Comments on: Open Thread: Hedonics – or “Dedonics” ? http://www.ritholtz.com/blog/2008/07/open-thread-hedonics-or-dedonics/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Tue, 14 Feb 2012 20:08:08 +0000 hourly 1 http://wordpress.org/?v=3.0.5 By: Roy S http://www.ritholtz.com/blog/2008/07/open-thread-hedonics-or-dedonics/comment-page-3/#comment-98344 Roy S Sun, 27 Jul 2008 18:57:01 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/07/open-thread-hedonics-or-dedonics/#comment-98344 In the manufacturing sector there is always a cost 'squeeze', usually after the introduction phase of a new product. This is the perenial attempt to 'decontent' the product to reduce cost and improve profit margins. This can be as simple as resourcing components to a less technical supplier (or geography) who has lower labor rates with less automation; eliminating low usage options on the product with associated overhead; downsizing part thicknesses and attachments or substituting alternate materials/lower cost; avoiding higher 'burden rates' by 'modularizing' assemblies to outside suppliers. The issue is evaluating "value added" to the product and where OEM uniqueness can be optimized and generic components can be 'off the shelf', that is - technology only where it gives you product advantage over your competitors. Best way to do this is 'benchmarking' the product base and access what's needed to beat your competitor. Example of technology reversal. Designed for robotic assembly of a vehicle's interior. By the time we designed to meet the robotic requirements (ie. everything up or down, limit sideways, projection, and rotations) we eliminated enough labor content that there was little value in robotics (approx. went from 41 people and 2 supervisors to 24 people and 1 supervisor with substantial assembly quality improvements). Basically the robot didn't take a coffee break, but required a higher level of skilled labor for maintenance. Welcome to my world. RoyS In the manufacturing sector there is always a cost ‘squeeze’, usually after the introduction phase of a new product. This is the perenial attempt to ‘decontent’ the product to reduce cost and improve profit margins. This can be as simple as resourcing components to a less technical supplier (or geography) who has lower labor rates with less automation; eliminating low usage options on the product with associated overhead; downsizing part thicknesses and attachments or substituting alternate materials/lower cost; avoiding higher ‘burden rates’ by ‘modularizing’ assemblies to outside suppliers. The issue is evaluating “value added” to the product and where OEM uniqueness can be optimized and generic components can be ‘off the shelf’, that is – technology only where it gives you product advantage over your competitors. Best way to do this is ‘benchmarking’ the product base and access what’s needed to beat your competitor.

Example of technology reversal. Designed for robotic assembly of a vehicle’s interior. By the time we designed to meet the robotic requirements (ie. everything up or down, limit sideways, projection, and rotations) we eliminated enough labor content that there was little value in robotics (approx. went from 41 people and 2 supervisors to 24 people and 1 supervisor with substantial assembly quality improvements). Basically the robot didn’t take a coffee break, but required a higher level of skilled labor for maintenance.

Welcome to my world. RoyS

]]> By: billmasi http://www.ritholtz.com/blog/2008/07/open-thread-hedonics-or-dedonics/comment-page-3/#comment-95119 billmasi Wed, 09 Jul 2008 19:43:24 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/07/open-thread-hedonics-or-dedonics/#comment-95119 Latest Ultra-portable Fujitsu computer. I've gone through two previous generations happy as a clam, now comes the new one and in every way but the price and a bright new screen, it's a step backward. (How about a fingerprint sensor that's also the scroll wheel? Ha.) For years I thought I'd never own anything but a Fujitsu but this baby's about to be history. Latest Ultra-portable Fujitsu computer.

I’ve gone through two previous generations happy as a clam, now comes the new one and in every way but the price and a bright new screen, it’s a step backward.

(How about a fingerprint sensor that’s also the scroll wheel? Ha.)

For years I thought I’d never own anything but a Fujitsu but this baby’s about to be history.

]]> By: PB http://www.ritholtz.com/blog/2008/07/open-thread-hedonics-or-dedonics/comment-page-3/#comment-95118 PB Wed, 09 Jul 2008 01:27:34 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/07/open-thread-hedonics-or-dedonics/#comment-95118 Let's chalk this one up to the 'great' Bob Nardelli. In order to SAVE TIME, I go to a Home Depot & order a gallon of paint. I leave to pick up my daughter & come back & guess what? No paint. So I have to find the color (because the woman who took my order also took & lost the swatch) & order the paint AGAIN & of course wait for the mixing & shaking. I mentioned to the clerk that this was not good considering the economy, especially the home improvement market & two of their competitors across the street. It doesn't end there. Mind you, in this recession during the middle of the day on a weekday the store is basically empty. On the way to check out I pass by a number of employees talking to each other but when it comes time to pay for my paint all I see are 'self-checkout' lanes. I find ONE live human being to check me out & his English was so poor I felt sorry for him. Good luck Chrysler/Cerberus. Bottom Line: We know all of the factors that are affecting the economy negatively but this instance points to another reason; Businesses themselves are so #$%^%^ poorly run! Hedonics my ass. Why not take a weighted average basket of consumables? Rent, Utilities, Transportation, Gas, Food, Insurance, Taxes, Entertainment, Etc, ... & average the prices in the 10 largest US markets & use the change as CPI. Pretty cut & dried and also simple me thinks. Interesting 2000 article on Bush, hard to believe the detailed predictions have ended up so close to reality. I feel I'm getting close to gyofb territory. Let’s chalk this one up to the ‘great’ Bob Nardelli.

In order to SAVE TIME, I go to a Home Depot & order a gallon of paint. I leave to pick up my daughter & come back & guess what? No paint. So I have to find the color (because the woman who took my order also took & lost the swatch) & order the paint AGAIN & of course wait for the mixing & shaking. I mentioned to the clerk that this was not good considering the economy, especially the home improvement market & two of their competitors across the street.

It doesn’t end there. Mind you, in this recession during the middle of the day on a weekday the store is basically empty. On the way to check out I pass by a number of employees talking to each other but when it comes time to pay for my paint all I see are ‘self-checkout’ lanes. I find ONE live human being to check me out & his English was so poor I felt sorry for him.

Good luck Chrysler/Cerberus.

Bottom Line: We know all of the factors that are affecting the economy negatively but this instance points to another reason; Businesses themselves are so #$%^%^ poorly run!

Hedonics my ass. Why not take a weighted average basket of consumables? Rent, Utilities, Transportation, Gas, Food, Insurance, Taxes, Entertainment, Etc, … & average the prices in the 10 largest US markets & use the change as CPI. Pretty cut & dried and also simple me thinks.

Interesting 2000 article on Bush, hard to believe the detailed predictions have ended up so close to reality.

I feel I’m getting close to gyofb territory.

]]> By: Chris D. http://www.ritholtz.com/blog/2008/07/open-thread-hedonics-or-dedonics/comment-page-3/#comment-95117 Chris D. Tue, 08 Jul 2008 21:16:43 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/07/open-thread-hedonics-or-dedonics/#comment-95117 Lots of things have gotten worse, but price competition has reduced the price of previously unattainable items in the premium or low-end of premium part of the market. For example, 90% of my clothes comes from Lands End clearance. You wanna know what didn't sell last Summer? Look at what I'm wearing this Summer. Much higher quality than you'll find in any store. I save up enough wants to buy a quantity that is exempted from the shipping charge. Maybe Lands End isn't what it used to be--I dunno. But, it's far better than anything in most stores or from premium stores at full price. I don't get that much satisfaction from my clothing. As long as my wife says it looks okay, I'm good to go. I finally convinced my wife to do this with her favorite brands. (She gets to buy more items at the lower price instead of less at the higher price.) She jumps on the discount e-mails--and we get many! I think the discerning buyer can do much better these days on most--but not all--items. If the plebes want crap, be my guest. Lots of things have gotten worse, but price competition has reduced the price of previously unattainable items in the premium or low-end of premium part of the market. For example, 90% of my clothes comes from Lands End clearance. You wanna know what didn’t sell last Summer? Look at what I’m wearing this Summer. Much higher quality than you’ll find in any store. I save up enough wants to buy a quantity that is exempted from the shipping charge. Maybe Lands End isn’t what it used to be–I dunno. But, it’s far better than anything in most stores or from premium stores at full price. I don’t get that much satisfaction from my clothing. As long as my wife says it looks okay, I’m good to go. I finally convinced my wife to do this with her favorite brands. (She gets to buy more items at the lower price instead of less at the higher price.) She jumps on the discount e-mails–and we get many! I think the discerning buyer can do much better these days on most–but not all–items. If the plebes want crap, be my guest.

]]> By: iz http://www.ritholtz.com/blog/2008/07/open-thread-hedonics-or-dedonics/comment-page-3/#comment-95116 iz Tue, 08 Jul 2008 18:38:06 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/07/open-thread-hedonics-or-dedonics/#comment-95116 Healthcare insurance? BCBS has about 240 options now and most of them are worthless. I know in my case, and I have one of their most "decent" plans for a family of four, in a worst case scenario I would have to come up with 40K (assuming they pay what they are suposed to pay) after paying 11K a year in premiums. I think most people that buy health insurance now days do it for the illusion that they have some coverage. Healthcare insurance? BCBS has about 240 options now and most of them are worthless. I know in my case, and I have one of their most “decent” plans for a family of four, in a worst case scenario I would have to come up with 40K (assuming they pay what they are suposed to pay) after paying 11K a year in premiums. I think most people that buy health insurance now days do it for the illusion that they have some coverage.

]]> By: Lynn http://www.ritholtz.com/blog/2008/07/open-thread-hedonics-or-dedonics/comment-page-3/#comment-95115 Lynn Tue, 08 Jul 2008 18:01:48 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/07/open-thread-hedonics-or-dedonics/#comment-95115 Products don't last as long as they used to. My first TV set lasted 20 years, my second one lasted 7 years and it was a Consumer Reports "Best Buy". My point is that we have to buy products more often, which, in the long run, costs us more money. Products don’t last as long as they used to. My first TV set lasted 20 years, my second one lasted 7 years and it was a Consumer Reports “Best Buy”. My point is that we have to buy products more often, which, in the long run, costs us more money.

]]> By: ramstone http://www.ritholtz.com/blog/2008/07/open-thread-hedonics-or-dedonics/comment-page-3/#comment-95114 ramstone Tue, 08 Jul 2008 17:11:20 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/07/open-thread-hedonics-or-dedonics/#comment-95114 Oh yeah, two words: High Fructose Corn Syrup. Oh yeah, two words: High Fructose Corn Syrup.

]]> By: Lord http://www.ritholtz.com/blog/2008/07/open-thread-hedonics-or-dedonics/comment-page-3/#comment-95113 Lord Tue, 08 Jul 2008 17:04:12 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/07/open-thread-hedonics-or-dedonics/#comment-95113 <i>Top quality products are available, we just have to search them out and pay a bit more. </i> That just means prices really didn't drop, quality was lowered, which is the point. Top quality products are available, we just have to search them out and pay a bit more.

That just means prices really didn’t drop, quality was lowered, which is the point.

]]> By: cs http://www.ritholtz.com/blog/2008/07/open-thread-hedonics-or-dedonics/comment-page-3/#comment-95112 cs Tue, 08 Jul 2008 16:36:11 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/07/open-thread-hedonics-or-dedonics/#comment-95112 re: year round availability of fruits and vegetables. Very nice, until you buy them and realize they're just eye-candy. The wonderful thing about seasonal items (experienced living in foreign countries) is how good they taste when they're in season. re: year round availability of fruits and vegetables.

Very nice, until you buy them and realize they’re just eye-candy. The wonderful thing about seasonal items (experienced living in foreign countries) is how good they taste when they’re in season.

]]> By: CS http://www.ritholtz.com/blog/2008/07/open-thread-hedonics-or-dedonics/comment-page-3/#comment-95111 CS Tue, 08 Jul 2008 16:30:00 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/07/open-thread-hedonics-or-dedonics/#comment-95111 Flavorless fruits and vegetables. Flavorless fruits and vegetables.

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