Supply and Lack of Demand

This is not a scale representation of the current available supply.

I fell into this whole business operation thing just like how I fell into the open manhole cover on the sidewalk:  I was on my tablet and not paying attention to where I was walking.  I never had the inclination that I could manage a lemonade stand due to quality concerns and the fear I wouldn’t be able to keep up with demand.  My fear was unfounded.  I thought I had stumbled into an unbeatable deal when the original owner decided to sell to me in late September.  I found out the hard way during the blizzard that season that people aren’t interested in drinking lemonade outside while shoveling snow.

The temperature forced a natural pivot into a frozen lemonade stand.  Keeping the stand from getting buried in snow piles proved just as difficult as generating foot traffic.  I was forced to shut down operations when the snowplow destroyed the stand.  It took me weeks to finish drinking all of the extra lemonade, and then I spent the next month coming down from the sugar high.  I do not want that experience again.

Based on my cold lemonade lesson, I learned that calculating demand for a given product was a sound method to determine the proper supply needed.  I thought I saw a chapter regarding this in one of my textbooks.  There must be calculators available that are programmed to identify the ratio for a given product, but my search up to this point has been unsuccessful.  It’s hard trying to tabulate this without having sales numbers and any idea about the size of the market.  Most of our focus groups meetings have not been helpful or accurate predictors of what happens in the field.  I am considering changing the name to unfocused groups.  I don’t think I am alone in having to deal with market based predictive issues.

AcMo is poised to capitalize on our upcoming successful F-One affiliation when we start producing our own road cars.  It is only natural that we will have an extreme marketing and claimed technological transfer from the F-One car to our as yet to be developed road car.  In order for this to work, I need to understand how the car business works.  The supply/demand trap isn’t going to catch me for a seventh time.

A new AcMo revenue stream idea is forming.  Once I crack the formula, I can write an app that will predict future sales so that manufacturers can determine exactly how much inventory they will need to produce and when it should be produced.  The app will have the power to eliminate the specter of oversupply.  The AcMo Demand Analyzer® will revolutionize the retail industry.

I read an interview with Cadillac’s president, Johan de Nysschen, yesterday as part of my research, and he will be my first call once we have the analyzer functioning.  He mentioned that Cadillac is going to become more exclusive and they are working hard to reduce the incentives, rebates, discounts, intimidation tactics, etc. required to move vehicles.

The margins can’t be good when the market is oversaturated with a product that becomes heavily discounted as a result.  I can’t figure out why any manufacturer would continue to produce products that are piling up at the dealer.  How is that a sound long-term strategy?

Maybe if I had paid more attention in class, or bothered to read my textbooks, I would have already developed a keen understanding of this brilliant strategy.  Cadillac is not alone in producing far more vehicles than can be sold, but I never thought about it too much before I read his statement.

AcMo has enough inventory on hand to sell 40 years’ worth of products at current demand levels.  This was not by choice.  We couldn’t find any 3^rd party manufacturing groups who were willing to produce runs smaller than 1 million units.  We needed our products on the market, and we didn’t yet have our 3D printers on line to produce them ourselves.  What would you have done?

The lessons I have learned from our current oversupply and the behavior of many large-scale automobile manufacturers has allowed me to see the truth.  Inventory is like a vampire that sucks the profitability out of a venture.  Once you invite inventory into your warehouse, it never leaves and won’t do anything to help keep the facility running.

AcMo has the fortitude to hold strong on pricing and will not follow suit of the auto manufacturers by offering rebates, incentives, threatening phone calls, or discounts to move our products.  We are confident that the discerning customer will recognize our commitment to quality and understand that our products are unparalleled on the market and will pay our asking price without complaint.

This may take more time than we have available to reduce our inventories to manageable levels, but our clever bill padding will keep us profitable until we reach a supply/demand equilibrium.  I’m not sure how Cadillac and the other manufacturers will handle their oversupply issues, but I’m glad I don’t have to figure out how to sell cars to people who don’t want to buy them unless there are discounts or incentives available.  Even if Cadillac doesn’t recognize the amazing opportunity AcMo can offer, practically every other auto manufacturer could benefit from our insight.  At least one of them will have the courage to see what AcMo can offer.

There may be another AcMo revenue stream available in this situation.  Perhaps we can structure a deal to help Cadillac move inventory by offering to organize and populate a one-make racing series using off the lot vehicles.  Think of the exposure that could generate for AcMo.  If we can do this with the other manufacturers, it would be a fun way to reduce the number of available competitors in the marketplace when we debut our road car.  The auto manufacturers will never see us coming.