Logistics, quantities, labor costs, shipping costs.

[Timofmars]

I've played both Cap 1 and 2 back when they were new. The one thing I've always felt was missing was an ability to properly estimate costs of manufacturing and shipping, estimate quantities of goods and materials, and also estimate overall quality of goods. Adding this ability would really allow players to make better, more detailed management decisions, and depend less on guesswork and rules of thumb. I think the suggestions I make below would allow players to easily experiment with different management choices and would help bring these educational business concepts out into the light.

Manufacturing and Shipping Costs

When I play, I want to try to determine whether it's better to produce a high volume of something in a low wage city and then export it everywhere, or if it's better value to produce it locally in a city to save on shipping costs even if wages are higher. Part of that depends on just how labor intensive each item is, and the ratio of the item's value versus it's shipping cost. In other words, I need to find out if the cost of an item is mainly in the material costs, or if it's in the labor cost (manufacturing process), and how much shipping adds to the cost. But all of that in Capitalism is guesswork. You need to build the factory and begin manufacturing and do some mathematical conversions to see how much labor costs added to the total cost. For example, 1 oz gold @ $300 may become 2 gold rings @ 200 each, meaning the manufacturing process added $50 of cost to each ring (which would be a higher cost in a higher wage city). This is a big thing in business economics and in the educational aspect of the game, but it's not very obvious in the game and extremely difficult to determine even if you are aware of the concept.

Perhaps this information could be provided. In the sales unit from a factory, you have the cost of the item broken down into "cost + freight", but you could break it down into "materials + labor + freight". Showing the overhead cost for the factory somewhere would be nice to remind us that it exists, and it'd be even better if it's shown in a way that is comparable to the other costs (so show both total monthly overhead and total monthly labor cost).

Now let us do all that but with requiring us to build the factory. Instead, let us get estimates by building an imaginary test factory. Let us place an imaginary factory, select inputs, choose what to produce (even using raw materials that aren't for sale), adjust input prices of those raw materials, and then see what the costs are if the process all runs at full speed. Even show us where the bottlenecks are by showing the relative utilization levels of the units as they are currently set up.

A simple way to let us figure out shipping costs would be to create a button/tool that lets us designate a Point A and a Point B and then select various items and see what shipping costs would be.


Quantities of Goods and Materials

It's very hard to estimate how much of something will be produced by a manufacturing unit, or how much of something a retail store is capable of selling. How much does a crop unit in a farm produce? It's always guesswork in determining these things. But these things should be known. I want to know if I should make a separate small factory to produce certain intermediate materials. I want to know how many wallet manufacturing units can a single livestock leather processing unit make. How much cotton will my factory run through in a year, and how many farm units is that? I can see quantity of sales of an item in a city, but how many manufacturing units are needed to make that much?

This problem can be solved by using same method I mentioned before, by letting us build an imaginary facility and showing us how much stuff it would produce in a month (and how much of a product retail locations can sell). Or in the farming and manufacturing guide pages, just list how much product is produced by the associated unit operating at full capacity.


Overall Quality of Goods

Each city cares about price, quality, and brand of each product by different amounts. But the difficult thing to figure out here is just how much price affects overall quality. Is $500 a good price? How much better is $20 off? It depends on the product and the city.

One of the things I'd like to do is to judge how much quality or brand is worth in terms of how that can affect the price I can offer to achieve the same overall quality. Maybe that high-income city cares a lot about quality and brand, so I want to be able to judge whether I should import higher quality goods and materials at a higher price, or if I should go with the lower quality stuff available nearby for lower shipping cost. This is another fundamental economic decision in the game that requires you to guess or to try both to compare.

I think this issue could be solved by letting us play around with a price/quality/brand bar for each product in each city. Let us see what would happen if we adjust the quality, brand, and price to different levels. Then we can figure out if we'll be competitive before we set up the factory or link to the supplier.

[WilliamMGary]

Timofmars welcome to the forums!

I agree with the cost break down being done inside of the business units. The being able to estimate the costs of shipping to make a decision on rather to important or manufacture within is a very important business decision to make, the issue here is how to best provide this information within the interface of the game. The only way I can think of doing this would to have a national shipping rate added to the economic indicator based off weight and the price could fluctuate based on economic cycles & inflation. This would make it easier to determine at the time the decision needs to be made which one to do but, you also must realize that the thing changes and it may be a good idea in the year 1990 to manufacture within the city and in 2000 it no longer makes sense.

Recently it's been suggested (kinda) that we have the ability to export financial data (balance sheets, unit income statement, etc) from the game in CVS format. Many of the things you laid out here probably could be done with an Excel spreadsheet, the issue is the game making the data available so that it can be analyze.

[Esoteric Rogue]

I want to try to determine whether it's better to produce a high volume of something in a low wage city and then export it everywhere, or if it's better value to produce it locally in a city to save on shipping costs even if wages are higher.

Yea, I don't know if shipping varies with the local wage rate or whether the old values for freight hold true: Only looking at freight, for the end products, all are cheaper to import components, except cars and motorcycles.

Yes, the game could provided more data.

Each city cares about price, quality, and brand of each product by different amounts.

Edit: Ah, thanks, I did not realize there is a small variance per city! I'll include a sample for anyone else.

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Leather Wallet Product Details 
             Price Quality Brand
Montreal        31      35    34
Raleigh         31      35    34
Durban          35      35    30
Kansas City     33      34    33
...
Rating = (QR x QC) / 60 + (BR x BC) / 60 + ( (StdPr - SellPr) x PC) /StdPr

We may note that the necessity index as used in the current prosperity/recession state (ie, consumer demand per product) dwarfs the P - Q - B concerns.

[Esoteric Rogue]

I know your point is that it would be nice if the game provide us more data, but I did some work and want to share it.

Using Leather wallet and Durban from the Fashion Challenge as an example:
For Leather Wallet, SP ~= 145 [N.B. I don't know the mechanisms for rounding for every variable, so this value is approximate]
For Durban, BC=30, PC=35

The fundamental calculations are:
How much brand is needed to increase overall by 1?

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60/BC

In Durban, 2 points of brand increase overall by 1.

How much price reduction is needed to increase overall by 1?

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SP/PC

In Durban, $4.14 of price reduction increases overall by 1.

So, we can now directly compare those:
"How much is 1 overall worth of brand in equivalent price change?"

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SP*BC/(60*PC)

So, in Durban, each point of brand is equivalent to $2.07 price change.

I'll do that for the 4 cities in that challenge to give a vague idea of the variance between cities:

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Price change to brand equivalency
Montreal $2.65
Raleigh $2.65
Durban $2.07
Kansas City $2.42

So, we can see that Montreal's overall rating is 28% more sensitive than Durban to branding changes as opposed to price changes for Leather Wallets. But what I'm going to do with that information I have no idea. I guess now that we can put a dollar amount to the value of brand change, we can do our cost accounting on the value of advertising, which itself is highly variable due to media firm prices changing like the wind. But it all seems a bit pointless sense the amount of overall required for success is dictated by our competition, not by these factors. [Edit to add:] I know going in that advertising is usually going to cost much more than lowering the price (and that price adjustment is immediately effective) so we first lower price so that it's still reasonably above cost, and then if we need more overall we advertise more. And if the competition is competent, we're going to need to research also. In short, we need all three. I don't think getting specific is going to help for this aspect of the game.

But I do seek exact quantity numbers and think your simulation solution is a creative idea.

[WilliamMGary]

We can see that Montreal's overall rating is 28% more sensitive than Durban to branding changes as opposed to price changes for Leather Wallets. But what I'm going to do with that information I have no idea.

What to do with such "valuable" information.

Let's say that Montreal is where the majority of the profit you get from your Leather Wallets, you know now that an increase in the branding of your Leather Wallets will increase your sales in Montreal more then then it will in Durban. The opposite is also true

[Timofmars]

I want to try to determine whether it's better to produce a high volume of something in a low wage city and then export it everywhere, or if it's better value to produce it locally in a city to save on shipping costs even if wages are higher.

Yea, I don't know if shipping varies with the local wage rate or whether the old values hold true. For the end products, all are cheaper to import components, except cars and motorcycles.

You may save on shipping costs by importing the raw materials, but you may pay more in manufacturing costs due to differences in wages. Your manufacturing costs are lower in low wage cities, and that savings could easily more than make up for the extra shipping fees.

I was mistaken earlier when I said the manufacturing costs were incorporated into the cost of items. It's not. Wages and overhead are calculated independently from costs, and the only place I know of that you can view this information is in the corporate income statement, which isn't helpful since it's just the total of all your firms. This is why farm products you create are assumed to have zero cost. Natural resources (mines, etc.), on the other hand, just divide the cost of the land by the total reserve to find a value.

I did a little test. I started new games, created a factory that imports silica to make glass with 1 purchasing, 2 manufacturing, 1 inventory, and 1 sales units. I let it run for 1 month. Doing this in a high wage country gave me a monthly wage cost about 120k in wages (found in the corporate income statement). In a low wage country, salary cost was about half as much. I think it's directly determined by the Real Wage Rate of the city.

I also saw something I hadn't noticed earlier. The monthly overhead for the same building type seemed to vary in each city by the same Real Wage Rate factor. In a city with 28 Real Wage Rate, it costs 50k in monthly overhead for a large factory. In a city with 72 Real Wage Rate, it costs 129k in monthly overhead for the same large factory. You can see the difference in the build menu prices depending on what city you are in.

If you could at the very least see the wage information for individual firms, you could at least look at the quantity sold graphs and use that info to get a rough estimate of how much of a factor wages are to an item's true cost.

Each city cares about price, quality, and brand of each product by different amounts.

Edit: Ah, thanks, I did not realize there is a small variance per city! I'll include a sample for anyone else.

Code: Select all

Leather Wallet Product Details 
             Price Quality Brand
Montreal        31      35    34
Raleigh         31      35    34
Durban          35      35    30
Kansas City     33      34    33
...
Rating = (QR x QC) / 60 + (BR x BC) / 60 + ( (StdPr - SellPr) x PC) /StdPr

We may note that the necessity index as used in the current prosperity/recession state (ie, consumer demand per product) dwarfs the P - Q - B concerns.

It looks like your cities in that example consist of 3 relatively high wage cities and one medium wage city. I have Shenyang as a city with 28 Real Wage Rate, and the P/Q/B concern is 45, 29, 26. These kinds of differences might mean you should sacrifice quality to get a better price. For example, you could have a mine producing high quality material, which you had to acquire at a high price. And you may have another mine producing the material of a much more inferior quality, but for dirt cheap. You may see the best overall quality and profit margins by importing the low quality materials to the low wage city that is so concerned with price. Maybe you could even develop 2 tiers of products (cheap and low quality, versus expensive high quality) for cities of different wealth levels.

[Esoteric Rogue]

But what I'm going to do with that information I have no idea.

Let's say that Montreal is where the majority of the profit you get from your Leather Wallets, you know now that an increase in the branding of your Leather Wallets will increase your sales in Montreal more then then it will in Durban. The opposite is also true

Yep, but we still can't predict how much advertising will cost. Need current media prices and the formula for different branding strategies, and we need to spend time for that to take effect.

Not to mention the other confounding factors: Competition, Necessity during recession (Demand), Supply limits, w/e else.

• If competition is great, additional spending on any attribute could be effectively wasted -- improving your overall from 35 to 40 when your opponents are sitting pretty around 75 is like spitting in the wind.
• If you're trying to sell gold rings during a depression ... well, I haven't found a solution yet, I just don't think it's going to happen.
• Of course if you're already selling your full supply, nothing to do but raise the price.

I guess the branding formulae are secret aren't they? I guess ex post facto cost accounting is the only way to model the true cost of a brand rating increase.

[Timofmars]

Not to mention the other confounding factors: Competition, Necessity during recession (Demand), Supply limits, w/e else.

• If competition is great, additional spending on any attribute could be effectively wasted -- improving your overall from 35 to 40 when your opponents are sitting pretty around 75 is like spitting in the wind.
• If you're trying to sell gold rings during a depression ... well, I haven't found a solution yet, I just don't think it's going to happen.
• Of course if you're already selling your full supply, nothing to do but raise the price.

There's also what I mentioned above where difference in price concern can affect your decision of whether to go for high cost high quality materials, or low cost low quality materials.

Or if you've got a competitor selling a high quality product, could you compete with them by offering a low quality product and raising the brand? You might be able to estimate what cost you can achieve and what brand and quality levels you can get, but knowing whether that adds up to a competitive overall score is another thing. It's even murkier when you try to factor in wages, overhead, and the advertising cost. You can easily fool yourself into thinking you're making a profit simply because you didn't factor in these hidden costs.

There's also the question of whether advertising is worth it. My low wage city has 1% concern for brand for livestock products, while my high wage city has 18% brand concern for the same products. Obviously advertising isn't worth it for the low wage city, but what about the other city. It's not just about getting more sales, either. It's about being able to increase profit margins by raising the price as your brand rating increases.

[Esoteric Rogue]

Real quick, Tim, you do know about the firm income statement? (Just click the $ icon in Firm Overview) When you mention overhead costs, I think you do, but when you say it would be nice to know how much wages contribute to product cost, I think you don't

In this shot, the YTD is useless because it's only been 3 days. The "Last Month" column is perfect tho.

FirmIncomeStatement.jpg (324.74 KiB) Viewed 4782 times

clickthis.jpg (218.4 KiB) Viewed 4782 times

[Esoteric Rogue]

Each city cares about price, quality, and brand of each product by different amounts.

Edit: Ah, thanks, I did not realize there is a small variance per city! I'll include a sample for anyone else.

Code: Select all

Leather Wallet Product Details 
             Price Quality Brand
Montreal        31      35    34
Raleigh         31      35    34
Durban          35      35    30
Kansas City     33      34    33

It looks like your cities in that example consist of 3 relatively high wage cities and one medium wage city.

Ah, you are correct! Thank you for explaining that to me! I was completely unaware that the macroeconomics affected this!

_____
Now, about the whole want to compare prices for cheaper buy lower quality goods. I just want to offer some fuzzy math to show it's not often that it's applicable.

First, and just a bit offhand, when I looked at my blazer to do quality analysis, well, I'm the only provider of Textile, so no choice. I was the only provider of Linen, so no choice. I did have a choice for Dye, but I was the best choice for quality and price. So sometimes (or usually) there's no choice.

Also, if there is a choice between you and a competitor, choose yourself. It should be self-evident in almost all cases.

Also, a components quality isn't that significant. This is the fuzzy math, and I want to check out the most significant it can be.
First, on average, only 50% of it is materials instead of tech. Then, if you have three components, well, a third of 50% is 17%. Now, that's just to get the product quality. When it comes to sales, we know that perhaps a third of the overall rating is actually quality. So, we're now down to 6%. So, if you were decided upon one of three components where you could choose quality 80 or quality 40, well the difference is 40. But the effect on overall rating will only be 6% of that or 2.4.

I'll skip over real explanations and say that an increase of 2 in overall rating isn't significant. What could be significant is how a lower quality product can adversely affect your brand, significant by crashing Brand or Corporate strategies, but at least lower the brand awareness, but that can be strengthened with tech rather than overspending on components.

Back to the most significant it can be, rather than the average 6%: I guess that will be the Jewelry. Gold ring and Silver necklace are both 60% material, and only have a single contributor, so that's 60% of qualities going into the overall calculation which values quality at about 40%. So, The quality of gold or silver may affect overall by 24%. Using the same example choice: Choosing between quality of 80 or 40 would be a difference of 40, so we're looking at a difference in overall of about 9.6. Well, 10 overall is a lot more significant than 2 was, but this is the exception.

Edit to add another note: usually the difference in qualities is less than 40. In a 25 year old game, I see 4 wool suppliers that only have a difference of quality of 10. 4 suppliers of Timber was the most significant I see, ranging from 83 to 56, only a difference of 27. 27*.5*.4 ~= 5 overall for a bed, but only 27*.1*.4 ~= 1 for a sofa.

_____
Now, regarding different quality lines in different cities, that's a nice idea. I'm going to state that if you don't have competition, that it doesn't matter what you do. But if you do have competition, well, the games not doing it's job if your competitor isn't offering it's top quality products in both cities. Trying to run a second rate product against a competitor should be the wrong decision when you have a choice, but perhaps it is interesting, since I've been saying that usually price outweighs the usual insignificance of component quality.

_____
And I want to state again, I'd love to see accurate number for quantity somewhere, rather than our graphical estimates.