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> Consider a company that manufactures its product on lathes. Assume that it has ten lathes that can just meet production requirements. Assume also that each la

> Consider a company that manufactures its product on lathes. Assume that it has ten lathes that can just meet production requirements. Assume also that each lathe wears out in ten years and that the company has its investment plans so well organized that one lathe is replaced every year. Now consider what will happen if there is a 10 percent increase in demand for the product. The plant will need eleven lathes to meet production requirements. It will have to buy two lathes: one as a replacement for the worn-out lathe and a second to increase capacity. Thus a 10 percent increase in the demand for the product has produced a 100 percent increase in the demand for lathes. The 100% increase doesn't seem to make sense in this example.

MajimasEyepatch 3y ago
It's a 100% increase (i.e. double) relative to what the ordinary demand for lathes would have been.
- Retric 3y ago
  The universe isn’t quite that binary. Suppose those lathes ware out 0.1% faster than expected lasting ~3 days less than 10 years, now eventually you replace 2 of them in the same year thus doubling demand in that year… Except the manufacture wouldn’t notice a spike from occasionally sending out a few days earlier even if it’s crossing a calendar year.
  - bluGill 3y ago
    a lathe doesn't wear out that way. It just slowly gets harder and harder to maintain tolerance. Eventually a new machine will be enough better as to make an experienced machinist take less time - they always have to stop and measure as no lathe can give you absolute accuracy, but when the lathe is new it is more predictable how much turning a handle will change things and so you measure before the last operation and adjust it to the right setting vs you measure get closer and measure again.
    - serf 3y ago
      I run a small machine shop, and while I agree that you're opinion is closer to reality it's absolutely not out of the ordinary for a precision metalworking lathe to fail entirely and be dead weight until repair; it's not all gracefully easing into imprecision. Older lathes, for example, love to put the AC motor under something that either accumulates or produces chips; you can see why this might be a problem over time. It's not out of the ordinary to require motor re-winds.
    - deleted 3y ago
      [deleted]
AnimalMuppet 3y ago
Well, it's a 100% increase from that company, for one year. The next year, though, they only need to buy one lathe again. And the next year, and the year after that. Every tenth year, they'll buy two lathes. Calling that a 100% increase doesn't seem to make sense because it actually doesn't make sense.
- jacquesm 3y ago
  Yes, and there even is such a thing as equipment lease for companies that are liquidity constrained to be able to move to match the market even if their short term reserves would stop them from doing so otherwise. At a price, of course. The most asked question about the CNC gear we sold was whether or not it could be leased and whether we could offer financing. Almost none of it was bought outright.
  - HeyLaughingBoy 3y ago
    I realize that I'm late to this party, but I learned about the phenomenon of CapEx vs OpEx when the small company I worked for came under new ownership in the early 90's. We made relatively inexpensive light-industrial electronic controls and the new owner, a former CFO from a public utility, came up with the "brilliant" idea to allow customers to lease hardware from us vs buying it outright since they might have more money in their Operations budget as opposed to Capital. In theory, not a bad idea. In practice, the only business likely to want to lease a $200 item is probably close to bankruptcy.
- lmm 3y ago
  The point is that it's an extreme bullwhip effect. Yes, it's not a sustained 100% increase, but it's a 100% increase that year.
KevinMS 3y ago
Do lathes actually wear out? Machine tools are built like tanks and could probably last until the end of time, you just need to replace the bearings and motors occasionally.
- dale_glass 3y ago
  Yes, it's a machine with many moving parts. There's bearings, gears, ball screws, lead screw, belts, etc. There's also multiple precision ground surfaces that wear unevenly because some parts of the surface get far more use than others. The bed tends to accumulate damage over time, as try as you might, you'll eventually drop something heavy on it. A lot of it is very much fixable, but I suppose that eventually one decides it's too much to bother, especially if something is damaged is badly enough, or the lathe is old enough and it doesn't make much business sense to fix it. If you abuse a machine badly enough you can get something bent to the point it's not really worth fixing.
- Kon-Peki 3y ago
  There's an entire refurbishment industry keeping them going. I know that this article said that you could order machine tools from Japan in the 1980s and get them in a few weeks. But that's not the case anymore. People buy some press or lathe or whatever out of a liquidation warehouse in Michigan for ~$50k and then pay a refurbisher $1,000,000 to get it to whatever specs they need. That's more expensive than buying a brand-new machine from Germany/Italy/Japan, but you get it installed in your facility so much faster that the extra cash is worth it. And because they last forever with proper care and maintenance, nobody cares if the "new" tool is 70 years old. Note that this behavior can easily distort the stats on demand for new machine tools ;)
  - p_l 3y ago
    My understanding is that a lot of lower end in manufacturing might at time seriously consider turning old manual equipment into CNCs, not just hackers. And dunno about USA, but there's a cottage industry of people running hacked up ex-volkswagen robots despite them requiring a human holding dead man switches. They are not going to buy a new industrial robot, but they can afford to turn bunch of ex-volkswagen gear into semi-automatic machines.

MajimasEyepatch 3y ago

It's a 100% increase (i.e. double) relative to what the ordinary demand for lathes would have been.

Retric 3y ago
The universe isn’t quite that binary. Suppose those lathes ware out 0.1% faster than expected lasting ~3 days less than 10 years, now eventually you replace 2 of them in the same year thus doubling demand in that year… Except the manufacture wouldn’t notice a spike from occasionally sending out a few days earlier even if it’s crossing a calendar year.
- bluGill 3y ago
  a lathe doesn't wear out that way. It just slowly gets harder and harder to maintain tolerance. Eventually a new machine will be enough better as to make an experienced machinist take less time - they always have to stop and measure as no lathe can give you absolute accuracy, but when the lathe is new it is more predictable how much turning a handle will change things and so you measure before the last operation and adjust it to the right setting vs you measure get closer and measure again.
  - serf 3y ago
    I run a small machine shop, and while I agree that you're opinion is closer to reality it's absolutely not out of the ordinary for a precision metalworking lathe to fail entirely and be dead weight until repair; it's not all gracefully easing into imprecision. Older lathes, for example, love to put the AC motor under something that either accumulates or produces chips; you can see why this might be a problem over time. It's not out of the ordinary to require motor re-winds.
  - deleted 3y ago
    [deleted]

AnimalMuppet 3y ago

Well, it's a 100% increase from that company, for one year. The next year, though, they only need to buy one lathe again. And the next year, and the year after that. Every tenth year, they'll buy two lathes. Calling that a 100% increase doesn't seem to make sense because it actually doesn't make sense.

jacquesm 3y ago
Yes, and there even is such a thing as equipment lease for companies that are liquidity constrained to be able to move to match the market even if their short term reserves would stop them from doing so otherwise. At a price, of course. The most asked question about the CNC gear we sold was whether or not it could be leased and whether we could offer financing. Almost none of it was bought outright.
- HeyLaughingBoy 3y ago
  I realize that I'm late to this party, but I learned about the phenomenon of CapEx vs OpEx when the small company I worked for came under new ownership in the early 90's. We made relatively inexpensive light-industrial electronic controls and the new owner, a former CFO from a public utility, came up with the "brilliant" idea to allow customers to lease hardware from us vs buying it outright since they might have more money in their Operations budget as opposed to Capital. In theory, not a bad idea. In practice, the only business likely to want to lease a $200 item is probably close to bankruptcy.
lmm 3y ago
The point is that it's an extreme bullwhip effect. Yes, it's not a sustained 100% increase, but it's a 100% increase that year.

KevinMS 3y ago

Do lathes actually wear out? Machine tools are built like tanks and could probably last until the end of time, you just need to replace the bearings and motors occasionally.

dale_glass 3y ago
Yes, it's a machine with many moving parts. There's bearings, gears, ball screws, lead screw, belts, etc. There's also multiple precision ground surfaces that wear unevenly because some parts of the surface get far more use than others. The bed tends to accumulate damage over time, as try as you might, you'll eventually drop something heavy on it. A lot of it is very much fixable, but I suppose that eventually one decides it's too much to bother, especially if something is damaged is badly enough, or the lathe is old enough and it doesn't make much business sense to fix it. If you abuse a machine badly enough you can get something bent to the point it's not really worth fixing.
Kon-Peki 3y ago
There's an entire refurbishment industry keeping them going. I know that this article said that you could order machine tools from Japan in the 1980s and get them in a few weeks. But that's not the case anymore. People buy some press or lathe or whatever out of a liquidation warehouse in Michigan for ~$50k and then pay a refurbisher $1,000,000 to get it to whatever specs they need. That's more expensive than buying a brand-new machine from Germany/Italy/Japan, but you get it installed in your facility so much faster that the extra cash is worth it. And because they last forever with proper care and maintenance, nobody cares if the "new" tool is 70 years old. Note that this behavior can easily distort the stats on demand for new machine tools ;)
- p_l 3y ago
  My understanding is that a lot of lower end in manufacturing might at time seriously consider turning old manual equipment into CNCs, not just hackers. And dunno about USA, but there's a cottage industry of people running hacked up ex-volkswagen robots despite them requiring a human holding dead man switches. They are not going to buy a new industrial robot, but they can afford to turn bunch of ex-volkswagen gear into semi-automatic machines.