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Jan 042013
 
This online gun supply resource shows a steady stream of zeroed out inventories.

This online gun supply resource shows a steady stream of zeroed out inventories.

On December 14, 2012 – some three weeks ago – a crazed gunman killed 20 children and six adults at Sandy Hook Elementary School.

It is hard to say which happened most quickly immediately thereafter – calls for the banning of just about all firearms, or people rushing to buy guns and ammunition due to fears they might be banned.

The media (which is predominantly anti-gun) has been full of stories, almost every day since then, about soaring gun sales, and within a very few days of the start of the rush on guns, of soaring gun prices and disappearing inventory.

It is true there has been an uptick in gun sales.  And it is also true that most gun stores have sold almost every gun and spare magazine they have, as well as every round of ammunition.  It is also true that there are unknown leadtimes and backlogs for more guns, accessories and ammunition to get through the system and become available.

It is also true that prices of guns and ammunition have skyrocketed – more than doubled, sometimes more than tripled.

So what has this to do with prepping?  To answer that, we first need to correct the media misinformation so we truly understand the current situation.

Gun Sales Have NOT Skyrocketed

So, let’s pierce the illusion of an apparent ultra-humungous sudden surge in gun sales.  Fortunately, we can track what has happened to gun sales through the FBI NICS reporting data – this is the count of calls in to their instant check hotline.  All new guns have to be sold through gun dealers and the gun dealer has to get a NICS approval before completing the sale.

The NICS count isn’t exactly the same as the total number of guns sold in a month, because sometimes one call to NICS is for a purchase covering multiple firearms being sold to the same person at once.  On the other hand, sometimes one transaction requires two or more calls to NICS.  And some calls to NICS are for other reasons (some states do NICS checks as part of issuing concealed weapons permits).

But these various factors are more or less steady, so that one can more or less say with confidence ‘If the NICS calls are up, so too are gun sales’.  In general it seems that the monthly count of NICS calls is somewhat higher than the actual count of new guns sold.

You can see the FBI’s NICs stats here.  As you can see, the monthly NICS calls have been steadily increasing, and the yearly totals have been going up for the last ten years in a row.  More than twice as many NICS calls were made, and probably therefore, more than twice as many new guns were sold in 2012 as were sold in 2002.  Increasing gun sales is nothing new, it has been going on even prior to Obama winning his first term.

Now look at the numbers for December 2012.  2.78 million, up 39% on November 2012.

But – a 39% increase?  Excuse us for being underwhelmed, but that is all?  That’s sure not what you’d think from all the newspaper reports of mass panic and huge increases in guns being sold.  To read the media stories, you’d think that gun sales had increased ten fold or twenty fold.  But no – they didn’t even manage to double.

Furthermore, it is common for December sales to be up on November sales, anyway (hello, Christmas!).  Last year, December sales were 21% up on November’s sales for no specific reason at all, the year before they were up 17% and the year before they were up 15%.  So between 15 – 20% of the 39% increase was something everyone sort of expected might occur anyway – the actual extra and unexpected increase is maybe only 25%.

So what is this telling us – a mere 25% increase in gun sales, over and above what was more or less expected anyway, is enough to totally destroy the gun sales marketplace?  It seems that just about every new gun in the country has been sold, and gun prices have doubled and even tripled, with waiting lists and lead times now of an unknown duration but possibly months?  All because of this small increase in sales?

We can’t track sales of gun accessories or ammunition the same way, but we do know (because we, ahem, ordered some ourselves and have yet to get any sort of confirmation about when they’ll ship) that magazines have disappeared completely, and so too has ammunition.

That’s also an amazing thing – how many millions – probably billions – of bullets do you think were out there in retailers’ stores, in wholesale warehouses, and in factories?  They’ve all gone.  How many bullets a day are being made?  How many more are imported?  They all disappear faster than they come out of the machines.  Can’t the entire world’s extra ammunition manufacturing capacity keep up with US domestic demand at present?

This is the message for preppers, and it doesn’t apply only to guns.  These days, there is no ‘surge capacity’ in our supply chain.  The slightest blip in demand – or the slightest interruption in supply – and you suddenly find yourself stuck with the twin evils of shortages and panic buying, with the inevitable result that prices soar sky-high, encouraging more panic, more hoarding, and a total breakdown of the marketplace.

The Same Happens with Other Products/Situations Too

We see this every time a storm threatens gas supplies.  A region might have gas on hand good for 7 – 10 days of regular demand, perhaps, but as soon as a disruption is threatened, everyone rushes to fill their vehicles and any additional storage containers they have, emptying out the supply chain in a day or two.

Or – do you remember the Japanese nuclear power reactor radiation leaks after the earthquake and tsunami in March 2011?  Due to concerns about the radiation plume traveling across the Pacific and to the US, people rushed to buy Potassium Iodide tablets.  But you couldn’t find a Potassium Iodide tablet, anywhere in the US, remaining available for sale.  And the last few that did sell were going for ten (or more) times their earlier price, just a few weeks previously.

Lessons for Preppers

The message to us is simple.  These days, even mild disruptions to any supply chain can totally destroy the normal ‘rules’ of that product’s availability and pricing.  This is due to ‘just in time’ ordering and shipping/delivery, and a carefully projected future demand that is synchronized to production.

If that calculation gets out of alignment with the market, then drastic shortages will quickly result.  And it may take a long time for extra production to come on-stream to provide more product to meet the elevated demand.

These days, most things are produced in a complicated process with multiple dependencies.  For example, a new pistol isn’t built by only one company, with the company ordering in slabs of solid steel as their raw material and shipping out finished pistols after doing all the processes in-house.

Instead, a typical firearm manufacturer may do little more than assemble firearms from the finished parts which are ordered from a dozen different suppliers.  One company might specialize in barrels.  Another might do frames.  Another might provide some types of springs, and a fourth company might provide other springs.  A fifth company might provide screws, a sixth might provide some small castings, and a seventh might provide grips.  An eighth company might make the magazines, and a ninth company will print all the instruction manuals and materials, while a tenth company will make boxes/cases for the finished firearms.  An 11th company will provide oils and lubricants, and a 12th company will provide who knows what else.

And – wait, that’s not all.  Each of these providers of subassemblies and components are in turn dependent on their suppliers for sub-sub assemblies and other raw materials.  And so on, all the way back to the mining company that digs the iron ore out of the ground and the oil company that pumps the oil that ends up as plastic, and the forestry company that grows the trees that becomes paper.

You only need any one of these 12 or more suppliers to have a supply constraint with any of their, in turn, who knows how many more suppliers, and the ability to create a complete finished firearm fails.

You only need one of these many different suppliers to be working at maximum capacity to mean that the rate of final production of completed firearms is limited to the speed of the slowest of the suppliers.

We are talking through this particular example of firearms because it is timely and easily understood, and because we’re seeing the proof of it right now, in empty gun stores, and in used firearms now doubling and trebling in prices.

But the concepts are as true for just about any other manufactured good as they are for firearms.  The same constraints and restrictions and dependencies apply, and all the companies involved in just about any/all types of manufacturing are all working on the same concept of minimizing their inventories (both of raw materials and finished goods) and running their production lines at close to capacity (so as to get best return from their machinery investments).

Here’s another example – these days, we have super-computers that can design planes or cars or just about anything else for us.  They ‘model’ and simulate all sorts of different aspects of a design, and CAD/CAM processes have replaced huge big offices full of draftsmen.  Instead of needing to build a model, test it, then analyze the results, you can input some variables into the computer program and have it do it all theoretically instead.  The earlier process could take weeks or months for each test cycle, the computerized system can take a day or two.

And when a new product is ready for production, new robotic assembly lines can efficiently and quickly reprogram and retool for the new final product and make them with much less human labor or issues.

This is all true.  So can anyone tell me why designing a new car today takes as long as it ever has, and designing a new model airplane takes many years longer than it used to?

What We Need to Do as Preppers

Now I’m not feeling personally panicked at present.  Indeed, I’m thinking I might sell a few firearms and some boxes of ammunition right now!  But there are a lot of people who are feeling panicked.  Fortunately for us all, owning an extra firearm or two, and an extra case or two of ammunition, is not essential to our survival today.

But who’s to know what the next item that suddenly surges in popularity might not be?  The only thing we can be sure of is that if we don’t maintain a sufficient inventory of everything we need and might conceivably need, enough to tide us over whatever variation of Level 1, 2 or 3 situations (definition here) we wish to plan for, then we might find ourselves in a situation where the item we need is unavailable and can’t be purchased at any price from any source.

We sort of know that in a Level 3 situation, all the existing supplies of ‘stuff’ will get used up in some uncertain period of time.  But we are suggesting that the speed at which inventory of anything will disappear is very much faster than anyone might expect.

Remember that with the gun shortage at present, this is not because there have been any reductions in new gun manufacturing and importing.  Quite the opposite.  You can surely guess that every gun manufacturer in the world is working overtime at present to make and ship as many guns as possible to the US.  But even with the same or probably a higher rate of ongoing production, a modest blip in demand has destroyed the marketplace.

As preppers, we can’t rely on outside help, or on outside supplies and sources.  We have to plan for a future where what we have is what we have, and we can’t expect any resupply beyond that.

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David Spero[suffusion-the-author display='description']

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