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You can't look at Tariffs and manufacturing with such a simple lens. Manufacturing in America was and is still a massive part of the economy. China took the carbon footprint and pollution of the foundries, mines, and the other early parts of the manufacturing process, that is very dirty, and is also very low value added. There are very few massive factories in America because its just much better to have a thousand agile machine shops dotted across rual towns to take advantage of cheap land, labor, and infrastructure costs.
Wanting your children to grow up working in mines or the foundries to turn ore into basic metals is dumb and the people who tell you thats what these tariffs are going to do are bad people. Those are terrible jobs that do not pay well and wreck the lives of the people involved in them. Having the later chains in the process's to turn raw materials into finished products produce incredible jobs that can be technologically advanced to the point where someone like me can work on tractor parts all day but are not allowed to lift anything above 15lbs and nothing above 5lbs if I have to move or twist in any way.
If you want to improve manufacturing in a country you need to attack the costs, labor is already cheap due to rapidly advancing productivity, green energy can make energy costs non-existent. The things that are expensive that are the materials to produce things and the housing to attract skilled workers to the machine shops. There is no universe where reopening mines and foundries in America is going to lead to lower material costs for manufacturing.
Germany had a booming economy and a bright, shiny future for all of Europe because they could buy energy and raw materials from Russia, before selling the finished product back to them and the rest of the world.
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On July 01 2025 08:40 Sermokala wrote:
You can't look at Tariffs and manufacturing with such a simple lens. Manufacturing in America was and is still a massive part of the economy. China took the carbon footprint and pollution of the foundries, mines, and the other early parts of the manufacturing process, that is very dirty, and is also very low value added. There are very few massive factories in America because its just much better to have a thousand agile machine shops dotted across rual towns to take advantage of cheap land, labor, and infrastructure costs.
Wanting your children to grow up working in mines or the foundries to turn ore into basic metals is dumb and the people who tell you thats what these tariffs are going to do are bad people. Those are terrible jobs that do not pay well and wreck the lives of the people involved in them. Having the later chains in the process's to turn raw materials into finished products produce incredible jobs that can be technologically advanced to the point where someone like me can work on tractor parts all day but are not allowed to lift anything above 15lbs and nothing above 5lbs if I have to move or twist in any way.
If you want to improve manufacturing in a country you need to attack the costs, labor is already cheap due to rapidly advancing productivity, green energy can make energy costs non-existent. The things that are expensive that are the materials to produce things and the housing to attract skilled workers to the machine shops. There is no universe where reopening mines and foundries in America is going to lead to lower material costs for manufacturing.
Germany had a booming economy and a bright, shiny future for all of Europe because they could buy energy and raw materials from Russia, before selling the finished product back to them and the rest of the world.
Mining isn't in the 1800s anymore, take a look at Australia, they are very tech leaded and pay very handsomely.
Or china with its autonomous trucks that are powered by green energy.
The china advantage is not the cost, but the complete package.
If the US wants to compete, it needs more manufacturing jobs at all levels and across industries.
we can get customised beanies and scarves, headwear, coins all packed into a double-sided printed box with magnet closure within 45 days, with third party inspection including samples.
It has not been the cheapest for a while now. But china has a strong manufacturing base, starts with raw material, to a huge population with manufacturing experience, and tonnes of little manufacturing hubs with well developed freight network.
There's nowhere else in the world could make it as cheap and quick as china, and that's not because of one particular product, it's the whole package, and that includes subassembly of products.
To have the higher "tier" suppliers being feasible, the entire value chain must exist first, and there are plenty that can't exist simply due to the timing alone.
It all needs to start somewhere, and a push for more manufacturing at all level, should always be welcomed.
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You just described every way that china has lower costs. The Cities that dominate their industries sprouted up in the last few decades. You have every advantage when you've got a state wiling to pay for and plan cities with specific industries in mind. Labor costs were cheap because they had just had hundreds of millions of people in extreme poverty sitting around that they could build the industries around using. Not having to work around existing cities and infrastructures and instead just employ the latest urban development theory as you turn fishing villages into the largest cities in the world.
You're not going to be able to do that in the United States, half the country is deathly allergic to the government doing anything to better their lives. We were supposed to get a massive canal to connect the great lakes to the Mississippi. It really wouldn't be that hard to do today but it would cost money. Any efforts to build up the freight infrastructure would be killed by the carbrained masses. Any efforts to build the housing to allow manufacturing to be more agile would be killed by the unfortunate thing that people own property in America.
The value chain for manufacturing existed in America, it included taking advantage of cheap materials and levered access to new markets to sell the products. That doesn't exist anymore and so manufacturing is just going to suffer.
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On July 02 2025 09:34 Sermokala wrote:
You just described every way that china has lower costs. The Cities that dominate their industries sprouted up in the last few decades. You have every advantage when you've got a state wiling to pay for and plan cities with specific industries in mind. Labor costs were cheap because they had just had hundreds of millions of people in extreme poverty sitting around that they could build the industries around using. Not having to work around existing cities and infrastructures and instead just employ the latest urban development theory as you turn fishing villages into the largest cities in the world.
You're not going to be able to do that in the United States, half the country is deathly allergic to the government doing anything to better their lives. We were supposed to get a massive canal to connect the great lakes to the Mississippi. It really wouldn't be that hard to do today but it would cost money. Any efforts to build up the freight infrastructure would be killed by the carbrained masses. Any efforts to build the housing to allow manufacturing to be more agile would be killed by the unfortunate thing that people own property in America.
The value chain for manufacturing existed in America, it included taking advantage of cheap materials and levered access to new markets to sell the products. That doesn't exist anymore and so manufacturing is just going to suffer.
I have worked in product development and merchandise for a decade.
China doesn't have the cheapest cost globally anymore and especially so for the past 5-7 years.
India and Vietnam are fair amount cheaper, hence Chinese firms are actually investing and moving plants over there.
If money and opportunities exist, it will happen. The problem is the US needs a fair number of "push" to even start taking it back
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On July 02 2025 10:29 ETisME wrote:Show nested quote +On July 02 2025 09:34 Sermokala wrote:
You just described every way that china has lower costs. The Cities that dominate their industries sprouted up in the last few decades. You have every advantage when you've got a state wiling to pay for and plan cities with specific industries in mind. Labor costs were cheap because they had just had hundreds of millions of people in extreme poverty sitting around that they could build the industries around using. Not having to work around existing cities and infrastructures and instead just employ the latest urban development theory as you turn fishing villages into the largest cities in the world.
You're not going to be able to do that in the United States, half the country is deathly allergic to the government doing anything to better their lives. We were supposed to get a massive canal to connect the great lakes to the Mississippi. It really wouldn't be that hard to do today but it would cost money. Any efforts to build up the freight infrastructure would be killed by the carbrained masses. Any efforts to build the housing to allow manufacturing to be more agile would be killed by the unfortunate thing that people own property in America.
The value chain for manufacturing existed in America, it included taking advantage of cheap materials and levered access to new markets to sell the products. That doesn't exist anymore and so manufacturing is just going to suffer. I have worked in product development and merchandise for a decade. China doesn't have the cheapest cost globally anymore and especially so for the past 5-7 years. India and Vietnam are fair amount cheaper, hence Chinese firms are actually investing and moving plants over there. If money and opportunities exist, it will happen. The problem is the US needs a fair number of "push" to even start taking it back
I do not think that China moving production to even cheaper places means that the US has a better opportunity, it likely means it will be even harder.
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On July 03 2025 03:23 Billyboy wrote:Show nested quote +On July 02 2025 10:29 ETisME wrote:On July 02 2025 09:34 Sermokala wrote:
You just described every way that china has lower costs. The Cities that dominate their industries sprouted up in the last few decades. You have every advantage when you've got a state wiling to pay for and plan cities with specific industries in mind. Labor costs were cheap because they had just had hundreds of millions of people in extreme poverty sitting around that they could build the industries around using. Not having to work around existing cities and infrastructures and instead just employ the latest urban development theory as you turn fishing villages into the largest cities in the world.
You're not going to be able to do that in the United States, half the country is deathly allergic to the government doing anything to better their lives. We were supposed to get a massive canal to connect the great lakes to the Mississippi. It really wouldn't be that hard to do today but it would cost money. Any efforts to build up the freight infrastructure would be killed by the carbrained masses. Any efforts to build the housing to allow manufacturing to be more agile would be killed by the unfortunate thing that people own property in America.
The value chain for manufacturing existed in America, it included taking advantage of cheap materials and levered access to new markets to sell the products. That doesn't exist anymore and so manufacturing is just going to suffer. I have worked in product development and merchandise for a decade. China doesn't have the cheapest cost globally anymore and especially so for the past 5-7 years. India and Vietnam are fair amount cheaper, hence Chinese firms are actually investing and moving plants over there. If money and opportunities exist, it will happen. The problem is the US needs a fair number of "push" to even start taking it back I do not think that China moving production to even cheaper places means that the US has a better opportunity, it likely means it will be even harder.
Well the US is pushing towards a large class of people being forced to work any job at all, disregarding conditions. Combining that with increased cost of living you might see company cities happen again in the US. Though I doubt even those would make it profitable to do manufacturing in the US when you basically have to train your skilled blue collar workers from nothing.
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On July 03 2025 03:23 Billyboy wrote:Show nested quote +On July 02 2025 10:29 ETisME wrote:On July 02 2025 09:34 Sermokala wrote:
You just described every way that china has lower costs. The Cities that dominate their industries sprouted up in the last few decades. You have every advantage when you've got a state wiling to pay for and plan cities with specific industries in mind. Labor costs were cheap because they had just had hundreds of millions of people in extreme poverty sitting around that they could build the industries around using. Not having to work around existing cities and infrastructures and instead just employ the latest urban development theory as you turn fishing villages into the largest cities in the world.
You're not going to be able to do that in the United States, half the country is deathly allergic to the government doing anything to better their lives. We were supposed to get a massive canal to connect the great lakes to the Mississippi. It really wouldn't be that hard to do today but it would cost money. Any efforts to build up the freight infrastructure would be killed by the carbrained masses. Any efforts to build the housing to allow manufacturing to be more agile would be killed by the unfortunate thing that people own property in America.
The value chain for manufacturing existed in America, it included taking advantage of cheap materials and levered access to new markets to sell the products. That doesn't exist anymore and so manufacturing is just going to suffer. I have worked in product development and merchandise for a decade. China doesn't have the cheapest cost globally anymore and especially so for the past 5-7 years. India and Vietnam are fair amount cheaper, hence Chinese firms are actually investing and moving plants over there. If money and opportunities exist, it will happen. The problem is the US needs a fair number of "push" to even start taking it back I do not think that China moving production to even cheaper places means that the US has a better opportunity, it likely means it will be even harder.
It just means the US providing incentives like tariff matters.
profitability ultimately is more important than cost.
biggest one is definitely whether tier1 supplier (down stream manufacturers) have moved offshore. And a strong tier 1 leaving can collapse the entire hub.
And this is the perfect job for Trump, he pushes buttons and not afraid to get ugly.
Meanwhile look at Germany:
https://www.reuters.com/markets/europe/german-corporate-insolvencies-highest-level-decade-study-shows-2025-06-26/
Needing to boost military spending to play catch-up in a shitty economy.
And the Reuter tried to write it down nicely, this has a much more detailed breakdown
https://www.wsws.org/en/articles/2025/06/30/xkpv-j30.html
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The problem is that the US doesn’t really have a coherent strategy to actually develop the complete package, as you previously alluded to.
Like you said, China is no longer the cheaper manufacturing hub in the world but it is the most consistent and effective hub in the world due to the huge amount of planning and infrastructure built to support the entire business from top to bottom.
In the past, this was the primary reason why Apple (and Tim Cook) invested so much into Chinese manufacturing and why Apple’s years old game of “we’re building a factory in the USA some time in the future” rings so hollow. If they cared and it was feasible, they’re be slamming the factories down left and right but they’re not. The solution they have is to pay Trump inducements so they can dodge tariffs as they continue to manufacture most of their stuff in China.
Same reason why tier 1 desktop chassis manufacturers have consistently stated the tariffs aren’t going to change their place of manufacture. They can’t just shift boats to somewhere like Thailand or back to the USA to dodge tariffs because no one can manufacture like the Chinese can. Even if you ship the technological knowhow over, there’s insufficient infrastructure that makes the entire process silky smooth in China.
That’s why the US tariffs ring so hollow to me. Yes, technically it’ll bring back some manufacturing and it is a useful tool. But they’re not doing it for that reason and it doesn’t take a genius to know domestic manufacturing is still going to be cooked. There actually has to be a coherent strategy to build a foundation that supports the entire manufacturing chain, not scream into the ether that you’re going to Make American Manufacturing Great Again by shoving money into Foxconn’s hands or whatever.
The government does absolutely nothing to improve domestic transportation infrastructure and constantly makes it public that they have an allergy to stuff like improved rail systems to link up suppliers and beef up supply chain reliability and speed.
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On July 03 2025 07:59 Hat Trick of Today wrote:
The problem is that the US doesn’t really have a coherent strategy to actually develop the complete package, as you previously alluded to.
Like you said, China is no longer the cheaper manufacturing hub in the world but it is the most consistent and effective hub in the world due to the huge amount of planning and infrastructure built to support the entire business from top to bottom.
In the past, this was the primary reason why Apple (and Tim Cook) invested so much into Chinese manufacturing and why Apple’s years old game of “we’re building a factory in the USA some time in the future” rings so hollow. If they cared and it was feasible, they’re be slamming the factories down left and right but they’re not. The solution they have is to pay Trump inducements so they can dodge tariffs as they continue to manufacture most of their stuff in China.
Same reason why tier 1 desktop chassis manufacturers have consistently stated the tariffs aren’t going to change their place of manufacture. They can’t just shift boats to somewhere like Thailand or back to the USA to dodge tariffs because no one can manufacture like the Chinese can. Even if you ship the technological knowhow over, there’s insufficient infrastructure that makes the entire process silky smooth in China.
That’s why the US tariffs ring so hollow to me. Yes, technically it’ll bring back some manufacturing and it is a useful tool. But they’re not doing it for that reason and it doesn’t take a genius to know domestic manufacturing is still going to be cooked. There actually has to be a coherent strategy to build a foundation that supports the entire manufacturing chain, not scream into the ether that you’re going to Make American Manufacturing Great Again by shoving money into Foxconn’s hands or whatever.
The government does absolutely nothing to improve domestic transportation infrastructure and constantly makes it public that they have an allergy to stuff like improved rail systems to link up suppliers and beef up supply chain reliability and speed.
I think it's fine.
The US isn't china, it can't just move thousands of people just to build a highway etc.
But the US is signalling it wants manufacturing, and having the highest FDI in record is a sign this is going to have a significant impact.
And the US is getting tier 1 firms, apple, NVIDIA, Amazon, tsm, Roche etc.
These changes are far better with organic growth, because firms will want to grow around these tier 1 suppliers.
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I don't think you know what teir 1 suppliers are if you think Nividia Apple and amazon are them. Amazon is literaly the marketplace, Apple and Nividia are both end stage manufacturers. Neither of them have any need to have localy sourced supply chains around them and all sell their products so globally that it would be counterintuitive to make them locally.
Plus these supply chains and the infrastructure to develop the industries take years and decades. The companies have every reason to just let the economy crash, and tell the next guy to just repeal the tariffs that everyone can agree caused inflation and the economy to crash.
the FDI inflow is less than 1.5% of GDP You do know that the GDP is measured in the trillions yes?
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On July 03 2025 12:58 Sermokala wrote:
I don't think you know what teir 1 suppliers are if you think Nividia Apple and amazon are them. Amazon is literaly the marketplace, Apple and Nividia are both end stage manufacturers. Neither of them have any need to have localy sourced supply chains around them and all sell their products so globally that it would be counterintuitive to make them locally.
Plus these supply chains and the infrastructure to develop the industries take years and decades. The companies have every reason to just let the economy crash, and tell the next guy to just repeal the tariffs that everyone can agree caused inflation and the economy to crash.
the FDI inflow is less than 1.5% of GDP You do know that the GDP is measured in the trillions yes?
Nope, supply chain including warehousing etc. There are literally no situations where these firms moving/investing in one specific location ain't going to have a massive impact.
Apple is investing in semi-con manufacturing in the US.
Nvidia is following TSM or other way around.
Hyundai etc
You think there's no single component of the supply chain is going to move to US along with them? Apple alone is expecting to work with thousands of suppliers in the US.
No companies want the economy to crash, not sure how you came to that forecast.
And FDI isn't meant to be bigger than GDP, let alone the largest economy in the world, if that's what you trying to say? Or you saying the biggest FDI inflows is somewhat a bad thing?
It's a weird thing to have people doubting these are good things or insignificant. It might not be a fully made in America iPhone, it doesn't mean these firms basing in the US have no significant impact.
There's literally no company working with these companies gonna just ignore these directions. Same with companies that start exploring opportunities over there.
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Apple, Nvidia, etc. Just keep making the same generic "500B investment in America" claims that are shit they already planned to spend, share buybacks, etc. They're not building out the middle class with living wage mfg jobs lmao
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Brother, the 1950s called, and they have this thing called Lean Manufacturing. I don't know why you have this image that manufacturing is all done on site and where you have the factory site determines where you source your materials but it hasn't been that way for decades. You source the chains on stability, reliability, and long term partnerships. Companies are not going to change their entire practices for short term gain when long term the only reasonable path to take is to let the economy crash and get better conditions when a madman isn't in office anymore. There are not enough unemployed people atm to take up the lower, less valuable steps on the chain and trump wants to lower our labor pool on top of that.
The chip fabs being made in Arizona are not even going to be the bleeding edge chips that apple will use in their latest chips. Its going to be the secondary market with lower margins and lower value added than the Taiwan fabs.
FDI being less than a percent and a half of the GDP means that its not going to have the kind of economy-changing effect you're trying to potray it as. Its bearly just being reasonable. Mexico has much higher Poland canada Argentina has almost triple as part of their GDP. Warehousing has been a massive no no for assembly for decades.
Samsung for one is going to completely ignore what Apple is doing because they have Korea. Its a global economy and trying to cut off trade as much as trump wants to do is just going to make american manufacturing less competitive in that economy.
Like just the concept of moving this kind of infrastructure on shore should be clear just how dumb it is to try to do it with instant tariffs. Everything takes so long to build and everything still needs to exist now that will be built over the next few years. Then when you finally build the new factories and facilities to onshore your supply chains that old factory and old facilities are still going to be out there. You've now only created inherently less efficient that is being artificially propped up by government intervention in the economy.
This bull headed inability to reckon with the very basic, very easy concepts to comprehend about how we've gotten here and instead an insistance that basic facts about the world can be easily changed if you insist that they do is really silly.
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On July 05 2025 06:24 Sermokala wrote:
Brother, the 1950s called, and they have this thing called Lean Manufacturing. I don't know why you have this image that manufacturing is all done on site and where you have the factory site determines where you source your materials but it hasn't been that way for decades. You source the chains on stability, reliability, and long term partnerships. Companies are not going to change their entire practices for short term gain when long term the only reasonable path to take is to let the economy crash and get better conditions when a madman isn't in office anymore. There are not enough unemployed people atm to take up the lower, less valuable steps on the chain and trump wants to lower our labor pool on top of that.
The chip fabs being made in Arizona are not even going to be the bleeding edge chips that apple will use in their latest chips. Its going to be the secondary market with lower margins and lower value added than the Taiwan fabs.
FDI being less than a percent and a half of the GDP means that its not going to have the kind of economy-changing effect you're trying to potray it as. Its bearly just being reasonable. Mexico has much higher Poland canada Argentina has almost triple as part of their GDP. Warehousing has been a massive no no for assembly for decades.
Samsung for one is going to completely ignore what Apple is doing because they have Korea. Its a global economy and trying to cut off trade as much as trump wants to do is just going to make american manufacturing less competitive in that economy.
Like just the concept of moving this kind of infrastructure on shore should be clear just how dumb it is to try to do it with instant tariffs. Everything takes so long to build and everything still needs to exist now that will be built over the next few years. Then when you finally build the new factories and facilities to onshore your supply chains that old factory and old facilities are still going to be out there. You've now only created inherently less efficient that is being artificially propped up by government intervention in the economy.
This bull headed inability to reckon with the very basic, very easy concepts to comprehend about how we've gotten here and instead an insistance that basic facts about the world can be easily changed if you insist that they do is really silly.
As someone with a degree in supply chain from the best program in the world, this guy gets it ^
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Okay, can anyone help me out here?
Today I got into an discussion with a colleague who claimed that putting too much stock of a raw material in the warehouse (to be used in a product), was at the very least suboptimal and even losing capital. I posited that, even if the stock for this product (fixed price btw), had a guarantee use, that this wouldn't be too much of a problem because the turnover is guaranteed. He also threw a number around that putting a product on stock costs like a fixed sum per pallet or something (which I don't really understand and I assume this is where the devaluation of the raw materials is coming from). If my company owns all the items and the warehouse included, how is it losing money to stock an item for an unforseeable time when this item will 100% be used at a point in time?
I see 3 issues that could become a problem when putting too much stock:
1) hampering warehouse efficiency. Putting too much causes too little space for literally fitting everything and because turnover rate is high for many items this causes a fixed % of the warehouse being unusable and basically hampering your flexibility.
But, we have enough space.
2) buying the materials up front and the market value then decreasing subsequently. This leaves you with an overpriced material that you'll have to sell at a loss.
But this item has a fixed price.
3) buying too much of the material anticipating a turnover that just doesn't happen. This leaves you with a raw material that becomes dead weight for you and so this is a loss for when you sell to a third party with a big discount.
But, this product will sell and the expiry date is very long.
So am I missing something here? Why is there an opex for assets that we literally own? Or is this just accounting just so you can drive business or something (i.e. Things have to mooooooooove).
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On September 26 2025 01:10 Uldridge wrote:
Okay, can anyone help me out here?
Today I got into an discussion with a colleague who claimed that putting too much stock of a raw material in the warehouse (to be used in a product), was at the very least suboptimal and even losing capital. I posited that, even if the stock for this product (fixed price btw), had a guarantee use, that this wouldn't be too much of a problem because the turnover is guaranteed. He also threw a number around that putting a product on stock costs like a fixed sum per pallet or something (which I don't really understand and I assume this is where the devaluation of the raw materials is coming from). If my company owns all the items and the warehouse included, how is it losing money to stock an item for an unforseeable time when this item will 100% be used at a point in time?
I see 3 issues that could become a problem when putting too much stock:
1) hampering warehouse efficiency. Putting too much causes too little space for literally fitting everything and because turnover rate is high for many items this causes a fixed % of the warehouse being unusable and basically hampering your flexibility.
But, we have enough space.
2) buying the materials up front and the market value then decreasing subsequently. This leaves you with an overpriced material that you'll have to sell at a loss.
But this item has a fixed price.
3) buying too much of the material anticipating a turnover that just doesn't happen. This leaves you with a raw material that becomes dead weight for you and so this is a loss for when you sell to a third party with a big discount.
But, this product will sell and the expiry date is very long.
So am I missing something here? Why is there an opex for assets that we literally own? Or is this just accounting just so you can drive business or something (i.e. Things have to mooooooooove).
It is mostly opportunity cost. If you spend €1 000 000 on buying things you will need in 6 months you have to compare that with what other things you could do with that money. The simplest being putting it in a bank for interest. As long as that interest increases faster than the value of the goods you lost future earnings.
Many companies consider stock costing ~11% extra per year in opportunity cost, since they could have used that money in a marketing campaign, financing R&D etc.
The biggest loss is of course buying goods you then have to scrap. Rubber products, food etc fall in this category. Buying early just means you throw it away.
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And that's why I'm not a supply chain man. 11% shieeet.
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United States44283 Posts
On September 26 2025 01:10 Uldridge wrote:
Okay, can anyone help me out here?
Today I got into an discussion with a colleague who claimed that putting too much stock of a raw material in the warehouse (to be used in a product), was at the very least suboptimal and even losing capital. I posited that, even if the stock for this product (fixed price btw), had a guarantee use, that this wouldn't be too much of a problem because the turnover is guaranteed. He also threw a number around that putting a product on stock costs like a fixed sum per pallet or something (which I don't really understand and I assume this is where the devaluation of the raw materials is coming from). If my company owns all the items and the warehouse included, how is it losing money to stock an item for an unforseeable time when this item will 100% be used at a point in time?
I see 3 issues that could become a problem when putting too much stock:
1) hampering warehouse efficiency. Putting too much causes too little space for literally fitting everything and because turnover rate is high for many items this causes a fixed % of the warehouse being unusable and basically hampering your flexibility.
But, we have enough space.
2) buying the materials up front and the market value then decreasing subsequently. This leaves you with an overpriced material that you'll have to sell at a loss.
But this item has a fixed price.
3) buying too much of the material anticipating a turnover that just doesn't happen. This leaves you with a raw material that becomes dead weight for you and so this is a loss for when you sell to a third party with a big discount.
But, this product will sell and the expiry date is very long.
So am I missing something here? Why is there an opex for assets that we literally own? Or is this just accounting just so you can drive business or something (i.e. Things have to mooooooooove).
What you're describing is called the cost of working capital and it's a thing. It's been a KPI at some of the companies I've worked at which have made serious efforts to reduce it.
You can see more here.
https://www.investopedia.com/terms/w/workingcapitalturnover.asp
Essentially you want as little cash tied up in the business as possible because reducing the denominator in ROI formula is just as good as increasing the numerator. So as little inventory as possible, and of the inventory you have you ideally want as much of it getting used within the payment period (so if the vendor requires payment within 30 days and you convert it into a sale within 20 then you never have any cash tied up in inventory).
All of that completely falls to shit if someone crashes a cargo ship into the side of the Suez. A lot of companies need to be reminded from time to time that they're not Toyota and they should stop trying to do Toyota things.
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On September 26 2025 01:10 Uldridge wrote:
Okay, can anyone help me out here?
Today I got into an discussion with a colleague who claimed that putting too much stock of a raw material in the warehouse (to be used in a product), was at the very least suboptimal and even losing capital. I posited that, even if the stock for this product (fixed price btw), had a guarantee use, that this wouldn't be too much of a problem because the turnover is guaranteed. He also threw a number around that putting a product on stock costs like a fixed sum per pallet or something (which I don't really understand and I assume this is where the devaluation of the raw materials is coming from). If my company owns all the items and the warehouse included, how is it losing money to stock an item for an unforseeable time when this item will 100% be used at a point in time?
I see 3 issues that could become a problem when putting too much stock:
1) hampering warehouse efficiency. Putting too much causes too little space for literally fitting everything and because turnover rate is high for many items this causes a fixed % of the warehouse being unusable and basically hampering your flexibility.
But, we have enough space.
2) buying the materials up front and the market value then decreasing subsequently. This leaves you with an overpriced material that you'll have to sell at a loss.
But this item has a fixed price.
3) buying too much of the material anticipating a turnover that just doesn't happen. This leaves you with a raw material that becomes dead weight for you and so this is a loss for when you sell to a third party with a big discount.
But, this product will sell and the expiry date is very long.
So am I missing something here? Why is there an opex for assets that we literally own? Or is this just accounting just so you can drive business or something (i.e. Things have to mooooooooove).
In addition to the opportunity cost, I have to quibble with point (1): you have space. Space costs money. You rent a warehouse (or have bought a warehouse). That's a cost you want to minimise. At absolutely perfect efficiency you need no warehouse at all: the product comes in and is already needed in production. This is the dropshipping way, and is great if your supply is always guaranteed with known delivery times. But recent "hiccups" have shown this isn't necessarily the best option: the accident in the Suez canal, COVID, Yemeni rebels, tariffs, etc. all caused delays and/or uncertainty in international supply lines. So relying on prompt and reliable delivery is risky and having storage provides some slack in delivery, at the cost of having to store materials. That IS a cost. Even if you "have the space", because you could be doing something else with that space. There's also the risk of breakage or spoilage, even if they have a long expiry date: rats, humidity, moths, etc.etc. could ruin a batch, so you have to invest in things to keep your warehouse clean, dry, etc. and the more storage space you have the greater that cost.
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EPT
