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Aircraft Carrier Analogy

Newport News Shipbuilding ad offering third carrier free with two-order commitment, total shutdown costs, liquidity expense parallels

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Newport News Shipbuilding once underscored the staggering cost of industrial downtime by offering a "buy two, get one free" deal on aircraft carriers, provided they were ordered simultaneously. This bold proposal highlights how liquidity is remarkably expensive, as single-unit production forces manufacturers to inflate prices just to cover the overhead of an idle factory. Similar to a restaurant prepaying a steak supplier to secure its supply chain, these bulk commitments transform sporadic, high-cost orders into more efficient inventory management. Ultimately, the analogy illustrates that maintaining a continuous workflow is often far more cost-effective than absorbing the massive financial burden of shutting down and restarting production.

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The head of Newport News Shipbuilding and Dry Dock, which builds the US aircraft carriers, once ran a full page ad announcing that if Congress would order two carriers at once, instead of one at a time, they'd throw in a third carrier for free. The total shutdown between jobs was that expensive for them.
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That reminds me of the restaurant using its liquidity to prepay its dry aged steak supplier. https://commoncog.com/cash-flow-games/#3-pre-payments-in-the... Liquidity is expensive. Selling a carrier one at a time is like a retail business where you're expected to hold onto stock. If you don't build up an inventory to sell from and just sell one unit, you have to markup the price to cover the cost of the factory when it is idle.