President of Federal on ammo shortage

Discussion in 'General Gun Discussions' started by hso, Jan 26, 2021.

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  1. hso

    hso Moderator Staff Member

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  2. jmorris

    jmorris Member

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    That doesn’t seem to be the case from this just two paragraphs above it.


    That’s a lot of money on the table. If sustainable for years, someone will fill the void and make the money. I have seen business come and go on the waves of demand though.
     
  3. jmr40

    jmr40 Member

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    Ammo makers COULD add additional machinery and hire more workers, but I understand the reluctance to do so. That would be a huge investment in infrastructure and at some point we have to reach the point of saturation where they'd be stuck with more equipment and workers than needed.

    There has been an almost constant run on ammo for more than a decade now. And I'd argue that the amount of ammo being fired hasn't increased by nearly that much. There is a butt load of ammo out there in peoples homes. I'm 62 and if I never bought another round of ammo could make what I have last the rest of my life. Of course I'd not shoot as much as I'd like. But I'm sure there are a lot of others like myself.

    And FYI, a buttload is actually equal to 2 hogs heads.

    A Buttload is an Actual Unit of Measurement – Commonplace Fun Facts (wordpress.com)

    How Much is a Buttload? (ponderweasel.com)
     
    Last edited: Jan 26, 2021
  4. Double Naught Spy

    Double Naught Spy Sus Venator

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    Yeah, just a bunch of hooey from the president. How they manage to keep getting caught flat footed several elections in a row is just beyond me. Yes, there is more this time, but they still got caught flatfooted AGAIN and are feigning ignorance.

    Unprecedented? Sure. Unpredictable? Not at all.

    I like how the experts called it a Trump Slump, but the same thing happened with the previous elections. Remember all the posts and memes about Obama being the greatest salesman of the year?

    So there was a bit of a Trump Slump after Trump won. Did the ammo companies using the lack of demand to build up inventory in preparation for the next election? Nope. They don't work that way. It would be costly to do, which is why they don't do it.

    Remember folks asking if the ammo companies would increase production during the previous shortages?

    Remember how people get surprised by ammo shortages with the last elections?

    Searching for these things on THR is a nifty little walk down memory lane.

    The bottom line here is that ammo companies either won't or can't actually gear up production for regularly scheduled panic buys. They are deathly afraid that if they gear up production and build up inventory and the predicted panic buying does not materialize, then they will potentially go out of business. HOWEVER, they can just ride the panic and keep making money and remain in business. Failure to make huge profits at the risk of going out of business is a poorer business strategy than being more conservative and making only some changes in direct response and staying the course overall.

    Even if they did ramp up production with new machines and facilities, what would they do with those machines and facilities during most of the years between elections?
     
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  5. MechAg94

    MechAg94 Member

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    I figure some ammo like 9mm has been shot more in the last 10 years. Other than the sheer number of 9mm guns made and sold, I think a lot of people have been setting up steel targets and such to blast away with cheap 9mm (I did). I burned through a lot in the last 5 years. I don't know if 9mm will ever get back under $200 for 1000 rounds, but it was fun while it lasted. Wish I had stocked up on it more. I shot a pistol last weekend and limited myself to 50 rounds, loading no more than 5 rounds at a time.
     
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  6. reddog81

    reddog81 Member

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    You can't plan for demand to double(?) overnight.

    In 2018 and 2019 ammo companies were focused on selling anything they could in order to stay in business. Retailers were running sales and manufacturers were running rebates. No bank would finance an expansion when sales are dropping quarter after quarter after quarter.

    It's much easier for me, as a consumer, to buy a 4 year supply of ammo than it would be for a company to build warehouse across the country and stock then in hopes that sales increase at some undetermined point in time.
     
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  7. MechAg94

    MechAg94 Member

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    "Buy It Cheap, Stack It Deep" isn't just a funny phrase. It is something to actually do (whatever you can afford). I recall guys like Tom Gresham recommending everyone stock up on whatever they could afford as the current prices would not be around forever. He recommended people buy a few boxes of ammo every month to put away if you can't afford to buy by the case.
     
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  8. HankB

    HankB Member

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    I think most readers here understand supply and demand - what's harder to understand is no supply and demand.

    If a retailer gets a lot of ammo in and it sells out promptly, that's supply and demand at work . . . but what if the retailer doesn't get the ammo in the first place? I've spoken to sales staff at really big retailers (Cabela's, Bass Pro, Academy) as well as a couple of small gun shops, and the story is the same now as it was a couple of years ago during the .22 rimfire shortage - they're not receiving ammo from the manufacturers. If the big guys don't get it - and the small guys don't get it - who IS getting it?

    I'd really like to see someone in the know (NRA? Are you listening?) detail exactly where in the supply chain the ammo is going - because somewhere between the manufacturer's shipping dock and the retailer's shelves it's vanishing.
     
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  9. daniel craig

    daniel craig Member

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    It’s equipment and workers will eventually have to get rid of when the demand dies down.
     
  10. daniel craig

    daniel craig Member

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    I think one of the things a lot of people gloss over in their own reasoning is material shortages. Like was mentioned in the article brass it’s getting harder to find an economic rate and it’s becoming more expensive.

    People assume that steel or copper cased ammo is **** so even if manufacturers switched to a commodity easier to find, it wouldn’t sell well.

    This is an old article but I always wondered about Polymer/plastic rifle casings:
    https://www.polymersolutions.com/blog/making-ammunition-with-plastic-cartridge-casings/


    i’m curious to see how many more ammunition shortages we have before there’s an increase in innovation in ammo manufacturing or before a new idea for weaponry comes out (whatever that looks like I don’t know).
     
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  11. SSN Vet

    SSN Vet Member

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    They're in business to make money and that's what they're doing.

    Ramping up production during the "Trump Slump" in anticipation (speculation) of a pandemic and gun control isn't exactly a sound business strategy. Sure, you'll make more money "if" you call it right, but you risk going under if you don't. So they ramp up as best they can with current facilities and raise prices to keep up with the cost of raw materials.

    It's really not rocket science :p
     
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  12. daniel craig

    daniel craig Member

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    Exactly. It cost a lot of money upfront to be able to produce more ammo. You might never get that money back and that’s not a risk that a lot of companies want to take. That’s not a risk a lot of companies in other industries want to take.
     
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  13. Double Naught Spy

    Double Naught Spy Sus Venator

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    While we are agreement on this, that the explanation given doesn't mirror this reality is why I think the comments are a bunch of hooey.

    All businesses speculate. The only question is really how much they are willing to speculate. Ammo companies are playing it conservatively in a reactionary manner instead of being proactive and then trying to explain away the shortages as being on the market, when they are part of the problem as well.
     
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  14. daniel craig

    daniel craig Member

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    I don’t necessarily think I agree. Let’s say they had been proactive and spend 10 million dollars… Likely more… Getting a new place more machinery and more workers prior to the run on ammo, maybe January/February timeframe. and let’s say it takes from February to June to Find a new factory get all the equipment set up and get all the people hired… they increase their production by 100 or 150% and the run dies down by December. There’s no way they would’ve made all their money back and then once demand is lower because everybody’s calm down it would take them years to make the money back and they would have to lay a bunch of people off.
    That’s not a risk any sane company would take. We have seen that this current animal crisis has lasted quite a while and it may still last quite a while but there’s no way to know how long that is so chucking a bunch of money at the problem to make more ammo quickly well almost never makes sense. They would have to do it slowly and carefully.

    I think the explanation in the article is absolutely in line with reality. Especially given that Covid has meant that a lot of places I decrease decrease the number of workers they had for a while, so 100% production would have meant 100% of a decreased workforce.
     
  15. bassjam

    bassjam Member

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    It's unreasonable to expect ammo companies to stockpile 1-2 years worth of ammo for 8-12 years just to be prepared for the next panic buy. And had Covid not happened, it realistically could have been that long. They'd have to expend hundreds of millions in materials and overtime labor that they won't get a return on for years and years. They'd have to store the ammo loose and pack when needed, or go ahead and pack it in normal paperboard packaging that starts to deteriorate in humidity or when it dries out. They'd have to rent or buy a royal $h!tload of warehouse space, and I'm sure the insurance costs for warehousing to store ammo are pretty costly. Then there's the constant inventory management and labor to keep track of everything and cycle through it in the warehouse to ensure none of it is too old, vs normally when they'd just send it straight out the shipping docks from the manufacturing facility direct to distribution. Not to mention the political firestorm they'd receive once the media finds out they have that much ammo saved up. You can bet at least one of the governors in a state where one of those warehouses is would attempt to pass laws preventing such a thing or at least heavily taxing them.
     
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  16. NuShootr

    NuShootr member

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    Well, not exactly. First off, there are 7M new gun owners out there. That number alone should push the envelope a little. Secondly, they are selling it as soon as it is off the production line, which basically means production is lagging way behind.
    The smart thing to do would be to hire an actuary to do some number crunching and make some reasonable projections.
    The other thing is, I'm not sure when everyone will "calm down". My estimate is not for at least a couple of years. Especially with all the "gun control" noise coming out of our new administration.
     
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  17. daniel craig

    daniel craig Member

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    You think they haven’t hired people to do the math and watch the market trends? I guarantee the bigger manufacturers have.

    I find it rather curious and borderline arrogant that we here, seem to think we know better than the actual people involved in the production. I’m sure most of the larger companies have people who’s entire job is to watch, anticipate and crunch the numbers and if it made sense, recommend it. We seem to be acting as if the major companies have no idea what they’re doing.

    I mean, unless anyone here is on the board of the major companies and wants to come out and say otherwise.
     
    Last edited: Jan 26, 2021
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  18. 3Crows

    3Crows Member

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    With one billion plus dollars, per the Federal president, on the table for orders that cannot be fulfilled, apparently the answer is yes, they have not done the math or watched trends. Of course there is more going on here other than lack of manufacturing elasticity. The raw materials (China, EPA, Covid), labor shortages (Covid), state taxing of inventory value, hoarding, resellers/speculators and an increase in gun ownership all play into the perfect storm.
     
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  19. bassjam

    bassjam Member

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    I guarantee you they have those people running numbers. They likely know the exact costs to build a new facility and buy and install equipment. They know exactly how long it'll take and what type of internal resources they need to manage the project and train new employees. But the management that make the decisions are only going to pull the trigger if it makes business sense. The ROI might be 3-5 years to just install a new line, and if there's no room for a new line you're looking at far longer to build a new facility. That's a HUGE loss if in 2024 there's another Republican in office and suddenly the market is flooded with ammo (and guns). Companies like Federal aren't in business to just make a ton of money today. They are in the market to make steady profits for the years and decades to come and need to make their growth decisions with that in mind.
     
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  20. army_eod

    army_eod Member

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    Maybe ammo manufacturers should diversify their business. What a concept.
     
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  21. NuShootr

    NuShootr member

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    I'm not so sure. Companies that make huge profits get complacent. And just because a company makes big money, doesn't necessarily mean their management knows how to project growth, or even cares. This is the downfall of many companies that think their gravy train will never end.
     
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  22. NuShootr

    NuShootr member

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    Other business models have done this and failed. Harley Davidson is one of those. Have you seen any Beull motorcycles on the road in the last 10 years? As did Gibson guitars. Their "partnership" with Yamaha was a catastrophic failure and almost led to their demise.
     
  23. FROGO207

    FROGO207 Member

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    Alot of this has to do with the just in time business plan. If you buy just enough raw materials to get as much product as you can make or sell produced then you will not get stuck paying taxes on product in your watehouses. Let the end sales company sit on it if they want to. Then when supplies of raw materials are not repleneshed fast enough you loose some money. Which is worse is anyones guess. Building new manufacturing and hiring people for a temporary bubble is probably not going to pay off in the long run. What if threatend bans decimate the owners guns? Nobody is shooting ammo without a gun. Then what?
     
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  24. Charlie Martinez

    Charlie Martinez Member

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    I have never hoarded ammo because it never occurred to me until recent years that I would go to a Walmart or a sporting goods store & find empty shelves, especially of 22 LR & 12 ga. shot shells. I have heard rumors about people that pay $50 or so to store clerks to contact them whenever a shipment of ammo arrives. They rush to the store & purchase all they can afford to buy. I hate when that happens because most of these people never shoot that much & hoarding just prevents others from enjoying the sport. Maybe stores should limit sales like they do when they offer special deals.
    A former shooting companion & longtime friend passed on several months ago. He lived alone and when his brother cleared out his house he found well over 500,000 rds of boxed ammo, mostly 22 LR but considerable numbers of 45 ACP, 9 mm & 223. My friend shot three to four times a month & I never saw him shoot more than 200 rds per session. Nobody (probably not even him) knew how much he had accumulated over the years. He died at the age of 70 so theoretically he would have never exhausted his supply.
     
  25. daniel craig

    daniel craig Member

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    Exactly.
     
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