine 2-ish years back... I'd like them to add a little primer making capacity because they stated that is their real limit. by inference, no the ammo makers are not adding to capacity. miranda Link to comment Share on other sites More sharing options...
Chillywig Posted January 24, 2021 Share Posted January 24, 2021 Did you all see the sequel? https://www.youtube.com/watch?v=E5zNNk130V0&t=35s Would have liked to heard about costs - manufacturing vs retail where we are getting gouged. But in his answers sounds like primers will be scarce in the market for a while... Link to comment Share on other sites More sharing options...
Miranda Posted January 24, 2021 Share Posted January 24, 2021 Hi chillywig, yeah that is the vid I saw on another thread... I did not want to link to the other thread. I appreciate your including it. miranda Link to comment Share on other sites More sharing options...
ltdmstr Posted January 24, 2021 Author Share Posted January 24, 2021 Well, this might have something to do with rising costs. Manufacturing Rebound Has Suppliers Struggling to Keep Up Manufacturing Rebound Has Suppliers Struggling to Keep Up Bob Tita | Photographs by Nolis Anderson for The Wall Street Journal A quicker-than-expected recovery in U.S. manufacturing is resulting in supply disruptions and higher costs for m... Link to comment Share on other sites More sharing options...
Miranda Posted January 24, 2021 Share Posted January 24, 2021 the WSJ requires a subscription to read that article. If the ammo manufacturers are building extra capacity... IF do not skip that IF. what I could read of it would only show why the extra capacity is NOT being done... It can explain why brass cases might cost more. back in 2008 we were told the ammo manufacturers had long term contracts and that the powder shortage mostly affected the reloading community. Long term brass contracts are likely to defend from higher brass costs. Lets discuss profits somewhere else. I am not bitching about the higher prices for ammo. I am bitching about not having primers. (I do hate to say this) I am willing to pay normal inflation for the primers and I am not getting that option. miranda Link to comment Share on other sites More sharing options...
Jollymon32 Posted January 25, 2021 Share Posted January 25, 2021 Scarcity and price increases are the result of too much money chasing too few goods. Get used to it. https://fred.stlouisfed.org/series/M1 Link to comment Share on other sites More sharing options...
ltdmstr Posted January 25, 2021 Author Share Posted January 25, 2021 5 hours ago, Jollymon32 said: Scarcity and price increases are the result of too much money chasing too few goods. Get used to it. https://fred.stlouisfed.org/series/M1 That's definitely part of it. Just saw an interview today with someone from Hornady. Basically, he said: Their ammo production is up 30% over last year, when a typical year is +5-10 percent. So that's huge. Inventory turnover for them this year was 18x, compared to 6x for a typical year. If you know anything about manufacturing, that's also huge number. They're experiencing supply chain issues with materials, including components and packaging, that are beyond their control, as well as rising prices for those materials. For higher margin stuff, they're absorbing some or all of the cost. For low margin stuff, they have no choice but to pass the costs on to consumers. The unemployment rate where their plant is located is 2.9 percent, which in economic terms, is pretty much full employment. So even if they had more equipment and materials available, they can't get people to run them. He also flat out said they're in business to make money, like everyone else, and if they had a way to produce more ammo, they would, because right now, they're selling everything they can make, as fast as they can make it. So, in all, it pretty much confirms much of what's been said already. And despite suggestions to the contrary, manufacturers are doing everything the can to meet the demand. For those who continue to argue otherwise, and think that the ammo companies are holding back for some reason, you might find better support for those ideas over at 4chan vs. here. Link to comment Share on other sites More sharing options...
Miranda Posted January 26, 2021 Share Posted January 26, 2021 (edited) hi Itdmstr, can you share a link to the article? I keep reading 6x turnover is normal and they went to 18x turnover that implies 300 percent increase... and the 30 percent is what I expected... That implies the 30 percent is an instant ammo rate or more done in a given time sort of thing... not a total amount over a month or year the turnover thing is a comment that I am hoping the article will clear up. miranda Edited January 26, 2021 by Miranda removed an errant word Link to comment Share on other sites More sharing options...
ltdmstr Posted January 26, 2021 Author Share Posted January 26, 2021 Pretty sure this is it. https://www.gunsamerica.com/digest/the-truth-about-ammo-gunsamerica-exclusive-interview-with-hornady/?utm_source=email&utm_medium=20210125_BlogDigest_414&utm_campaign=/digest/the-truth-about-ammo-gunsamerica-exclusive-interview-with-hornady/ Link to comment Share on other sites More sharing options...
mpmo Posted January 26, 2021 Share Posted January 26, 2021 Turns for inventory are not the same as increases in sales. It just means that inventory is sitting on the shelves for less amount of time. They are however related. As in this case, when (lets say) 90% of ammo is back ordered, you are going to ship it as soon as you have the production done. Rather than it sitting on the shelf for an average of 2 months (6x turns.) 12 turn average would mean that you move your entire inventory on average every month. That still might mean that your 6.5 Creedmore might sit on the shelf for a couple months, while you ship your 9mm out 3 times a month, as soon as it is ready to ship. Turns is important in business because it plays into cash flow. If your inventory doesn't turn fast enough, you don't have the cash to make / purchase more. Finding a balance is important. Too much inventory sitting on shelves, no cash, too little and you don't have what your customers need. There are really 2 reasons why turns may be a bit important to this discussion. 1.It somewhat represents the demand, in that everything that is made is shipped. Not sitting on shelves. 2.If you are creating 12x more actual shipments, that is also a strain on the business and will cause an increase in costs and possibly cause other delays in the actual production process. You either have to hire more people to handle and ship more packages or you might have to pull employees from somewhere else in your business to do it. The actual cost of shipping is also more for smaller shipments. Link to comment Share on other sites More sharing options...
Miranda Posted January 26, 2021 Share Posted January 26, 2021 (edited) 3 hours ago, ltdmstr said: Pretty sure this is it. https://www.gunsamerica.com/digest/the-truth-about-ammo-gunsamerica-exclusive-interview-with-hornady/?utm_source=email&utm_medium=20210125_BlogDigest_414&utm_campaign=/digest/the-truth-about-ammo-gunsamerica-exclusive-interview-with-hornady/ thanks. off to read. ETA a good read. it is reassuring. uh. he does head into some political observations... that is not reassuring in terms of the ammo shortage. miranda Edited January 26, 2021 by Miranda Link to comment Share on other sites More sharing options...
Miranda Posted January 28, 2021 Share Posted January 28, 2021 a little more kicking the meanings of things. I understood the time frames for inventory 6x being stock turnover once every 2 months. and 18x is lets call it 3 weeks... it has nothing to do with the volume of stock, just how long it takes to get 'sold.' the car industry is where I first met the concept of the capital tied up in inventory. they tend to speak in terms of months of supplies they have. when you speak of autos that cost 250 thousands it is easy to understand... it also makes production rates pretty easy to guess. all that said, the shortage may be well described if you also included for example Our cycle for all our production is a month. That means that there is an open week where all production is gone before the cycle is complete again. siiiigh. it still don't get me primers... miranda Link to comment Share on other sites More sharing options...
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