My business is failing what should I do?

[jondonnis]

I tried a new idea out, well mentioned this before, to see how it worked. It failed but made somewhat sense.

Built 14 farms in the cheapest wage area and just sold frozen meat and eggs. 2 farms for each city all in the one city. Works really at the beginning to get some cash, with max training and the sales going through meaning your quality is growing (didn't realise until last game that if products aren't shifted from a shop, farm etc, then the training for that department is pointless as each department will stay at 1, until products are being moved from it. So on last game was wasting space in a warehouse, moving stuff to them just to get the departments level up and quality to go up)

Anyway. I then thought, I'll make several warehouses in the central most city. Then all the farms will supply those warehouses. Then everyone can buy from those warehouses instead of the farms that might be too far away. That's where it fails. I was hoping this might bring down freight costs for some of the firms buying from me. Because of course, the warehouses maybe closer to them than the farm. Doesn't appear to work like that. Everything ended up costing a lot more so hardly anyone would buy from the warehouses.

I still think it's a semi sound idea but I guess the mechanics in game don't allow this to work as it should. Or maybe I'm just not understanding it well.

[Camio]

I tried a new idea out, well mentioned this before, to see how it worked. It failed but made somewhat sense.

Built 14 farms in the cheapest wage area and just sold frozen meat and eggs. 2 farms for each city all in the one city. Works really at the beginning to get some cash, with max training and the sales going through meaning your quality is growing (didn't realise until last game that if products aren't shifted from a shop, farm etc, then the training for that department is pointless as each department will stay at 1, until products are being moved from it. So on last game was wasting space in a warehouse, moving stuff to them just to get the departments level up and quality to go up)

Anyway. I then thought, I'll make several warehouses in the central most city. Then all the farms will supply those warehouses. Then everyone can buy from those warehouses instead of the farms that might be too far away. That's where it fails. I was hoping this might bring down freight costs for some of the firms buying from me. Because of course, the warehouses maybe closer to them than the farm. Doesn't appear to work like that. Everything ended up costing a lot more so hardly anyone would buy from the warehouses.

I still think it's a semi sound idea but I guess the mechanics in game don't allow this to work as it should. Or maybe I'm just not understanding it well.

As it should fail.

Basically, you're adding extra freight cost for no apparent reason. The least movement the products have, the better it is, cost wise. By having you move the products from farms to warehouses in another city, then selling these, you're just adding extra freight cost for the firms that wanna buy from you who are in the city that the farms are, for example. There could be other firms that are closer to your farms than where the warehouses are (cities wise).

The usage here of warehouses in other cities not only drives up the freight cost for your products, it also drives up the cost due to the cost of the warehouses themselves (to build them, the overhead and also salaries).

Farms dont need warehouses attached to them. If you had like 4 farms in 1 city making milk and wanted to use a warehouse right next to these 4 farms to use as a place to ship all milk from, then this would work. Otherwise, it makes no sense. In real life, it makes no sense still (as its extra cost).

I guess in this game, some might find it easier to use warehouses to ship all products (instead of having to link to all individual farms, you just have 1 warehouse). Personally, I dont see the point in using warehouses for that purpose. I dont even see 1 advantage.

[jondonnis]

But what about the idea? Lets remove farms but if they were factory products. I'm half way across the world in the US, the goods are made in Russia. Would it not help if there was a warehouse in the UK that could then ship to the US?

We have the likes of Amazon etc doing this. Having warehouses based in main countries they sell to. Or do they also make a lose on these warehouses?

[Camio]

In real life, you gotta consider things that affect the time of delivery. Be it the way its shipped, customs, weather, whatever. There's none of that in Capitalism 2

The only thing I see warehouses do is add overhead and salaries, thats all. I just saved my game a couple hours ago and gave the warehouses a try for the purpose discussed here. I saw no advantage, besides the fact some could feel this is easier to manage when you get bigger, since your suppliers for your factories are warehouses, cutting on the amount of suppliers as a whole if you select warehouses only when linking stuff.

Then when adding a new steel/ccd/cpu factory for example as the demand grows, you just have to link that new factory to the warehouse. Some could find this an advantage I guess. Thats the only pro warehouses have.

I dont see the point personally using them for this purpose only.

[counting]

But what about the idea? Lets remove farms but if they were factory products. I'm half way across the world in the US, the goods are made in Russia. Would it not help if there was a warehouse in the UK that could then ship to the US?

We have the likes of Amazon etc doing this. Having warehouses based in main countries they sell to. Or do they also make a lose on these warehouses?

As I mentioned before, warehouse doesn't lower freight cost, most of the time you'll pay extra freight cost. Since instead of directly from source to destination, it's from source to warehouse and then warehouse to destination. And instead of just downstream clients paying the freight, the source to warehouse freight cost is part of the warehouse expenses. But by reducing fluctuation, or increase utilization, or reduce the number of factories needed, your overall overhead marginal cost can be lower, in term a higher profit margin. Whether implementing warehouse complex is beneficial or not, depends heavily on the cost of freight of that product and the gain you get selling to downstream. The location of the warehouse is just as important as the location of retail store.

For a product like egg, since the ratio between freight cost to usual end-customer price is quite high, normally even if you don't use warehouses, the egg farms still need to be quite close to retail store to get a decent profit. Hence almost always it's better to use a close by local farms. The livestock meat products are a little better, but you still need to weight on the benefit and cost. Sometimes it's worth it, sometime don't. Normally you don't need a warehouse in every city, but just warehouse near your farms in the same city for the benefit of smoothing product flow.

For factory products that have low material cost and negligible freight to retail price ratio. Warehouse can help in your scenario of local central warehouse system. Not just from management perspective, like Camio pointed out, but also the benefit of wholesaler price differences (if you don't have the money to spam so many retail stores in the beginning). Every city has different base local price and rating, if you only have factories as wholesalers source, you need to put your price quite low for AIs in all cities to buy from you, and your own retail stores have to compete with AI retail's demand. If you put local buffer warehouses and only allow AIs to buy from them, you can control the price and supply of goods much easier, at the same time create wholesale price differences between cities (remember always weight on the benefit and cost, the gain may not always be greater than the cost of maintaining warehouses and extra freight cost). Generally speaking, you can run a corporation without warehouses quite all right (as it should be as in Cap2), but with warehouses you get more flexibility and options.