Supply Chain Management 101: on the ammunition shortage

Supply Chain Management 101: on the ammunition shortage

This is a discussion on Supply Chain Management 101: on the ammunition shortage within the Defensive Ammunition & Ballistics forums, part of the Defensive Carry Discussions category; Supply Chain Management 101: on the ammunition shortage. | Ammunition, General gun stuff, Shooting industry | GRANT CUNNINGHAM Gunstores continue to be a never-ending source ...

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Thread: Supply Chain Management 101: on the ammunition shortage

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    Member Array kdydak's Avatar
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    Supply Chain Management 101: on the ammunition shortage

    Supply Chain Management 101: on the ammunition shortage. | Ammunition, General gun stuff, Shooting industry | GRANT CUNNINGHAM

    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, The Joos, 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. Imagine what would happen if...


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    Distinguished Member Array ErnieNWillis's Avatar
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    No no you're wrong. It's the liberals in government who are making it almost impossible to aquire tools to use against them when they try to subjigate us! They know with out the ability to defend ourselves we will be easily manipulated!

    Actually I think your story makes much more sense. I dont think they could take our guns if they wanted to. Make it difficult and inconvenient? Yep, but wholesale dissarmament is not BLOODY likely.
    Last edited by Captain Crunch; April 24th, 2009 at 01:52 PM. Reason: Deleted OP's quoted post. No need to repeat it.

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    "You know what's scarier? Your food comes to you the same way. Imagine what would happen if..."

    Fire up the grill for that good ol' barbecued armadillo.
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    Ah, man! It was so much more fun blaming every one else for this shortage. Now we just have to blame ourselves.

    No, wait! We can blame the people who forecast usage/demand at the wholesale, manufacturing, and component levels for not seing that this could happen.

    Whoo! That was a close one!


    Great Post!
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    You can't possibly be right.It makes too much sense
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    it's all panic buying
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    If the whole supply chain embraces JIT or Lean Mfg then ramping up isn't as impossible as it sounds. Our company is driving JIT in both directions throughout the flow of goods. Our suppliers must embrace LEAN or be dropped. Our warehoused must do the same too.

    It sounds to me like JIT has not made it all the way through the supply chain. People can be hired overnight to ramp up volume but if the whole chain is not in sync then there is no materials to Mfg like you mentioned. There should be an invisible fishing line attatched to every piece and component and chemical that goes into making the bullet and when that one (1) bullet goes out the door it is pulling more in at the same rate.

    Going Lean can be risky if (Just In Time) is not flowing throughout the whole river of raw goods to manufactured goods. I think this is part of the scenario presented in the OP.

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    Good Supply Chain Management studies trends in material demand and resources. I worked for 30 years in companies that did business with DOD and there is no excuse for not paying attention. I'm not saying there wouldn't be shortages but if the procurement management and production people had been doing their jobs things wouldn't be as bad. In any case, not much we can do now accept to wait for the so called Supply Chain people to ramp up and meet demand or for the private individual to stop hoarding.

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    Distinguished Member Array ErnieNWillis's Avatar
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    Quote Originally Posted by GreenHorn View Post
    If the whole supply chain embraces JIT or Lean Mfg then ramping up isn't as impossible as it sounds. Our company is driving JIT in both directions throughout the flow of goods. Our suppliers must embrace LEAN or be dropped. Our warehoused must do the same too.

    It sounds to me like JIT has not made it all the way through the supply chain. People can be hired overnight to ramp up volume but if the whole chain is not in sync then there is no materials to Mfg like you mentioned. There should be an invisible fishing line attatched to every piece and component and chemical that goes into making the bullet and when that one (1) bullet goes out the door it is pulling more in at the same rate.

    Going Lean can be risky if (Just In Time) is not flowing throughout the whole river of raw goods to manufactured goods. I think this is part of the scenario presented in the OP.

    I am an engineer incharge of facilitating LEAN Manufacturing and Kaizen Events/ Projects for my company. When I read the original post that was exactly what I was thinking.

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    Member Array Uechi's Avatar
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    My experience with JIT is for every company that makes it work there are dozens in which it doesn't. It depends on the commodity/s, the people and the corporate culture. Management is great for saying they support Total Quality Management, Six Sigma etcetera and then doing the exact opposite.

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    Distinguished Member Array ErnieNWillis's Avatar
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    Quote Originally Posted by Uechi View Post
    My experience with JIT is for every company that makes it work there are dozens in which it doesn't. It depends on the commodity/s, the people and the corporate culture. Management is great for saying they support Total Quality Management, Six Sigma etcetera and then doing the exact opposite.
    Yep. In order for it to be successful it must have support from the top.

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    Senior Member Array Tom357's Avatar
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    Even when JIT or LEAN methods and philosophies are embraced throughout the supply chain, higher than anticipated demand, starting earlier than expected, and lasting longer than anticipated, might eventually outpace the ability of the raw material/component producers time to manufacture, even if said manufacturers are closely monitoring demand and adjusting for it, constantly.
    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.
    Inelasticity in the supply chain would be the opposite of a JIT/LEAN model. I think the author's description of "just in time" inventories was, perhaps, an unfortunate choice of words to describe a complacent industry unable to foresee and respond to rapid, sustained increases in demand, coupled with a large number of relatively small retailers maintaining small inventories easily depleted with even small increases in demand. The retailers, mantaining limited inventories, would constantly be depleted, if the supply chain were as sluggish and unresponsive as described.

    LOL, in this case, we might well see a glut, down the road, if backorders anticipated sustained demand, with panic demand easing at the very time inventories begin to catch up.
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    VIP Member Array sgtD's Avatar
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    Quote Originally Posted by kdydak View Post
    You know what's scarier? Your food comes to you the same way. Imagine what would happen if...
    Yup, exactly correct. We used to keep comodoties stocked in this country. There used to be enough grain to feed everyone for a year back in the old days.

    Not anymore. I think now there is enough to last something like 3 weeks, IIRC.

    The whole basis for the JIT system seems to be reducing or doing away with the costs of maintaining inventories, and it is done at the expense of readiness for unexpected events. That's why I tend to maintain my own inventories. They use the Just in Time (JIT) system, I use the Just In Case (JIC) system.

    The guy at my local gun shop had the same idea on the ammo shortage after talking to his suppliers. He said the 1st quarter ammo production was bought up in the 1st three weeks of the year and now everyone is trying to play catch up, and demand is not slacking off enough so that they can catch up.
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    With Obama backing off the AWB and others in Congress who have us spooked seemingly slowing down their anti-gun rhetoric, how much you want to bet they will be running sales on ammo this summer.

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