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Old February 15, 2013, 03:11 PM   #18
Senior Member
Join Date: October 3, 2012
Location: Arizona
Posts: 939
Wow, why didn't I think of that. Why cant we all be as smart and intuitive as you? Not sure what I would do without your infinite wisdom.
He made a good point. Not sure sarcasm was the best response here.

Let's say I make something relatively simple, more simple than magazines...brass for ammo companies. I know that I have a certain amount of demand for brass, and the fluctuations are fairly minimal under normal circumstance. In order to maximize my profits, I'm going to make sure that I can keep up with my demand. Anything I do to make more brass than what is demanded is going to cost me money and drive up costs. So my factory is going to be set up to efficiently crank out enough brass to meet demand. I might design the capability to go to 5-10% higher than demand, just in case, but much more than that, my costs go significantly up, and profits go significantly down. I have just enough machines, trained personnel, raw materials, etc to meet my demand.

Now, lets say we're now in the current climate. Demand for my brass has at least doubled. I maximize my production as much as possible, but I can only make as much as my setup will allow me. In order to meet current demand, I'll have to buy new machines. Get them tooled up. Hire personnel and train them. I'll have to talk to my raw material distributors, and hope they can meet my new demand. Maybe they can, but it'll cost me more (because they know they can get more out of me during a panic. Knowing that the panic likely won't last, and that afterwards, I'll have idle machines, and have to lay off the people I just hired and trained (all wasted money now) it makes more sense to do as much as I can during the panic, and just wait it out.

It's nearly impossible to double or triple output during a temporary panic and still make money, even with making a simple product. If it were easy, everyone would be doing it. But they aren't, because it's no so simple.
Gaerek is offline  
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