Supply Chain Management 101: on the
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
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
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,
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
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
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...