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What Was the Supply Chain Like in the 1800s?
Those who grow their own food have an advantage: The food is good. It’s fresh and, since it’s fresh, it probably tastes better. Maybe it’s more healthy. Most fresh foods can be canned and preserved – and indeed they are, and have been.
What about furniture and clothes? In the 1800s, these were often handmade. People go to the general store and buy fabric, needles, thread, wood products, glue, cheeses, etc.
After shopping in regular stores, people shop in catalogs. Sears Roebuck began selling watches and jewelry in 1888. Soon after, their product lines included sewing machines, sporting goods, musical instruments, saddles, guns, wagons and more.
But these old lost arts of home products and catalog shopping have largely been replaced by the mass market, the Internet, supply chains and logistics.
There were lower costs when people made their own products. Well, when they started buying ready-made products, the cost was out of reach for most people.
I think prices fluctuated with supply and demand just like today. You know, when there is a growing demand for certain things, the price goes up. When prices rise, there is less demand or people start buying other things.
These same principles of supply and demand have been applied by economists over the years. Economists have found that when the prices of other products go up, most if not most people will either stop buying that product or start buying more. So for some products, most if not most people will continue to buy the product even if the price goes up.
Those products where people will start buying around with the increase in price are called “elastic” products. Think of a rubber band stretched wider and wider – this would represent people leaving the store and walking around looking for other products.
Those products that people will continue to buy no matter how much the price is raised are called “inelastic” products. Customers are locked in. They won’t go away. They don’t leave the store and extend their search for better products.
Marketers want “elastic” products and consumers mostly. The best way to do this is by branding their products. People look to brands and marketers hope that their customers will stick to their brand in times of rising prices.
Smart marketers will monitor buying habits and can sometimes use pricing strategies to push or pull people towards certain products. Yes, it can be difficult but it can be very useful for those sellers who know what they are doing.
So far we have talked about the “buy side” and the “prices” that consumers have to deal with. What about the costs faced by sellers?
Most product prices are “cost-based”. This is in addition to price fluctuations based on fluctuations in customer demand. The simple formula is: Cost + Profit = Selling Price. Some products are “ad-based”. This is when the seller will price the product based on what the market will bear without much consideration of the seller’s costs.
Big box retailers (Walmart, Costco, Target, etc. – price-based) must control their costs in an effort to keep prices in line to maintain strong consumer demand. Specialty (market-based) stores have the luxury of selling at higher prices with little thought to cost – but their market base is often smaller than supermarkets.
Sellers have many types of expenses. There are costs of goods sold to manufacturing companies and there are selling, general and administrative costs. These account for a large portion of every dollar taken in by marketers.
If you dig into marketing costs, you will find logistics costs and these are monitored as logistics departments plan the best course of action to get and bring materials to the factory, store them, process them and ship them out.
Logistics costs remain at around 8% of nominal GDP with trucks making up the highest percentage of costs. That’s a lot of money for our economy as a whole. And, retailers, manufacturers, suppliers, producers and distributors need to keep an eye on the manufacturing process to stay competitive.
We haven’t even touched the base of the future, the expected innovations such as hydrogen fuel cells, cloud delivery, OTA engine updates, drone delivery and UVA, bionic improvements, on-demand 3-D printing, resource sharing , autonomous trucks and more. and move on.
But, we will save these topics for another day.
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