If i produce bottled water i buy water bottles and fill them with water. Why do i not buy plastic and make my own bottles? Why does it not actually save on costs from paying another company and taxes from buying/selling, and also possibly transportation?
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>If i produce bottled water i buy water bottles and fill them with water. Why do i not buy plastic and make my own bottles? Why does it not actually save on costs from paying another company and taxes from buying/selling, and also possibly transportation?
You can do it if you have enough capital. It’s called vertical integration.
But as I said it comes at an enormous upfront cost because in order to own and control 10 different parts of a supply chain instead of just 1 you will need ten times the resources, ten times the business contacts, ten times the specialized equipment, ten times the specialized personnel.
Instead of one business you’re now managing ten. You’ll also have to deal with antitrust concerns.
Because of the economies of scale and initial investment required for machinery. You make your own bottles – you need the raw materials, storage for your own materials, the moulds to make your bottles, the storage to store your bottles that are being made at a faster rate than you can fill them.
Large companies make use of just in time delivery so their bottles arrive daily/weekly as they need them. The same lorry will also pick up the full bottles and deliver them in to the wholesalers so there is also another reduction is costs there.
Some large companies will ‘make’ their own bottles using pre manufactured ingots of plastic that are then heated and blown in to shape at the bottling plant – this is beneficial because they can have several shaped bottles depending on the product being bottled at the time, but this will only require one basic ingot –
To answer your question exactly. My company does make its own bottles however in the area there is another company that just makes bottles and ships them to other bottling companies.
When investing in your company the higher ups tend to look at how long it would take to start seeing a return on their investment. A machine that turns resin into a preform and a blow mold that turns preforms into bottles can be incredibly costly. On top of the fact that you need to typically hire higher paid technicians to operate them, and keep up with the maintenance on machines. A low bottle producing company may decide the return on the investment is just to far out to make it
Because there is someone out there who knows better how to do it and can do it cheaper than you. Also more machines, more staff, more space. All very costly things that come with additional risks attached. In short, leave it to the pros if you aint one.
Because the other established bottle manufacturing company already has paid for the factory building, machinery, training, research and development, quality control etc. to produce bottles and is now offering them at a fixed price per bottle which is slightly above its own costs per bottle.
If you want to produce bottles before filling them with water, you have to replicate everything that other company has done over the years first. Which is a massive initial investment. After some time you might be able to produce bottles slightly cheaper than you could buy them from the bottle manufacturer, but by then some new law could have been introduced forcing you to change some manufacturing process or ingredient for the bottles, for which you need to do all that stuff again. So you’d need to constantly react to the volatile market environment for bottles, instead of focusing on your actual product: Bottled water. Which we haven’t even started producing until now – for that you’d also need factories, machinery, training, etc.
A big part of it is the cost to buy materials and machinery to produce.
If 1 person buys say 100ltrs of water and 200 half litre bottles to make 200 bottles then the cost will be far higher than if a company buys millions of liters of water and millions of bottles. Not to mention transport costs etc, etc.
Add onto that cost time to produce those bottles. You would probably take a few hours to do it by hand. In that time a big company with all the automated processes will have made thousands of bottles.
If you were to start selling the water at a rate high enough to make enough profit to have an income you’d have to sell the water bottles at a large mark up. Even if it was just for yourself by the time you factor everything else it’s probably still cheaper to buy.
There are exceptions to this. I 3D print models, tools, things for round the house, etc.
Now a model called a Space Marine purely for example. A box of 5 costs ~£25, I can produce 5 models as proxies for marines for around £0.5 and sell them for £10-15.
1 squad will take me around 4hrs to print.
All my printers combined cost me in the region of £2,500.
I’ve a feeling i went of track there but I hope that answered your question.
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