Thinking Globally


(YouTube link)

The term "globally" here does not mean worldwide so much as it means seeing the problem as a whole as opposed to its parts. Dr. Eli Goldratt {wiki} explains what happens to the supply chain of consumer goods during a recession, in terms even I can understand. With animation by Aharon Charnov. -Thanks, Joe Brown!


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Well, the modern retail inventory plan moved away from the buffer concept in favor of the "just in time" restocking plans that modern delivery and manufacturing need to reduce taxes on their stock while making sure that product is in the house. The tax reduction improves the P-R-O-F-I-T that the moichant piggy requires and can serve to lower manpower requirements. The really unfortunate part of this whole thing is that those same moichants moved their manufacturing bases to nations overseas where folks work for peanuts. This further improves the profit profile for the piggy.
Has anyone heard recently a political figure say that it might be a good idea to demand American products? I don't think so! Is there anyone out there suggesting that Americans save a little something for that rainy day? Nope!
It's very obvious to me that Americans don't need jobs and have more money than they know what to do with. Trust me when I say that every time I venture into a mall or retail store I make a little scene by asking loudly "hey, don't youse guys have anything made in the USA?". I can get away with it 'cuz I'm 70 and crankiness is expected.
In truth, we're a failed state economically, spiritually, and militarily. We're squandering the lives of young Americans on an illegal and brutal war designed only to boost the military industrial complex and massage Wall St. We've killed 300,000 innocent people in Iraq to the tune of over a trillion dollars wrested from the wallets of mostly middle class Americans. It is by definition nothing short of murder in the first degree and we should be ashamed of ourselves.
Support your country and its industrial base. Buy our products. Send home the illegals who comprise a 13 million strong legion of parasites on our economy. Leave something for your kids to be proud of. This is not the America I grew up in!
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@Scott-O

There is, as I said, the fact that your labor-force are also consumers. But if one needs more egotistically gratifying reasons; the cost to re-train new employees three months later up to past levels of efficiency probably outweighs the savings of laying employees off. This thinking was limited by the belief "we don't know when it (recession) will end". By being able to predict a return to normal rates in 3 months, the decision to maintain staff is obvious.
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Labor isn't the only cost in producing a product. When you're not selling parts at your usual 100%, it also means you're buying fewer components from YOUR suppliers, so your costs go down in that respect. And your machines aren't running as often, you're not paying for shipping out as many packages, etc., so there's another drop in your operating costs.

A smart company will use the downtime for training and cross-training employees, and figure out how to increase efficiency.
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Okay, dumb questions time:

So sales are at the same level for Jan- Mar. The retail inventory is being used to close these sales and, as a result, the need for new inventory is greatly reduced. Reduction in need for new inventory means your plants slow down or stop. Say your orders drop 30% while retail clears out inventory. If you have 100% of your work force filling 70% fewer orders than before, your labor costs remain the same but your input of money is reduced 30% due to the order reduction.
I don't understand how (in FINANCIAL TERMS ONLY) it makes sense to keep your costs at 100% when your orders (input) drops 30%. Seems like you have 30% of your work force standing around doing nothing but still bringing in a full check.

What am I mmissing?
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