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Trawling: Newsletter Challenge (01/30/07)

Posted January 28, 2007 5:01 PM
Pathfinder Tags: challenge questions

The question as it appears in the 01/30 edition of Specs & Techs from GlobalSpec:

Juan and Tomas run a fish trawling business on Todos Los Santos, a large freshwater lake on the border between Argentina and Chile, from November to May. The business is doing well but trawler maintenance is expensive. Juan suggests trawling year round to boost yearly profits, Tomas has his doubts. Who is right?

Answer

June through September is winter in the southern hemisphere. Winter trawling is a bad idea because they will catch less fish. During the summer, the deep water is cold and the surface water is warm. Little mixing occurs and the deeper cold water becomes anoxic. This forces the fish to stay closer to the surface and increases the catch of the trawler. During winter, the surface water can become as cold or colder than the deep water, which allows the oxygen rich surface water to mix with the anoxic deep water. Furthermore, water is most dense at 4° C, which means that the deeper water will be warmer at times than the surface water, which can reach close to 0° C. Since the fish are more likely to be more spread out in the deeper water, the trawlers will have much smaller catches.

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#1

Re: Trawling: Newsletter Challenge (01/30/07)

01/29/2007 8:49 AM

Doubts? How can you make business decisions on doubts? You need data to make a decision.

First, I have no idea what the fishing conditions are year round. There are probably seasons where the profit would be highest and seasons where it is lower or even non existent, or not permitted by law.

If the conditions are steady state year round, then the answer is obvious! That boat generates a profit on a per hour basis. The more hours that boat is active, the more profit you generate, period. While there are operational costs for the boat, it simply boils down to a simple equation; profit = gross revenue – cost of operation.

If conditions are not steady state, then you must average the cost of operation and determine if the per hour profit is worth the effort. You obviously, do not want to run the boat when the operational costs exceed the gross revenue per unit time (i.e., day or week). Maybe all they need is an accountant!

Finally, you have to determine if it is worth the effort. Maybe it is better to have the time off and enjoy life ulcer free.

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Anonymous Poster
#29
In reply to #1

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 2:04 AM

it's no shame for an engineer not to be knowedgeable about business. First, all business decisions are accompanied by doubt. With no further information we could say that Doubting Tomas is correct...because he has doubts. Juan can only be correct if he overcomes Tomas' doubts. So the key is, what are Tomas' doubts, and what could Juan show (in his palm so to speak) in order for Tomas to touch and believe. Awaiting reply before giving another hint.

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Anonymous Poster
#47
In reply to #29

Re: Trawling: Newsletter Challenge (01/30/07)

02/01/2007 3:02 AM

Okay! I am glad to see that many of you have begun to think about doubting Tomas' doubts. Several have mentioned things such as:

extending work through the winter season

fish harvest sustainability

including fish reproduction--possiby in the fall during which the extra trawling would occur--was mentioned tangentially.

Not mentioned was Thomas's doubts as regards:

long term vs short term (positive or negative) revenue growth potential

the effect of competition--especially if profits from year round fishing increases in the first year

Will return tommorow to see how it's coming along.

Hopefully, we can then discuss Tomas's doubts as regards his compadre's apparent misunderstanding of the difference between profit and revenue.

Next after that will come Thomas' thought regarding the trawlers operating cost outlay if fishing is continued year round.

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#62
In reply to #1

Re: Trawling: Newsletter Challenge (01/30/07)

02/17/2007 9:15 PM

In any discussion of fishing, there are aesthetic factors to be considered. It is written that Allah does not deduct from the time allotted to Man those days spent fishing.

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#2

Re: Trawling: Newsletter Challenge (01/30/07)

01/29/2007 10:19 AM

This Babel fish translation of the Chilean tourist blurb on the All Saints Day lake seems to indicate that fishing is illegal outside the months already being worked.

------------------------------------------------------------------------------

Lake of origin glacier, inserted in the National Park Vicente Perez Rosales. One is surrounded by Osorno volcanos, Pointed and cordilleranos hills in which the forests with olivillos, ulmos abound and coigües. Known in addition with the Emerald name by the intense green color of his waters, it allows the practice of sport fishing of salmonídeas species, predominating the trout arcoiris, fario trout, psalm to salar, trout fontinalis, and perca trout, sport that can be enjoyed between the 15 November and the first Sunday of May of every year. - It has the lacustrine ports of Petrohué and Peulla, those that constitute point of weighs anchor and saturated of navigation by the lake, which comprises of the Route internationally the International that unites Port Twigs with San Carlos de Bariloche, well-known as "Crossing Lakes".

-----------------------------------------------------------------------

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#3
In reply to #2

Re: Trawling: Newsletter Challenge (01/30/07)

01/29/2007 1:06 PM

Wow! Good job!

Now, what is sport fishing? I would think that would mean taking fish not for profit or commercial reasons. Am I wrong?

If true, that means that our two would-be fishermen are already in violation of the law! Maybe it would be wiser if they contacted an attorney.

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#4

Re: Trawling: Newsletter Challenge (01/30/07)

01/29/2007 6:01 PM

My guess is that during the Winter (southern Hemisphere) the lake is either stormy or frozen over. If it's on the border between Argentina and Chile it's probably in the Andes as well, so it may be at some riduclous elevation above sea level making the winter even worse.

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#58
In reply to #4

Re: Trawling: Newsletter Challenge (01/30/07)

02/07/2007 10:01 AM

Looks like the "official answer" completely ignores this somewhat relevant information.

Incidentally the lake uses from your link includes "sport fishing" AND "fisheries".

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#59
In reply to #58

Re: Trawling: Newsletter Challenge (01/30/07)

02/07/2007 10:08 AM

You Wrote: "Looks like the "official answer" completely ignores this somewhat relevant information."

The link I provided says the mixing is monomictic, that means:

monomictic –A term used to describe lakes which undergo one period of complete mixing during the year separated by one period of thermal stratification. Monomictic lakes also relatively deep and do not freeze over completely in the winter. Cayuga Lake mixes completely from late fall to late spring and becomes stratified early summer through late fall

So actually, it looks like the official answer agrees with the information I provided.

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#5

Re: Trawling: Newsletter Challenge (01/30/07)

01/29/2007 11:06 PM

Keep Juan away from the check book. Todos is right.

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#6

Re: Trawling: Newsletter Challenge (01/30/07)

01/29/2007 11:57 PM

Aside from any legal issues, taking the question as posed and all things being equal, you don't boost your profits (as a % of revenue) by increasing your volume unless you can, by doing so, reduce expenses. You may increase your revenues but trawler expenses should be proportional to usage and percentage profit does not change unless you can impact efficiency thereby.

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#12
In reply to #6

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 12:13 PM

I agree with your line of thinking, but I disagree with your conclusion. You say that if everything stays the same, profits are the same. That's not true.

Lets say a business has revenue of 50,000 dollars and costs of 40,000 dollars; over 6 months. For the year, the company makes 10,000 dollars.

Lets say that the cost structure stays the same but the work is over a full year now. Then revenue for a year would be 100,000 (2 x 50,000) and costs would be 80,000 (2 x 40,000) dollars. For the year, the company makes 20,000 dollars. So the longer season yields larger profit, all things being equal.

I don't think fishing in the winter will be the same as fishing in the summer, but I'm not sure why. It's not like the fish fly North for the winter. I know the fish will still be in the lake, so why wouldn't they catch as many fish with a net in the winter as in the summer? Is it that it costs more to use a boat in cold weather? Is bait scarce (they're using a net, so that shouldn't matter I would think) Is posting bail and paying fines for illegal fishing cutting into their profits?

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#18
In reply to #12

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 4:00 PM

I don't disagree that there will be more total but I did qualify my statement by saying not more as a percentage of revenue. Since it wasn't stated explicitly what was meant by "more" I qualified my statement in order to articulate my point regarding efficiency. I suppose we all have different ways of interpreting things. Having run my own business, to me, when someone says more profit, I automatically think of it as referencing rate. If they say more money, then that is independent of percent profit and it could be due to more % profit or more work done. I accept the usage of the term profit as being applicable to either and that is why I specified my usage of the term.

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#48
In reply to #6

Re: Trawling: Newsletter Challenge (01/30/07)

02/01/2007 1:16 PM

Great quote. Seems more pertinent than ever. Thanks.

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#7

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 12:46 AM

What in the name of Neptune are you going to trawl in a fresh water lake?

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#8
In reply to #7

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 1:03 AM

Sturgeon? Prawns? Catfish and Gar?

RichH

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#10
In reply to #7

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 9:57 AM

Trawling simply means dragging a net behind a boat. So you could basically trawl for any type of fish you wanted. It's just fishing with a dragged net. The lake is a very deep lake (337 meters) so I doubt they are doing bottom trawling.

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#11
In reply to #10

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 11:15 AM

Except for laws, quotas, weather conditions, fishing season length etc, thanks for the definition.

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#19
In reply to #7

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 4:35 PM

Ogo-pogo!

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#21
In reply to #19

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 4:47 PM

You know it habib!

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#26
In reply to #7

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 1:30 AM

And more specifically, trawling in a 1000' freshwater lake when the temps are around 40F...

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#9

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 9:11 AM

Is it a sustainable fishery? What is the breeding period of the fishery?

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#13

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 12:42 PM

When and where do the fish spawn? Do they swim up the rivers like salmon or steelhead and desert the lake?

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#14

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 12:42 PM

I traversed the length of Todos los Santos twice about 40 years ago. It is a beautiful long, narrow, deep lake trending mostly from west to east. In the morning it was almost calm, but during the day the prevailing winds blowing along its length build up huge waves, even in summer. I can only imagine what the waves are like in the winter. Use the winter to prepare the boat(s) for nexst summer! As someone said in another post, it is in the Andes, but at this latitude the peaks, like Volcan Osorno, are only around 3000meters (10000 ft) high. The lake is only a little above sea level: if it were just a bit lower, it could be considered a fjord.

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#15

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 3:04 PM

I believe that it is as simple as the seasons.

The Season

Since seasons are reversed, United State's December is Chile's June; this makes for an ideal winter getaway. The inland fishing season in Chile opens November 15th, and closes on the first Sunday in May. Peak season is January to March, but fishing can be excellent throughout the entire season. A local fishing license is required which costs US$ 15.00. It is best that we arrange to have this license available when you arrive. For this reason we will need in advance your full name, age and passport number. Neither shots nor a visa is required to visit Chile.

I imagine that unlawful acts are heavily punished in this region. It would be very hard to weigh profit against punishment. Could you only fish half of this time since you would be in prison for the other half? Are you risking gunshot wounds etc...?

Here is the answer for Juan and Tom. Fish in Chile during the season in Chile, then move to the northern hemisphere and fish there the rest of the year.

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#24
In reply to #15

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 8:19 PM

Since the lake is on the border, who owns it? Chile or Argentina? Or maybe both? How about fish in Chile's waters and when you see Chilian lake patrol coming go and fish in Argentina, and so on. ;)

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#16

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 3:36 PM

this is no engineering challenge question

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#17
In reply to #16

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 3:49 PM

Well yes and no. I believe that, as posted, it is really an economics sort of question and as such is an appropriate field of concern for engineers who need to be cognizant of such issues in order to make prudent design decisions. However, being engineers, or not, it seems to have branched into an endless number of "what if"'s that diverge from the crux of the question. The question did not address the legal/moral/philosophical/environmental issues that seem to have arisen, it really only addressed the matter of full time verses part time operation of the business. But that's just my opinion, I could be wrong.

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#25
In reply to #17

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 10:31 PM

The engineering aspect may concern two questions I have.

Are there fewer maintenance costs in keeping a boat active in fresh water versus putting it up for the off season?

Is it a motor boat or a sail boat? Don't assume that they trawl under motor power. The old Cheasapeake Bay oyster trawlers were under sail.

Economically, some manufacturers have run during market down cycles to cover fixed costs. And it doesn't hurt to keep the equipment running.

If they catch fewer fish but enough make it worthwhile, and mitigate any maintenance costs from being idle, it may make sense to fish year round.

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#27
In reply to #25

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 1:32 AM

Good point. Not being a "boat" person I hadn't thought of the maintenance required during non-income producing periods. That directly impacts profits. So, even if they only break even during the slow time it would be better than having expenses without revenues. Of course another possibility is that they accrue enough extra catch during the fishing season and freeze it to sell during the off season to produce a year round revenue stream with only part-time utilization of the equipment and hence a lower overall operating expense. I think there are multiple possible answers to the question as posed due to the lack of constraint in the question as posed.

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#20

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 4:45 PM

Chris,

We expect better questions from you!

However one answer does come to mind:

Fish the entire year, and on the last day, Tomas clubs Juan, weights him, and throws him over the side. Then Tomas takes ALL the profits, sells the business and retires comfortably in a lakeside villa.

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#22

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 5:10 PM

If maintenance is ongoing, then it makes sense to fish all year. Juan and Tomas will make the same percentage of a larger sum and end up with more money.

However, if the boat goes in for major maintenence or rebuild during the winter months, then neglecting this could lead to unplanned failure during the summer season.

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#49
In reply to #22

Re: Trawling: Newsletter Challenge (01/30/07)

02/01/2007 11:40 PM

Habib,

You're sorta on a right track, sorta on a wrong track. Please join the discussion thread starting at post #1. I think you might have something to add to it, and take away. Your "issue" about maintenance scheduling can then be better clarified as it pertains the hypothetical scenario.

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#23

Re: Trawling: Newsletter Challenge (01/30/07)

01/30/2007 6:50 PM

Tomas is right. The lake is south of the equator at altitude, and frozen in the winter between June and October.

John

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#52
In reply to #23

Re: Trawling: Newsletter Challenge (01/30/07)

02/02/2007 11:51 AM

I know from experience, that it is very expensive to trawl on a frozen lake!

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Anonymous Poster
#28

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 1:56 AM

One thing is clear, there have been no business people responding to the challenge.

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Anonymous Poster
#30

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 2:22 AM

Hi... fish usually go into deeper water in the winter.. especially in freshwater lakes. most freshwater fish actually stay near the bottom in the cold months because the watertemperature is almost constant year around. So i think their income would be a lot lower in the winter season (if it`s even legal to fish in that period)

Í´m studying to be a marine engineer, from Denmark

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#32
In reply to #30

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 4:14 AM

You have hit the nail on the head, due to the nature of fresh water being most dense at 4 degrees C that will be the warmest part of the lake, all the fish will effectively fly south to the bottom and I imagine due to rocks etc this would mean that nets would be damaged increasing maintenance costs. It is an engineering question after all.

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#31

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 3:58 AM

Since it's the southern hemisphere, during the rest of the year the lake might be frozen.

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#33

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 4:47 AM

No mention of fish stocks recovering over winter, we all know the consequences of over fishing the goose that lays the golden egg.

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Anonymous Poster
#34

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 7:01 AM

Ask Uncle Sam for a Grant to study the effects of trawling in the summer vs. winter. Grant $ would be used for purchasing new boat and equipment. Report that trawling was poor in the winter and good in the summer and claim a loss at the end of the year for the poor winter harvest.

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#35

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 7:18 AM

Ice trawling for fun and profit, what a concept!

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Anonymous Poster
#36

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 8:13 AM

Tomas - From May to Nov the weather becomes colder in the Southern Hemisphere and at the lake's altitude and latitude it would likely be frozen for much of this time.

Blair

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#37

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 9:22 AM

May to Novenber is not legal sport fishing season, and commercial fishing is not permitted year round. It´s winter, but the lake is not frozen, not high or south enough for that. Southern lakes have incredible trouts for sport fishing in Argentina and Chile.

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#38

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 10:04 AM

Consider the time they are fishing time they are ignoring maintenance on their equipment, whether it be the boat, motor, or nets. During a busy time you will do what you have to do in a hurry to get by but when the opportunity arises you will be doing things right (especially patching nets). If you ignore the PM on any object for any item you will be replacing it earlier than expected (even more expensive). What would happen if you never changed your oil? But, if you were working double shifts for a week would it hurt to go 500-1000 miles over 3000 to change your oil? No. If everything is structured correctly in pricing (and in your living expenses), the times you are busy fishing pays for the times you are not.

Also consider these 2 factors: Fish move to shallows to spawn or chase food but seek depth for protection (from predators or temperature) and pressure (from weather systems). If Juan and Tomas are dragging the top they will not catch the fish if they have moved to deeper water to stay in more stable temperature stratifications. They will start to see quite a few high pressure systems in May since winter is on its way. Besides, how far down could they possibly be dragging?

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#39

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 10:44 AM

If the fish cannot reproduce back to their original levels of the previous year then they will eventually get to a sustainable level that will not be economical for a trawler to operate. Since we do not know the reproduction rate of the fish in this closed environment it is most likely some form of a logarithmic scale. My recommendation is to extend the trawling season by dispersing viagra in fish food.

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#40
In reply to #39

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 11:03 AM

This is a two man trawler. I really doubt they are going to wipe out the entire fish population on a 178 km2 lake. Besides, most trawlers use nets that are too big to catch young fish.

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#41

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 11:08 AM

ithink tomas right because there high risk

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#42

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 11:46 AM

Juan and Tomas run a fish trawling business on Todos Los Santos, a large freshwater lake on the border between Argentina and Chile, from November to May. The business is doing well but trawler maintenance is expensive. Juan suggests trawling year round to boost yearly profits, Tomas has his doubts. Who is right?

Tomas has different conception of the problem.National Park/Parques Nacionales/ : There are restrictions imposed by the administration to keep the place untouched.

Bariloche -Peulla is a tourist place for Europeans and Latin American visitors. During the summer (Nov-March) there are boat tours in the lake.
Winter time April/October the lake is very windy .The wind go through a valley and build up waves with suden squals . Cold weather and snow. The fish go up stream.

If the old boat is expensive to maintain search the market for low maintenance cost/fiberglass type.

The wooden boats in the region are made with araucaria wood and need maintenance work every year. I bet for Tomas view.

I treek the region for seven years . It is beutiful !!

Mr. Dwight D. Eisenhower used to go fishing in the 60's at lake Lacar which is near to Bariloche. One of the first W. Disney movies "Bambi" was filmed in the Parque National Los Alerces because of the Heumul habitat.

Nahuel.

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#43

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 12:25 PM

Tomás is right in that trawing maintenance is expensive and that increasing trawing will not make that fact go away, nevertheless, the business is "doing well" regardless, and one must take into consideration if trawing maintenance will necesarily increase also.

On the other hand,el buen intencionado señor Juan's entrepreneurial inclination of increasing trawling activities is a good way to go in their already established enterprise, siempre y cuando there are no laws to get in your way and that you keep in mind that the more you fish the less fish there will increasingly be to thrive your business on in the near future.

So I'd venture to say that they both are right in their own judgement. It is a matter of perspectives and possibilities. Therefore, my suggestion to both of these these good business men would be to increase trawing activities intermitently in different parts of the lake while at the same time planning on diversifying their business into some other prosperous ones during the next coming years in able to increase capitol for these and the lake starts running dry. For example, they can try the restaurant or even the supermarket business and make the most in profits out of their already thriving and existing negocio.

Don Wilson C.

PA, USA

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Anonymous Poster
#44

Re: Trawling: Newsletter Challenge (01/30/07)

01/31/2007 9:34 PM

if you were to sit in one spot for a few months then you would need alot of maintenance to get going again,expensive maintenance at that.keep going and maintenance is alot cheaper the same with boats,if they sit around for periods on end they seize up,rust up and fill up with water and slime (a rolling stone gathers no moss) so providing there is fish to trawl weather and licence permitting then it is definitely more viable to fish all year round with scheduled maintenance.

no dought there is a smart tec answer i am a simple engineer and in my very limited experiance i have found this to be true

shooter@123a

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Anonymous Poster
#45

Re: Trawling: Newsletter Challenge (01/30/07)

02/01/2007 12:08 AM

The worst day fishing is better than the best day working! So it depends on whether they view the effort more as fishing, or as working. I would call it fishing, and go year round.

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Anonymous Poster
#46

Re: Trawling: Newsletter Challenge (01/30/07)

02/01/2007 1:21 AM

They are both correct. They need to add another boat or two so they can have one down for maintenance and the other one(s) out making money. They would start with one and see how it affected the bottom line and fish population numbers. Then if it checked out okay they would add more boats as needed. this way they have at least one boat making money while one is being serviced. If they already have more than one boat they need to schedule periodic maintenance so as to have the most boats making money. If it is a question of seasonal permits they would need to schmooze with governmental fiqures to get permission to extend the fishing season to enhance they earning potential.

68torino

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Anonymous Poster
#50

Re: Trawling: Newsletter Challenge (01/30/07)

02/02/2007 7:15 AM

From June to October it is winter time, fishing is harder -if allowed at all- and expenses will be higher. If trawler maintenance is expensive, they will barely breakeven. Being doubtful they will be able to increase profits, Tomas is right.

Experienced contracting engineer

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Anonymous Poster
#51

Re: Trawling: Newsletter Challenge (01/30/07)

02/02/2007 10:07 AM

Ok we spoke about external factors but...

What is the DOC (direct operating cost) and the IOC (indirect operating cost) of this fishing business.

How much is today the cost of the gas oil or gas per litre in the area? How often it changes?

How old is the boat? How old is the engine and accesories? Do they find spare parts locally or has to be imported? If the parts has to be imported how much are the duties and how long it take to have it? The parts has to paid in foreign currency.. What is the exchange rate? USA ? British Pounds ?

How many day in the season is the boat non operational?
How often the engine break down? How is the record for reliability? I do not think they use an scheduled maintenance program. Do they...?

Do they have spares parts in stock? How large is the invetory ?

How much it cost to keep the hull in condition? Material cost?
Have Juan and Tomas the ability to maintain the boat themselves or they have to pay for maintenance?
Do they have people working for them? How many?

Do they pay by hour? Do they pay social benefits, insurance ? I doubt....but ...maybe

I am wrong.

How much it cost to take the Trawler out of the water? How often do they do it?

Do they have a dock where to moore or is anchored in a bay? How is the overal context of the operation?

What about of the fishing nets? are new? old? costly to repair? How often....

What about the hidden cost of the operation ? Truck, office, rentals, etc.

How many kilos are fishing per day? How many days in the season?

How much is the price of the fish in the market?
Do they sell the fish for internal consumption or it is exported and they receive US Dollar insted of Pesos? How much is the exchange rate? How reliable is their customer base?

How is the competition in the area, in the market and in the Lake?

Are the prices stable or have weekly fluctuations?
Can they sell by thenselves or has to be sold to large brokers who regulate the price and manipulate the market?

If they export the product directly, do they have retentions from the government? What are those values?
What is the break-even load factor for this operation.

Do they have business debts?

At Chiloe latitude the cost of living is more expensive because of the distance to larges cities and the comodities has to be carried by trucks or even buses.

Sometime in winter because of the weather condition (rain/ snow) the roads are closed . Many times comunities were closed for weeks because of heavy snowfalls and they have be supported by air. This happen very often in the Andes region.

Can Juan and Tomas afford these contingencies?

I would fish in summer and in winter I would tour people to the sky-slopes.

Think, evaluate, think.... look the enviroment and someone has to come up with the best approach.

Nahuel

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Anonymous Poster
#53

Re: Trawling: Newsletter Challenge (01/30/07)

02/05/2007 4:04 AM

The answer cannot be who is right, but who is wrong? Clearly Juan is not the master (is not Jesus) in this little allegory; he might be a fisher of fish but is not master of business. Tomas on the other hand seems to be a asute disciple and is correct to doubt; while Juan is wrong not to doubt. Now, here are some business hints that might help guide some to the answer:

Pure competition

Day or nite hours when working through winter

Inelastic price

Inelastic demand

Inelastic supply

Competition

Increasing marginal expense

Decreasing marginal revenue

Maintenance is nothing more than a production input

Marginal expense for income must increase

Inelastic price to cover marginal expense inputs cannot increase

Like agriculture, fishermen are in pure competition—have no control over price

Trawler availability must decrease.

Increase opportunity costs

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Anonymous Poster
#54

Re: Trawling: Newsletter Challenge (01/30/07)

02/06/2007 2:16 AM

I assume that Juan and Tomas are already doing many things right if their business is doing well. This would include planning maintenance to take place during low demand periods, and maintaining an appropriate set of parts for emergency and scheduled repairs. A few things happen in the winter months that make a break for winter service favorable:

  • Seasonal labour will be available for service and repairs at a lower rate due to reduced seasonal labour opportunities.
  • Service facilities will be more readily available and lower cost in the off-season.
  • Some materials will be more available and lower cost in the off season due to lowered demand.
  • Major repairs can be scheduled to take place when convenient, and without interfering with fishing activities.
  • Delays will not have the same cost impact as the fishing season.
  • Boats are less likely to be damaged by winter storms when out of the water.

The down side of winter service are the reduced hours to perform repairs, lower temperatures, and increased precipitation. These can all be offset by erecting enclosures or hoarding, temporary heating and lighting, so they are cost prohibitive. Even in summer months some maintenance activities, especially on the hull, will require protection against sun and rain, and removal from the water.

Local demand for fish will be reduced in winter with the reduction in tourism, and ability to catch fish will be reduced due to shorter days, and deeper fish. Winter storms will also reduce the time available for fishing. If it is possible to maintain normal production levels, and hourly operating costs the same, it is unlikely that the produce will sell at the same rate due to limited demand, reducing hourly net profit. Even if more distant customers can be located to replace local sales, shipping, storage and marketing costs will increase significantly.

Changing to year-round fishing will increase the number of unplanned repairs, or move planned repairs into the profitable summer months (can't change service intervals or MTBF). High season repairs are considerably more costly - services, materials, labour and facilities are far more expensive, lost time is more costly (higher hourly net profit and more available hours) and delays are likely to be longer due to additional demand on services and facilities.

I think extending the season will be unlikely to increase net profit significantly. It will most likely move a significant number of repairs into the more costly high season, and result in increased downtime during the longer and more productive summer months.

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Anonymous Poster
#55
In reply to #54

Re: Trawling: Newsletter Challenge (01/30/07)

02/06/2007 4:49 AM

I assume that Juan and Tomas are already doing many things right if their business is doing well. This would include planning maintenance to take place during low demand periods, and maintaining an appropriate set of parts for emergency and scheduled repairs. A few things happen in the winter months that make a break for winter service favorable:


Seasonal labour will be available for service and repairs at a lower rate due to reduced seasonal labour opportunities.

Seasonal labor usually migrates...to where fishing, fish harvesting, is best--and in season. And what does seasonal labor do best? Harvest fish of course. What will it cost (what is the marginal expense?) to keep those labor units--those input factors of production--available? To induce them to stay put and relinquish known results elsewhere for uncertain results locally? What is the opportunity cost for the easonal labor. These will constitute significant added marginal expenses against revenue.


Service facilities will be more readily available and lower cost in the off-season.

As with crop farming, off-season is the time in which equipment (boat, winches, tackle) maintenance is done…when support facilities are available to do the work. But consider, Juan proposes that there will be no "off season." Not having such a season represents a lost opportunity—and with it, an added marginal expense—to perform that maintenance. Such services would not need to be purchased—a marginal cost increase—rather than be done by the fishermen themselves; or during normal (down time) upkeep periods. For example, while fishermen typically repair seines in their homes in preparation for the next season, now they must repair themselves while fishing(?) or hire extra hands to do that job; and procure and haul extra gear so that repairs will not stop the harvest.


Some materials will be more available and lower cost in the off season due to lowered demand.

Why will this be so? Off season would be the time for utilization of the materials—of stocking and repairing—in preparation for the coming season. And what exactly is, demand? Since materials are simply an input factor in the production process, they represent a marginal cost against potential demand for the output produce—the fishes—that will be produced. If that demand is lowered, then profits will lessen or turn into negative.


Major repairs can be scheduled to take place when convenient, and without interfering with fishing activities.

Major repair, but its very nature, is unscheduled maintenance. But supposed unscheduled repairs could be done, could be anticipated to be done, without interference. When might it be done? And how long would it take? Could that be planned as well? Consider also the differences in daylight or no-light conditions during which either the repairs would be done; or fishing would be foregone. An example might be that the repairs would be done in the darkness rather than in daylight…or under shelter as opposed to outdoors…etc. Another marginal cost—during which no fishing can be done—must be taken into account: say, the cost of lighting the repair work area; or the cost of providing shelter…and such. Since fish prices represent inelastic revenue, there would be no way to adjust fish prices to cover these marginal expense increases. This, in part, is what was meant by: equipment availability must decrease.


Delays will not have the same cost impact as the fishing season.

Even if they did--even if the impact was no more--they will not have the same marginal cost impact as during seasonal fishing. And it is marginal expense--the expense required to produce each additional unit of output--which determines whether or not the operation can stay out of the red. Again, because price is inelastic, revenues cannot be easily increased to cover the added marginal costs.


Boats are less likely to be damaged by winter storms when out of the water. The down side of winter service are the reduced hours to perform repairs, lower temperatures, and increased precipitation. These can all be offset by erecting enclosures or hoarding, temporary heating and lighting, so they are cost prohibitive. Even in summer months some maintenance activities, especially on the hull, will require protection against sun and rain, and removal from the water.

All true, as said above; and all representing increased marginal costs that cannot be offset by demand or by price adjustments.

Local demand for fish will be reduced in winter with the reduction in tourism, and ability to catch fish will be reduced due to shorter days, and deeper fish. Winter storms will also reduce the time available for fishing. If it is possible to maintain normal production levels, and hourly operating costs the same, it is unlikely that the produce will sell at the same rate due to limited demand, reducing hourly net profit. Even if more distant customers can be located to replace local sales, shipping, storage and marketing costs will increase significantly.

In essence, true. Hence Tomas is right to doubt.

Changing to year-round fishing will increase the number of unplanned repairs, or move planned repairs into the profitable summer months (can't change service intervals or MTBF). High season repairs are considerably more costly - services, materials, labour and facilities are far more expensive, lost time is more costly (higher hourly net profit and more available hours) and delays are likely to be longer due to additional demand on services and facilities.

I think extending the season will be unlikely to increase net profit significantly. It will most likely move a significant number of repairs into the more costly high season, and result in increased downtime during the longer and more productive summer months.

Like Tomas, you would do well to think: higher marginal expenses, inelastic prices at best, diminished or negative profits as the most likely outcome. The overarching doubt that would play on Tomas's or any business-minded person's mind would concern the…"law of diminishing returns."

Tomas no doubt thinks that perhaps there is something better than could be done with the boat during the offseason than getting (even incrementally) more fish at lower profit margin. He also knows that hoarding is not feasible since that too would be an added expense (for preservation in order to market the fish at lower prices).

So welcome off the gunwale and back into the boat, as we watch Juan out there floundering while he attempts to walk on water. Shall we throw him a net?

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Anonymous Poster
#56

Re: Trawling: Newsletter Challenge (01/30/07)

02/06/2007 9:35 PM

They may very well get a lot higher price for fish caught and marketed in the off season.

Working on the right side of the supply and demand relationship can be extremely rewarding.

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Anonymous Poster
#57

Re: Trawling: Newsletter Challenge (01/30/07)

02/07/2007 9:14 AM

Chilean law prohibits commercial fishing in Lago Todo Los Santos.

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Member

Join Date: Feb 2007
Posts: 6
#60

Re: Trawling: Newsletter Challenge (01/30/07)

02/10/2007 12:49 AM

While what you say may be true, it is massively incomplete. You have totally ignored the question of different maintenance levels on iced hawsers, and worse, you have completely ignored the effect such trawling will have on the fish population. You have offered a pint-sized solution to a gallon-sized problem.

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The Engineer
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#61
In reply to #60

Re: Trawling: Newsletter Challenge (01/30/07)

02/10/2007 11:01 AM

You Wrote: "and worse, you have completely ignored the effect such trawling will have on the fish population."

I agree that the question does seem to ignore things (price of fish in the winter seems like a significant oversight), but your objections are ridiculous. A two man trawler on a 180 square km lake with a depth of 300 meters (1000 ft) is not going to effect "fish population" in any significant way, even if it ran 24 hours a day. You really need to get a sense of scale.

You Wrote:"have totally ignored the question of different maintenance levels on iced hawsers,"

The lake doesn't freeze over (look it up), this has been stated multiple times, so there is no ice involved. Maintenance wouldn't change drastically from the summer months if the lake doesn't freeze, which it doesn't. If your going to raise objections, make them real ones, like the price of fish in winter being higher or the glaring fact that fishing is illegal in the months in question on the lake in question.

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