Even Wood Shims!?

[Frank Boettcher]

Grad school Economics professor said two things 35 or so years ago that I remember. The first is that Soviet communisim will fall without a shot being fired because of the inability of capital to flow properly in a planned economy. He was right. Certainly there were shots fired, but they had nothing to do with the ultimate failure which was an economic failure

Secondly, he said that the only way to have consistent and real increases in GDP was to base your economy on adding value to things that are mined or grown. Once you move away from that, you can hide for a while with service, but it is a zero sum game and eventually there will be a lowering of standard of living, devaluation of currency and many things bad. I'm beginning to think he was right again. Looks like stagflation with little that can be done about it because we are no longer in the value adding drivers seat.

I can't remember a time in the history of this country when falling US demand did not also have a corresponding fall in commodity prices, getting things back in balance. But here we are, with all energy and basic materials going through the roof with US demand falling daily.

In my little world we have been insulated from the big picture by a Toyota Assembly plant being built about twenty miles away with supplier plants popping up all over the region. But the big picture looks fairly bleak to me.

Frank

[Lobby Dosser]

The Chinese economy is soaring. The Chinese standard of living is not. The Politburo is sitting on a time bomb.

[J. Clarke]

While China's economy may be "soaring" by Chinese standards, their GDP is still only 3/4 that of Japan (and about 1/5 that of the US), to spread among more than ten times the population, so Politburo or no Politburo there's not all that much to go around.

[Lobby Dosser]

And the population is now exposed to higher standards of living.

[RicodJour]

And to the toxins in the waste we send over there to be recycled.

R

[Lew Hodgett]

enough

Two (2) things are at work that may not be evident to the casual observer.

1) Time cost of money. 2) Just in time delivery.

The goods in those containers in some cases are owned by the shipper until delivered rather than FOB, point of shipment, where ownership transfers as soon as it clears the shipping dock, thus cost of ownership (time cost of money) is born by the shipper rather than the buyer.

All those containers of goods moving around the country eliminate the need for warehouses and the associated costs.

The cost benefits are not just simply low cost labor.

Lew

[Frank Boettcher]

Well, that's not how it works in the woodworking machinery business

Respectfully beg to differ with you Lew, All those containers moving around the country cause you to need more warehouse space. You don't distribute from a container, you distribute from a distribution center.

Tupelo factory shipped industrial woodworking machinery to a warehouse in Memphis, where it was picked and shipped to distributors. Assembly lines were on a JIT flow basis so factory lead time on any item was very short usually less than 30 day and many items less than a couple of days. Model changes could be handled on the fly on asssembly lines when demand changed. Feedback on what was sold today could be factored into what was produced tommorrow, consequently the amount of inventory held in the distribution center was very small so not much space needed.

Most good US manufacturers have evolved to this point.

Alternatively, the industrial woodworking machinery from the far east has about a four month minimum lead time, factory, trans to dock, on the water, on the train or truck from the west coast, and then into the DC. Model changes consistent with demand can not be anticipated so the inventory held for all models is much greater. Additionally, the shipments are always late so safety stock is added to make sure there are no stock outs, particularly as you approach any peak selling seasons.

And once those containors get on your property, you better have the space to unload them, or you end up paying a per diem on the containers.

And when you anticipate wrong four months out and are facing a stockout, then you air freight the stuff and take a real bath.

There are no savings on the cost of carrying inventory or the cost of quality from the far east at least with regard to woodworking machinery. It is substantially more, factor of four for cost of carrying inventory and a factor of 2.5 for cost of quality.

It is, in fact fully burdened labor that is cheap.

Frank

[Father Haskell]

Cedar shingles are cheaper and better, and snap off easy after a whack with a beater chisel. You get occasional splinters, but no big deal to snip them off.

[Robatoy]

I disagree. I did it your way for many years. I like the 2008-way better.

[Leon]

AND they snap off a lot easier if you put them in with the holes away from you.

Ill keep that in mine, thanks.

[Lew Hodgett]

don't

Agreed; however, rather than a warehouse, it has become a distribution center which translates in to fewer warehouses required.

selling

Sounds like standard dumurage charges. Same for rail cars, trailers, etc. AKA: No free lunch.

Yep.

No question, fully burdened lsbor is the big prize.

My info was acquired as a result of sharing a plane ride with a computer jock whose primary customer was WalMart a few years ago.

He also indicated they manage their inventory based on the daily store sales registered at the check out.

As I remember, ".. almost real time" were the words he used to describe it.

So much of their inventory appears to be short term items that they just flush out one model and bring on the next one.

SAme applies to Home Depot and probably Lowes.

Also helps to control liability, returns, warranties, etc.

I'm certain what you described applies to the durable goods industry; however, most of what I described would not be considered as durable goods.

Either way, we are never going to be able to again compete in the low tech value add industries again.

Even things like airplanes are coming under fire.

Still remember a comment attributed to Jack Welch while he was still CEO of GE.

"The lowest cost solution is to build your factories on barges, then put them as close as possible to the lowest cost labor supply. When a lower cost supply develops, move the factory."

Unfortunately, that concept is closer than we think.

Lew

[Robatoy]

Some of those realities have already come and gone. The Japanese, for instance, were able to come across the Pacific, catch fish off Canadian shores, clean/process/can them on the way back to Japan, stick the cans in containers and ship them to Canada for less money than we could it ourselves. They did that for a long time. That kind of competition is real and fair.

[Chris Friesen]

Didn't they also come under fire for fishing in illegal areas and exceeding their quota though?

Chris

[Charlie Self]

I think the Chinese government is pushing chain smoking. The Russians used vodka.

[Charlie Self]

Check it 10 years ago. Check it 10 years from now.

[Charlie Self]

They're getting even with lead paint on toys and other contaminants in drugs and other products. What is it, heparin, with Chinese base materials, has killed a number of people.

[Charlie Self]

Yes, but...the costs are still there and must be included in product pricing.

Aye. Just in time. And that's why we're drowning in tractor-trailer rigs, and far too many of the Interstates are terrifying to drive on for a four wheeler. There is ALWAYS a cost: we're paying it in road construction taxes that primarily benefit trucking companies, and we're paying it in traffic fatalities because of the extra trucks on the road. Road construction always lags need, so we're always in a state of spending to help out companies.

[NuWave Dave]

And harpooning a few whales, no doubt.

- Dave in Houston

[Robatoy]

When all the whales are gone, we won't have to worry about that anymore.

[Robatoy]

The Americanadians used both...for taxes and to reduce the expense of old age care.