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  #11  
Old 04-28-2009, 09:56 PM
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MoviePropMaster2008 MoviePropMaster2008 is offline
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Default An explanation of the Supply Chain economics re: Ammo

Dell Computers was one of the founders of the modern version of JIT (Just in Time) supply chain, i.e. you don't make anything until it's needed or else you calculate how much is needed and replacement items arrive at the sellers "Just In Time". Of course this is great if you don't want to have inventory sitting around. Modern Commercial goliaths like Home Depot, Anheuser Busch, and others have this 'create or order' product to hit the shelves JUST before it's needed' to a science.....

(unfortunately the guns industry doesn't work as well).....

This column is an interesting read.....



Quote:
Supply Chain Management 101: on the ammunition shortage.
Monday, April 20, 2009
Filed in: Ammunition, General gun stuff, Shooting industry


Gunstores continue to be a never-ending source of hilarity. Walk into your local shooting emporium and ask why there is an ammo shortage, and you'll hear inane speculation coupled with a conspiracy theory or two.

The reality is that the supply chain for ammunition is relatively inelastic, and and is easily overwhelmed by a sudden jump in sales.

As one industry consultant has told me, ammunition demand over the years has been remarkably predictable. Ammunition wholesalers know (within a certain margin of error) how many units of each caliber they'll sell in the coming year, and approve purchase orders for the delivery of that amount of product during that year.

Ammo makers, too, know with fair certainty how much they're going to sell to the wholesalers during that period, and sign contracts for the purchase of sufficient components to produce those products. They don't typically keep large stores of components on hand, as standing inventory is expensive, so components are delivered on a "just in time" basis.

The suppliers of those components do the same thing with raw materials; again, ammunition is a stable business, which allows them to forecast with pretty good accuracy the stuff they need to make the components they sell. This pattern repeats itself on up the chain, all the way to the people who mine the stuff necessary to make a single cartridge.

Along comes a huge, sudden spike in demand.

Retailers all over the country are suddenly swamped with ammunition purchases, and quickly call their suppliers to get more. The first few calls are rewarded with replacement stock, but soon the wholesaler's shelves are bare too - their entire year allotment of ammunition is gone in just a few days.

The wholesaler calls the maker, and the same thing happens: all of the suppliers are doubling (or more) orders to get their dealers restocked, and the manufacturer is quickly stripped of on-hand components as he tries to fill those orders.

The dealers are out, the wholesalers are out, and now the manufacturers are out. But it gets worse.

The makers of the priming compound, primer cups, brass, powder, jacket material, and lead are suddenly swamped with desperate pleas for more product, and they in turn contact the suppliers of the raw materials for more. The entire chain of supply is empty, and everyone has to wait while all of the raw materials are gathered.

(I shouldn't have to tell you that those folks have other contracts to fill before they can get to the rush orders - they're not just waiting around for next year's order from the ammo companies!)

That all sounds simple, but it just isn't.

As an example, smokeless powder may contain a huge variety of raw materials: Nitrocellulose, Nitroglycerin, Nitroguanidine, Dibutyl phthalate, Polyester adipate, Ethyl acetate, Diphenylamine, 2-Nitrodiphenylamine, 4-nitrodiphenylamine, N-nitrosodiphenylamine, N-methyl-p-nitroaniline, tin dioxide, bismuth trioxide, bismuth subcarbonate, bismuth nitrate, bismuth antimonide, Potassium nitrate, Potassium sulfate, Talc, Titanium dioxide, Graphite, and Calcium carbonate. Each of these has to be sourced from a supplier, ordered, received, then finally compounded into smokeless powder. Think that all happens overnight??

Once the raw materials are finally in hand, the work can start. Lead has to be formed into projectiles, copper into jackets, brass into casings; priming compound is made from lead azide and/or potassium perchlorate, then the mixture combined with metal cups to make primers (they have to be made, too); the aforementioned powder has to be made (a huge job in itself.)

Once those components are ready, they can be sent to the manufacturer, who puts together into a finished round, then packages them appropriately. (Oops - we forgot that boxes and trays that have to be made and printed. That takes time and materials!) They're then shipped to the wholesaler, who (finally!) can ship to the retailer.

This whole process takes time - lots of it. If demand is high enough (which it has been), even the emergency orders placed all the way to the producers of the raw products may not be sufficient, and shortages will continue.

That's what we're seeing right now.

The supply chain is simply empty, all the way up to the people who mine the raw materials.

It's going to take time to replace all the links in that chain, and it's not because of the war in Iraq/Afghanistan, FEMA, the CIA, a secret agreement to implement gun control through ammo availability, or any other silly theory you may have heard.

This is a textbook example of what happens when an inelastic supply chain, composed with scarce "just in time" inventories, meets insatiable demand. It's not sexy or intriguing, but that's the way it is.

You know what's scarier?

Your food comes to you the same way.
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  #12  
Old 04-28-2009, 09:57 PM
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Gunmaster45 Gunmaster45 is offline
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[quote=MT2008;2264]Dude, do you seriously think Chris Rock has anything to do with this? Come on now.QUOTE]


No, I'm kiding. I still don't like that his idea could come true though, it's a stupid one.
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  #13  
Old 04-29-2009, 01:16 AM
jdun jdun is offline
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Quote:
Originally Posted by MoviePropMaster2008 View Post
Dell Computers was one of the founders of the modern version of JIT (Just in Time) supply chain, i.e. you don't make anything until it's needed or else you calculate how much is needed and replacement items arrive at the sellers "Just In Time". Of course this is great if you don't want to have inventory sitting around. Modern Commercial goliaths like Home Depot, Anheuser Busch, and others have this 'create or order' product to hit the shelves JUST before it's needed' to a science.....

(unfortunately the guns industry doesn't work as well).....

This column is an interesting read.....
Just in Time is common. No manufactures want to sit on a large supplies of unsold goods. The ammo manufactures did have back up supplies but high demand did them in.

Ammo price shot up in the last couple of years because there are more and more new people owning firearms.

Keep in mind that the US military owns its own ammo factory called Lake City (head stamped L C) and operate 24/7. The military does not get their ammo from civilians manufacturers.

Quote:
I went to a sporting goods store near me that had a whole section of firearms and ammo. A couple months ago all their AR-15s are gone, they had a sweet AR-10 , which is also gone and almost 3/4 of their handsguns are also gone. A couple days ago, I went back to check again, and the store was closing down. I went straight to the gun section. All the ammo were gone and only a handful of bolt action rifles, some shotguns, and a couple revolvers are left.
Most AR15 manufacture have at least a six month back order. Working six days and 20 hour shifts could not meet the high demands for AR15. When Brownells has a back order of over 500,000 PMAGS and growing, it gets to a point of hording.
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  #14  
Old 04-29-2009, 03:35 AM
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Quote:
Originally Posted by jdun View Post
Just in Time is common. No manufactures want to sit on a large supplies of unsold goods. The ammo manufactures did have back up supplies but high demand did them in.

Ammo price shot up in the last couple of years because there are more and more new people owning firearms.
Absolutely. JIT would work but as I noted in my post, the Gun industry doesn't work the same way. You hit the nail on the head with the succinct point that 'More gun owners, equals more demands for ammo'. The local gun stores are inundated with people who have NEVER bought a gun before, but now they fear that they may not be able to get one. These are the folks who were always 'interested' in guns, but were never motivated enough to bite the bullet (pardon the pun) and dish out some $$ for one. Well, when everyone ELSE is stampeding to get them, it is certainly hard not to get swept up along with the wave. But it seems obvious (well not obvious to the manufacturers) that more and more people exercise their 2nd amendment rights, then more and more people will be buying ammo, and buying spikes are geometrically larger.

Quote:
Originally Posted by jdun View Post
Most AR15 manufacture have at least a six month back order. Working six days and 20 hour shifts could not meet the high demands for AR15. When Brownells has a back order of over 500,000 PMAGS and growing, it gets to a point of hording.
There were many gun industry columnists or OP/EDs that opined that there would be a 'rush on guns' when Obama won the election, but the manufacturers didn't seem to get the message. I know it's hard to ramp up FABs but heck, I'd be cranking them out at a heart attack pace from last summer just like the Class III manufacturers did before the cut off date of the Hughes Amendment to the McClure/Volkmer Act of 1986 (I KNOW you all know that I'm referring to...)
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  #15  
Old 04-30-2009, 07:09 AM
ManiacallyChallenged ManiacallyChallenged is offline
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If some one will come up with a surefire method to use .22LR as a SD round, then we'll be all set.
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  #16  
Old 05-01-2009, 01:36 AM
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Here, 9mm luger and .40 smith and wesson and 44 mag are the most availible, 44 costs a lot though, that may be the reason. 9 is chaep and plentiful, and 40 is okay. Cant find 45 though.
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