Plausible explanation for ammo shortage

[bvarnell]

Found this quote on 1911forum.com

Pretty accurate as far as the way the big boys do inventory control.

The last thing a retailer wants is for any product to sit on the shelve for several months.

It's all about turns and operating on other peoples money. A few years ago, supermarkets operated on 24-26 turns a year. Thats turning a stores entire inventory every 2 weeks. Obviously, some items turned much faster and some not quite so fast. If there was a dramatic change either up or down, it could take several weeks/months for the system to stabilize.

Does anyone remember when Johnny Carson made a joke about a toilet paper shortage?? Early 70's I think.

It created a nationwide run on tp that took many weeks to level out.

Then nobody had to buy any for several months due to hordeing.

Quote:

There is a strong undercurrent of WJB-esque populism on both sides of the political spectrum. Today I got to see it surface when somebody blamed the fat cats for the current ammo shortage:

Quote:

I think it's the ammo manufacturers taking advantage of a demand side spike to run up prices when they could just as well pump out twice as much ammo and we could all get ammo at the same price we did last year at this time.

I had to respond:

"No, it's not.

I know it's fashionable in America to blame rich people, big business, fat cats, and whatnot for every misfortune (hey, at least we don't blame Jews anymore; we're making progress,) but this shortage is just a natural result of modern business practices.

See, once upon a time, it was common for American businesses to produce everything they could. Then they would send it to wholesalers, who would in turn sell to retailers who would buy all of it they could afford.

In the days before instantaneous, nearly-free, cross-country communications and three-day coast-to-coast delivery, this made sense.

Then in the '70s and '80s, American manufacturers got their butts kicked by the Japanese, led by Toyota, who had made a religion out of Just-In-Time inventory control. Now everybody uses it.

Federal Ammunition Co. will look at last year's Q1 business and only order enough components to produce what it thinks it can sell this quarter. The wholesalers will only buy based on what they think they can sell, again based on data from previous years. Same with the retailers. A big enough demand surge at the retail end can suck the pipeline dry all the way back to the component end of the process.

If I only sold 10 boxes of .44 Magnum a week at Anytown Firearms, I'd only keep an inventory of 11 or 12 on hand. Those unsold boxes are liabilities, after all; money tied up that's not turning a profit. If somebody comes in and buys all 12 boxes, I'm out 'til next week.

If he does that to every store in the area, and we all need to reorder from the same wholesaler to restock our shelves, we'll probably empty the wholesaler's shelves as well. And the wholesaler doesn't get weekly deliveries, he gets monthly deliveries. Meanwhile, since each dealer in Anytown only got an allocated 4 boxes of .44 Magnum, and word has gotten around at the range that there's a .44 Magnum drought, those four boxes are going to fly off the shelf. Now we're stuck until the wholesaler can get more from the manufacturer. Next month. See?"

Wow, same exact endpoint, with 99% less conspiracy!

[TripleDigitRide]

So true.

[Guest Swamprunner]

Abscolutely! I'm guilty of this. If I see a box or two on the shelf at one of the Wally-marts I frequent, I but it. Problem is, I then have to go out and shoot. Then I have to clean the shootin' irons. It's a vicious circle.

The wife said if I bring another box of ammo home, I'd be sleeping with it.

[Guest tnmale46]

sounds logical

[9teeneleven]

At some point, everyone is going to have enough ammo to stop stockpiling. Then, demand will fall, and there will be overstock.

[9teeneleven]

At some point, everyone is going to have enough ammo to stop stockpiling. Then, demand will fall, and there will be overstock.

[Guest marine77]

At some point, everyone is going to have enough ammo to stop stockpiling. Then, demand will fall, and there will be overstock.

That's what i'm waiting on!

[ukerduker]

Don' blame me, I'm buying the reloading components. I make my own.

Primers are getting harder to find.....you guys need to stop buying ammo.

[Guest SUNTZU]

Abscolutely! I'm guilty of this. If I see a box or two on the shelf at one of the Wally-marts I frequent, I but it. Problem is, I then have to go out and shoot. Then I have to clean the shootin' irons. It's a vicious circle.

The wife said if I bring another box of ammo home, I'd be sleeping with it.

I went upstairs this afternoon and my girlfriend had put five boxes of WWB .45 on my pillow that was on "her" side of the closet. She said she found them under her spring clothes. I gave her a big kiss, cause I had forgot about them.

[midtennchip]

I wish this explanation was correct, but it misses on at least two points:

1. just in time inventory doesn't just rely on prior orders. For example, Wal-Mart prides itself on up-to-the-minute adjustments to inventory. Their distribution system relies on the ability meet new demand at precisely the correct time and location. The information they collect is passed on to suppliers and (if a supplier wants to keep the business) Wal-Mart insists suppliers keep up with demand.

http://www.infoage.idg.com.au/index.php?id=777120740

2. a number of gun dealers are telling me that, when they ask the manufacturers why they cannot keep up, the manufacturers don't really answer the question.

I don't have the answer. But, the fact that places like Wal-Mart can't keep inventory and the manufacturers are not answering questions makes me think there's more to the story. It could be as simple as the manufacturers not having enough capacity to meet the new demand. If the manufacturers think (i) the demand will not stay high or (ii) that the government will do something to change demand (or worse, require changes in manufacturing), I doubt the manufacturers would be willing to increase production capacity at this point.

[Guest mn32768]

I'm not blaming anyone for hoarding, man's gotta do what man's gotta do. However, there's a side effect to stockpiling:

I took a guy I work with shooting a while ago. He got all enthusiastic and was going to buy his first handgun, get a carry permit etc. Then he heard about the ammo shortage and sure enough, there's no handgun ammo to be found. Now he's decided to not purchase a gun until sometime later, which probably means never once the initial excitement wears off.

According to news are lots of new gun owners who have bought their first handgun. If the ammo shortage/high prices continue, I wonder how many end up putting their gun in the drawer and leaving it there, or taking it to the pawn shop?

[Guest Mugster]

I wish this explanation was correct, but it misses on at least two points:

1. just in time inventory doesn't just rely on prior orders. For example, Wal-Mart prides itself on up-to-the-minute adjustments to inventory. Their distribution system relies on the ability meet new demand at precisely the correct time and location. The information they collect is passed on to suppliers and (if a supplier wants to keep the business) Wal-Mart insists suppliers keep up with demand.

http://www.infoage.idg.com.au/index.php?id=777120740

2. a number of gun dealers are telling me that, when they ask the manufacturers why they cannot keep up, the manufacturers don't really answer the question.

I don't have the answer. But, the fact that places like Wal-Mart can't keep inventory and the manufacturers are not answering questions makes me think there's more to the story. It could be as simple as the manufacturers not having enough capacity to meet the new demand. If the manufacturers think (i) the demand will not stay high or (ii) that the government will do something to change demand (or worse, require changes in manufacturing), I doubt the manufacturers would be willing to increase production capacity at this point.

I buy alot of odd things, including ammo components. There's some very strange supply problems going on in niche markets. And the gun nut industry is a very niche market that is not covered by large business on the supply end. Read, low profit potential.

Most powder and primers are made in europe and other places. The french still have goodly share of the powder market, which is kinda funny.

I believe the shortage is related to financial institutions being unwilling or unable to issue letters of credit (LOC) for shipping or to insure the shipment. AIG used to do alot of that. So did lloyds. Not sure who the frenchies use, probably AIG. I do know that worldwide shipping is way down, alot of stuff is stuck in a grey financial zone...sitting on the dock unable to be picked up. Lots of weird stuff going on.

I don't know if its going to get worse, stay the same, or improve. Plus people are just buying more and everybody is stocking up or trying to. That doesn't help. Most domestic bullet shops like sierra are in pretty good shape or seem to be.

[orientalexpress]

I've heard a few things regarding the .380 ammo shortage. I heard that .380 is produced on the same line as 9mm. I think Winchester makes ammo for the military so with stuff going on in Iraq and Afghanistan they're not going to stop fulfilling theyre contractual obligations just to make .380. Assuming it is made on the same line and even if you don't have a government contract why would you stop to make .380 when all of your 9mm is being sold?

It seems theres a perfect storm for this caliber. HCPs are up and lots of people are wanting pocket sized pistols in .380 Kel Tecs being making them for years, along with Bersa, and now the LCP with a Taurus, Walther, and Sigs right around the corner. Combine this with the political climate (ammo serialization, gun bans, etc.) and you have lots of panic buying.

Also Academy has been getting about a case of .380 per truck if anyone is interested. It's monarch, but i guess it's better than nothing.

[Guest LieutenantDan67]

All I see at my range are CCW classes that are PACKED SOLID...which means lots of new gun customers...who have to practice so need ammo....so 9mm especially along with .40 is really tough to find any given day.

Expect this to continue until the 'Obama Panic' subsides.

[Guest papa_t]

I was told by a wholesaler friend that the ammo manufacturers aren't hiring more people to increase production because they aren't sure what will happen in Washington. Manufactures don't want to hire people and then have to lay them off if legislation is passed that will decrease demand. Nobody knows what's going to happen.

[Guest LieutenantDan67]

Looking at the rate that ammo (and guns for a good part) fly off the shelves, you'd think gun owners were responsible for keeping our economy afloat in this recession.

[Guest looneeetunes]

i asked about it in another thread and got shot down but i have heard from a retailer that his supplier (rep) told him that it was in the works for ammo stamping, marking whatever you want to call it, and manufacturers were up in the air about that.

could this be what is going on?? or just hear say and urban legend

[bvarnell]

i asked about it in another thread and got shot down but i have heard from a retailer that his supplier (rep) told him that it was in the works for ammo stamping, marking whatever you want to call it, and manufacturers were up in the air about that.

could this be what is going on?? or just hear say and urban legend

If you heard it from a clerk in a retail store, I'm certain it must be true.

[orientalexpress]

I was told by a wholesaler friend that the ammo manufacturers aren't hiring more people to increase production because they aren't sure what will happen in Washington. Manufactures don't want to hire people and then have to lay them off if legislation is passed that will decrease demand. Nobody knows what's going to happen.

Also too you have to think that you probably don't want to hire you're average employee off the street to make ammo or guns for that matter. Hiring to run machinery to build precision instruments isn't exactly the same as hiring to flip a burger or stock shelves.

[Oh Shoot]

i asked about it in another thread and got shot down but i have heard from a retailer that his supplier (rep) told him that it was in the works for ammo stamping, marking whatever you want to call it, and manufacturers were up in the air about that.

could this be what is going on?? or just hear say and urban legend

It's true.

Starts July 1st.

Ammo will quadruple in price and will take about 6 months to even deliver.

Also, you will have to surrender any pre-numbered ammo in your possession or face federal charges.

You can believe this, because I have written it on the InterWebNetBlog thing.

- OS

[Guest SUNTZU]

This picture was funny till it came true.

[bvarnell]

Trying to see if this let's me see pg. 3

[Guest Mugster]

This picture was funny till it came true.

Haha, thats awesome. Imma print that out and put on door at the office.