Can industry work on a poor import schedule?

Question

I've been working for some time on a universe in which there is limited FTL consisting of short (up to five light years at a time) jumps between points in space. The jumps take no time at all for those on the ships making the transit but journey length as measured by universal clock (kept using the pulse pattern of a non-repeating pulsar) is, on average, roughly quarter of the time light takes to make the trip but varies considerably with some ships arriving years or even decades later than the average transit time would suggest.

What I'm trying to work out is whether manufacturing facilities could rely on imported raw material under these conditions. I've considered that a "grace-loading" system might be used wherein individual shipments are largely than the shipment schedule absolutely requires if everything arrives on time but I can't work out if that's realistic.

So my question is two fold, can an industry that relies on imported materials function when it doesn't know when the next shipment is coming provided it can assume that it will? And secondly is my method of overstocking shipments a sufficient measure in-and-of itself to allow smooth operation?

For the sake of simplicity lets assume that the raw material in question is processed elemental metals with no shelf life. Average variance from schedule is on the order of no more than a couple of months on an annual run. Smooth operation can obviously always be disrupted by a missing shipment or an excessive delay. The systems receiving shipments either have no in-system mining options for whatever reason, (generally because they don't yet have the population base), or such industry is insufficient to support the needs of the in-system manufacturing required to get local space industry going. Their industry requires the most basic raw materials to get started, planetary mining helps but getting that material into orbit is prohibitively expensive of time and energy. There is a minimum import/export cargo size but no maximum, the bigger shipments are more economical for all parties, so while they could "beat the spread" by using multiple small shipments it would be ruinously expensive.

Answer 1

As you point out, you will not be able to rely on Just in Time inventory management. Each manufacturing center will need to stockpile enough raw materials to last at least as long as a round trip of your shipping vessel. Or must maintain a constant supply of shipping vessels making the voyage.

But we need more data to see if your stockpiles of raw materials will suffice.

1. Are we talking about materials with a long enough shelf life to survive the maximum time between shipments? (i.e. Lumber, steel, ore, but not milk)
2. Do your logistics managers have a realistic measure of the minimum and maximum of your shipment time?
   1. If the low end is too low then NO. They can't do it. The warehouses will still be full and the shipment is useless.
   2. If the high end is too high, then your warehouses go empty, you go bankrupt, and then a ship arrives with no buyer.
   3. So your industry must have a reasonable window of delivery, constrained in such a way that the logistics staff can predict how much warehouse space they need.
3. How much do ships cost? How much does a round-trip cost in terms of fuel, wages, etc.?
   1. If too high, then it will never be cost effective to run the routes.
   2. Will the ships be deadheading? Or will they have goods on the outbound trips, to help offset the round-trip cost?
4. How reliable are the voyages?
   1. With variance in delivery times, is there a high risk that a shipment won't arrive at all? If so, you've got to build that into your storage and logistics planning and costing.
5. At the end of the day it's all economics and finance
   1. Is your cost of goods sold higher or lower than your sale price, factoring in all your costs?
   2. Does your equilibrium point on the supply and demand chart allow you to turn a profit?
6. Is the demand for your finished good predictable or chaotic?
   1. Are we talking about something that has predictable, easy to plan/model/predict growth?
   2. Or is there likely to be a surge in demand that you cannot meet because the ships are still inbound?
   3. If there's a sudden spike in demand, will your inability to ramp up production cause a loss of sales or will it erode customer confidence?
7. What is the EOQ -- Economic Order Quantity -- and can your supply chain meet that? Reliably?
8. Are there other factors that could force this despite being uneconomical, like the finished goods being a required, necessary item for survival or government influence?

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So the above questions feed into your formula. The end result will help decide if it is economically feasible to run the routes.

Answer 2

What you are trying to describe is roughly how industry works in times of war, when supplies are hiccupping all the time, if not lacking at all.

Production is possible, provided the raw materials are supplied.

Of course one cannot pursue extreme efficiency and optimization, as those usually rely on smooth and known in-flux of supply.

It becomes important to prioritize the deliveries of product, so that the downstream economy is affected as less as possible (do you supply steel bars to build a bridge or steel slabs for gate manufacturers?).

Answer 3

Even if you are committed to just in time, or the supply is highly perishable you can work around it by having a flexible production capacity.

When a shipment is late you put workers and capital on standby, but produce advertisements for the extra workers you know you will need when the late shipment arrives closer than expected to another shipment. It might also be a natural time to do maintenance or make improvements to your capital.

Agriculture, retail and tourism industries often do this. When there is work you hire workers, when there is not you let them go, but don't lose their number.

Answer 4

Divide your shipment into many smaller ones.

If your colony on Alpha Centauri Prime needs a shipment of 10000 tons of food every year, don't send one huge freighter every year, send a small ship carrying 30 tons every day.

Due to the law of large numbers, the randomized delays of the individual shipments will even out over time and you will end up with a smooth and reliable food intake. Some months you will get more shipments and some you will get less, but longer periods of scarcity leading to starvation will become quite unlikely.

The drawback will of course be that this is more expensive. Building many small ships will be more expensive than building one huge one. And controlling that fleet will require more personnel (even if they are unmanned vessels). Where exactly you make the compromise between reliability and cost depends on economic details.

Also, this calculation is based on the assumptions that the FTL travel delays are truly random. If their source are actually natural phenomenons which affect all ships in transit equally, then this won't work as well and you might still experience famines.

Answer 5

It is definitely possible if production can be forecasted. This problem is treated the same mathematically as current day Production Control problems. There are several methods but most involve the concept of safety stock, i.e. account for any variance in supply or demand with excess raw materials.

An example would be to say if we forecast the need for 500 widgets per year which both need 1 of X and 1 of Y. Ideally you would set up a schedule to receive 500X and 500Y every year. Well when should we order the next batch? Say it takes 6mo lead time on X and 3mo lead time on Y... we would order Xs when we only have 250Xs in stock and Ys when we have 125Ys in stock. Now assume Ys are known for being late, sometimes even 3mo late; so we should increase our safety stock by 125 Ys leading us to reorder Ys at 250 in stock.

Problems would exist if say the raw materials are perishable or if demand fluctuates or is not easy to forecast. These would either cause shortages or excessive safety stock.

Answer 6

You have several problems here.

1. unreliable supply situation
2. long transit times for supplies

The two are related but cause different problems within your manufacturing process.

The unreliable supply situation can be alleviated by stockpiling supplies. This is expensive but it can be done IF supplies when they arrive arrive in large enough quantities to allow stockpiling until the next shipment arrives. If demand for your manufactured products is highly variable this will be even harder.

Which leads to point 2. The long transit times of the raw materials may well mean that by the time a shipment arrives at your factories there is no more need for it because either the demand for the manufactured product no longer exists and the factory has shut down, or because the manufacturing process has shifted to using other, more convenient, raw materials. In both cases you're now stuck with a pile of possibly worthless raw materials that took a lot of effort (and thus money) to acquire. If you're lucky some other industry can use them, if not you're suckered.

A small but significant twist on this can be that your society develops faster transport methods while your shipment is in transit, and by the time your ship gets there after its 20 year journey (out and back) you've gotten 10 shipments already using your new ships that can do the same trip in a month.

Answer 7

Ahh, the beauty of capitalism. As long as the profit's right, they'll make it work. So what you need to do is not wonder whether it is possible, but design it in a way that it's attractive. Attractive for both the distributor of resources and the producer of the final goods. And of cause, for everybody who is in between these two ends.

Be aware however, that a design like this comes with its own problems.
For one, you must shut down alternatives like assembling the stuff already on the source planet (shelf life, market saturation, political laws, ...).
Second, a choke point like that is an enormous vulnerability. A malicious party could exploit the recipient under the threat of an embargo, or even let their economy collapse and annex the planet.

Also, of cause, there is no guarantee that the economy will look like you'd guess. As stock goes down, prices go up, but if there's a monopoly or oligarchy, there's no promise that prises will go down again once the stock is refilled.
At any rate, the heavy dependency would shape the civilization of this planet, and it's entirely up to you to reflect it.

Answer 8

The more your colony is reliant on outside support, the more fragile it is and the more risky the whole endeavor becomes. Therefore, you want your colony to be as self supporting as possible.

How you do THAT is to rely on a concept that has been driving human innovation since the dawn of time: Necessity is the Mother of Invention.

It starts with the fact that you have enormous lead and lag times in your supply chain, but life happens in the now. Your colonies are going to have to evaluate just about everything with Maslows' Hierarchy of Needs in mind.

First things first: Food, Shelter, Water. All of these need to be locally produced with an eye towards robustness. Take your average transit time and then look at necessary survival supplies. maybe lay in a stock of 2 times the full transit turnaround time for those local supplies. Freeze dried foods can last for a very long time.

Next: Things that aid survival. Safety on the hierarchy. In this situation i think that involve defending the food supply. From Whom? Failures in the system, Ag implements, Water Treatment widgets, all of this stuff is going to break eventually, so spares and spare parts are what is needed here. Saftey stock would likely be at least be one full replacement for everything deemed critical and each be designed with many times the lifetime of a turnaround trip in mind. This only applies until locally sourced solutions are put in place. Everything in your system that has to be replaced from outside represents a possibly fatal single point of failure and needs to be eliminated as soon as possible.

In normal industry, this would result in overstock nearly to the point of economic insanity, but keep in mind that it isn't materials to be consumed. It's an insurance policy. It't there to mitigate some pretty catastrophic failure risk until the colony reaches it's goal of self support based on local materials.

Next is things that are required for the colonists to do whatever it is they were sent to the next planet to do. Are they mining Unobtanium? Are they harvesting something tasty from the local oceans? We aren't going to send out and support a colony unless there was some purpose for doing so. Our level of ongoing support and location chosen with regards to local materials all depends on this factor. This can go on in a limited fashion while the colony develops the rest of it's infrastructure.

Only now do we get to the Mother of Invention thing. Encourage and incentivize colonists to engineer like crazy to make use of local materials for anything and everything possible. If you got lots of limestone but not a lot of metal, build with the limestone instead of wasting steel on prefab buildings would be one example. Recycle with as close to 100% efficiency as possible.

People with the right incentives can do an awful lot with very little. You want them to be as self sufficient as possible. You do this with engineering and creativity at the local level.

Now, with all of this groundwork down. you can deal with irregular shipments of goods and raw materials that make you a part of the overall economic system. Possible delays in shipping are no longer life or prime economy threatening, but fall to the level of annoyances. No one is going to die if a shipment of TV's or Iphones or whatever equivalents in the future gets delayed. A missed shipment of pumps and parts for water treatment could wipe out entire cities. That's why the need for self sufficiency

Answer 9

This is a reductio ad absurdum. You seem to imply that shipments are normally scheduled to the yoctosecond. Everything you do has an "opportunity cost". That is the cost of using the same resources in the "next best" way. Resources are often considered to be labor, capital, time, and information. (others like land, pollution credits, etc. sometimes are employed).

In order to have an economy, individuals have to make a profit (which equates with providing for themselves and their families). To make a profit, the cost of producing and selling the product has to be both smaller than the price AND has to have a return sufficiently predictable (and regular) so that you don't starve to death waiting for your first sale (so to speak).

Production doesn't need to be continuous or even predictable (it often isn't, think about shipbuilding or even new home construction.) But there's a cost for uncertainty. As long as you can somehow manage the costs (insurance, selling shares, loans), your supply chains can be as unpredictable as you can imagine. (Granted the costs might include paying workers to wait around doing nothing for months (years), paying utilities and taxes on shut plants, training, paying interest on loans, paying the cost of storage of the materials you only get irregularly (you'd have to stockpile them, at least, someone in the supply chain would). But then you throw in the word "smooth". Nothing is smooth if the scale is fine enough.

You seem to think "industrial" is the same as efficient. It's not. Industrial implies (to me, arguably) that mechanical devices have significantly replaced human labor. It does not necessarily imply a (continuous) production line.

A huge portion of our economy is bespoken, that is, customized. Think about wedding dresses, architect designed homes, (and yachts). It IS true that mass production (ie one size fits all) has drastically reduced costs and improved average standard of living. Perhaps in your Universe, the standard of living is supported otherwise or perhaps the needs are less or the productivity of industry greater.

There's no absolute reason why I couldn't make a living selling something once in a lifetime (think of a bestseller or platinum album), just as there's no absolute certainty that I can make a lot of something and make a living selling them; ever heard of the Betamax?