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COGS, Manufacturing Cost, and Transportation Cost

12/25/2010 3:02 PM

Wathcing a cooking show on PBS. An enameled cast iron dutch oven from China costs $50. Similar oven from another brand, not made in China, costs $230. Both are retail prices. This is not a discussion about nationalism, but only about the transportation costs.

A cast iron dutch oven weighs 15lbs. How can you even transport this hunk of a metal from the factory to the customer and still make a decent profit for all those involved in this chain? (forget the COGS and the manufacturing cost itself .. let's assume the quality is the same). I am astonished by the weight of the package and the price at which it is available to the customer after so much distance:

  1. trail/truck from the factory to the dock in China
  2. cargo across the Pacific on a ship (say the destination is USA)
  3. truck/train from the dock to a warehouse in the US
  4. land shipping from the warehouse to the customer (say in Iowa)

Some companies even offer free shipping on such products. Go over to Amazon.. most cast iron cookware qualify for free supersaver shipping.

I am wondering what the actual cost of shipping 1lb from one side of Pacific to the other is.

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#1

Re: COGS, manufacturing cost, and transportation cost

12/25/2010 8:43 PM

"I am wondering what the actual cost of shipping 1lb from one side of Pacific to the other is?"

March 2010 rate for a standard transpacific 40 ft container was $2716 according to exfreight.com/shipping rates.

Max load for a 40 ft container is 45000 lbs. Per alkenmurray.com.

At 15 lbs per each, that is 3000 Dutch ovens per container or roughly 90 cents each for the transpacific ride on the boat. Make It a buck each or so to cover cost of boxes.

The ocean freight is peanuts.

Milo

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#2

Re: COGS, manufacturing cost, and transportation cost

12/26/2010 5:52 AM

As well as Milo's salient point, you should know that Beijing subsidizes every single industry in China: 1. by direct export subsidies, and 2. by maintaining the yuan at one sixth of its real value, which policy makes Chinese products one sixth of the real cost.

Don't tell me it isn't a subject of nationalism, it is directly and totally a subject of nationalism, China is cheating the USA (and every other country they export to) and the US politicians are doing eff all about it.

Sickening.

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#3
In reply to #2

Re: COGS, manufacturing cost, and transportation cost

12/26/2010 1:28 PM

If we don't start manufacturing here in the US. that Dutch Oven that the Chinese NEED to sell over in the US.(the US. is still the largest consuming nation in the world) will have to be sold else where. All these companies that are and have been going to the lowest bidder in China will not have a market. Sure there are other consumers out there in the world, think about losing your largest buyer over the fact of saving manufacturing costs, that won't matter if we stop buying, for one main fact we will be broke. Short sighted at best!

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#7
In reply to #2

Re: COGS, manufacturing cost, and transportation cost

12/27/2010 12:00 PM

Hi another Guest,

You mention subsidies in China, and here I don't defend China or any other countries, but you should mention American subsidies in many areas, and how pharmaceuticals finance FDA to approve or maintain in drugstores pills that kill people. If you put all those subsidies, I promise that you get good answer with higher note, Gil.

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#4

Re: COGS, Manufacturing Cost, and Transportation Cost

12/26/2010 6:57 PM

So are you comparing cost, or quality?

When it comes down to manufacturing quality, 'irregardless' of cost, where does the sino/anglo market compete with the francais?

Check out which country produces the best quality dutch oven on the market.

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#5
In reply to #4

Re: COGS, Manufacturing Cost, and Transportation Cost

12/26/2010 7:05 PM

Then find out where it is actually made?

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#6
In reply to #4

Re: COGS, Manufacturing Cost, and Transportation Cost

12/26/2010 8:11 PM

what points would determine the quality of a dutch oven?

fit of the lid? thickness?

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#8
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Re: COGS, Manufacturing Cost, and Transportation Cost

12/27/2010 1:15 PM

Lack of lead content and open porosity/ inclusions would make my short checklist.

Milo

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#13
In reply to #8

Re: COGS, Manufacturing Cost, and Transportation Cost

12/28/2010 9:18 AM

Wouldn't being enameled would mitigate both the porosity & lead content?

I'ts also probably cast steel, not iron

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#14
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Re: COGS, Manufacturing Cost, and Transportation Cost

12/28/2010 11:25 AM

Yes . I hadn't recalled that condition in the OP.

However, I wouldn't want lead regardless, and the porosity and inclusions could interfere with the adhesion of the enamel so...

I like your thinking re cast steel vs cast iron.

Hmmm.

Milo

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#9

Re: COGS, Manufacturing Cost, and Transportation Cost

12/27/2010 5:43 PM

Bad acronym alert: "COGS"

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#10
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Re: COGS, Manufacturing Cost, and Transportation Cost

12/27/2010 7:32 PM

Cost Of Goods Sold

MBA Speak...

Milo

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#11
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Re: COGS, Manufacturing Cost, and Transportation Cost

12/27/2010 7:37 PM

You can learn something every day, whether you want to or not.

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#12
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Re: COGS, Manufacturing Cost, and Transportation Cost

12/27/2010 8:20 PM

"

"Come on Arthur, Our work here is done..."

The Tick Uhhh Milo

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#15

Re: COGS, Manufacturing Cost, and Transportation Cost

12/29/2010 6:55 PM

The quality is never the same.

Tried to purchase stainless steel flat ware. Tried most reputable brands. After washing all I got was rust spots.

No; it was not the dishwasher as it has a stainless steel tub. My old flat ware always came out fine, it was my parents.

The cost of shipping is down to it's lowest level, after that genius invented the container.

Therefore if you are shipping nothing of value, all you are paying for are the transportation costs and the mark up.

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#16
In reply to #15

Re: COGS, Manufacturing Cost, and Transportation Cost

12/31/2010 10:00 AM

Hi Icarus,

I agree with you that the first copy or imitation is not perfect but we said in the late 60s that japanese cars are small and cheap and never reach our standards.

Today, we have different opinion on our bankrupted automakers.

It will be the same with Chinese products, they are cheap and low quality but they coming better and better on every delivery. We cannot forget that "it's business"!

Chineses have less ego than us because they make what they can sell here.

Wish you a HAPPY NEW YEAR and ALL THE BEST FOR 2011, Gil.

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#17
In reply to #16

Re: COGS, Manufacturing Cost, and Transportation Cost

12/31/2010 2:21 PM

Was it not an American that went to Japan and helped to resolve their quality control problems, after being laughed out of the states for such a silly idea?

I can not remember his name, but he is still revered in Japan.

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#18
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Re: COGS, Manufacturing Cost, and Transportation Cost

12/31/2010 2:49 PM

W. Edwards Deming

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#19
In reply to #18

Re: COGS, Manufacturing Cost, and Transportation Cost

01/01/2011 12:22 PM

Thanks

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#20
In reply to #18

Re: COGS, Manufacturing Cost, and Transportation Cost

01/01/2011 7:33 PM

I thought it was Gil

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