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10% reduction in COGS (cost of materials)

Topics: Suggestions: 10% reduction in COGS (cost of materials)


Friday, May 18, 2012 - 06:58 pm Click here to edit this post
These numbers seem a bit high, more than a bit actually. Golden Rainbow is plagued with super huge shortages everywhere. Taking care of the supply is impossible because it's difficult to even take care of your own supplies needed.

I'm going to use an example from game and from real life to explain why this is needed. AT MARKET VALUE: Software in game has a base production of 1.5M valued at 1022 (so 1.533B)and requires 939.1M. That leads to a CM-Labor=39%. At market value 61% of the revenues recieved will be drained. Keep in mind this only accounts for materials and not price markups or quality over 100, yet it also doesn't account for sales over 100 either. So to use numbers I think is fair and conservative i'll use a 20% markup on cost of materials and triple the sales price (conservative numbers as a control to make my point less valid thus proving it). (1.2*939.1)/(3*1533)=1127/4599=24.5%. Too compare this to let's say Microsft which is probably the leader in the world it's COGS is 22% in 2012 Q1, this is after an increase of over 4% since the previous Q. So basically a great trading support system can supply with a worse CM then the real world can offer. This isn't minor either using 2011 Q3 results it's a 27% difference that isn't chump change.

Too enhance my point further: that Market Price is based off of severe shortage (57.6%). Meaning that more than half of everyone who needs software doesn't get it! These kinds of shortages contradict the concept of the free market. There is no competition when these numbers exist, there is simply make anything with a shortage and sell it for as much as possible. The only choice in the matter is what quality level to set your product to find the best point of diminishing return. Lowering the amount of inputs is neccessary as you can see. All actual costs aside which is just what I figured most people would be after anyways. The bigger issue is the balance of the market is skewed. I'm not going to put the work into it, but I believe that in terms of overall Market Value dollars the demand for product dominate supply to an unworkable level.

To keep companies honest and to actually have a pricing strategy there needs to be a concept of shortage and the only shortage that happens is when some dick plays with the commodities market. Of course there are other reasons to. As the game has a limited ability to control manufacturing growth and production levels, new corps are jumping into the market producing very high levels of production (well when compared to the output of fully established corps). In reality a new software company isn't going to produce the same supply as Microsoft. Lowering the inputs would help simulate a more reasonable experience as the big companies would have their upgrades bought and have affected the welfare for their additional success. Another balancing reason is that population is ambiguously capped. The bigger the country the more they have the ability to produce over their demands for product. I noticed that I don't require 2X the vegatables in my country with twice as many people, and army sizes are also not neccesarily proportionate either. If their was no cap on population or a point of population dropoff then I'd support just growing your pop to fix the world supply deficiency but it's not the case. So instead of complaining about that like everyone else this would help balance that.

I can't think of anything else right now to support it, but if I do I'll post it. Also I do understand that this would greatly lower the demand of products but that's the point, sure some players could see a problem with them not being able to sell as much as before, but it makes them play smarter. And I'm only asking for 10% so instead of 100000 coal only 90000 coal will be required for the corp, output would remain the same though. That is the suggestion.


Friday, May 18, 2012 - 11:36 pm Click here to edit this post
The market balance is a complex issue in simcountry and it depends mainly on the markets. we are staying out of it if we can and as long as there is no danger for a collapse.

There are more parameters.
When the price of vegetables goes up, countries buy less (the purchase vegetables for a fixed percentage of salaries).
This means that consumption is reduced when the product pricing goes up and the other way round.
If there is a reduction, more will be ordered.

A small change of 10% in the use of raw materials, will go together with a 10% increase in the cost of the materials. otherwise the corporation balance of income and cost will be disturbed. This could triggers different problems.

We are in the midst of a process that gradually reduces pricing and we think that eventually shortages will be reduced. These shortages are smaller in some worlds.

We have recently improved the working of C3 economies. They now close more corporations that are failing and produce products that are in oversupply and they setup new corporations producing products that show shortages.

This has to improve the situation on the markets over time with several hundreds corporations replaced each day.

consumption grows with the population. population x 2 eats 2 x more. Exceptions are pricing changes of specific products and population mix across the professions because spending depends on the income level. the percentage spent on food for example, declines when income becomes much higher.


Saturday, May 19, 2012 - 03:52 am Click here to edit this post
Ok, as long as this problem is understood. But I mean it seems to be a HUGE problem. Like I only put the money stuff in there to get attention really its just on Golden Rainbow there really is no concept of supply and demand at all.

As for the vegatables example I lied on that one, I actually refererenced import capacity compared to export capacity, but rather than trying to explain that I used a fictitious situation. The point of that was simply to state that the larger an empire is the more self sustaining it can be. It can output more goods in refereence to what it needs in larger populations. "Agathon" from Plato's Republic is a fine reference. At least my country with twice the pop seems to do a way better job producing more than it takes in anyways. I guess I might be wrong.

But with all due respect I don't believe your response to be entirely true. Because this would impact all corporations some more than others, it would in itself have a balancing effect. The suggestion is for corporations only though, and wouldn't make much sense to decrease the requirement of FMU's as they have a controlled variable associated with them, also the significance of country demand on individuual markets would also have an inproportianate value change because of it. BUT every market that is completely dependant on corporation demand would have the same proporiante difference in market value. The result would be FMU's and high country consumed items would have their values increase in comparison to the other industries.

Something like this is a permenant fix and seems much more appropriate then injecting products into the world, as people build corps dependant on those shortages they dip into commodities based on the health of the industry. Sure it has two drawbacks it may require a base price REDUCTION to most food items and FMU's and it would make corporations more profitable by reducing costs. Easily fixed with ummm... higher fixed costs or something, all in the name of saving market stability which is much more important.

Increasing supply costs couldn't possibly be a solution because corps supply each other, if you do that then their suppliers need an increase, then there suppliers need an increase and that's a repetive loop

But just cause I think my suggestion is better, it doesn't mean I don't want you to use other metrics to fix the problems. Thanks for the timely response and for providing maintenance.

Marshal Ney

Friday, May 25, 2012 - 12:28 am Click here to edit this post
"We have recently improved the working of C3 economies. They now close more corporations that are failing and produce products that are in oversupply and they setup new corporations producing products that show shortages."

Kudos to the Creator.

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