Hey, look at my wealth! – Why being Scrooge McDuck is not such a great idea. – Part 2

Reserves federal bank

If it’s all fake, why pay the storage costs? But sure feds know they SHOULD have some reserves

In part 1 I have explained, why it is generally a bad idea to store a lot of resources. I have also touched the subject of why do we have to store some of the resources. Today, I will go into a bit more detail into that – how big my reserves should be?

This article is a part of our series “Gamers, get your suits on!” on application of management skills and common sense in computer games. You can find the rest of articles here (including part 1 of this article)

Let’s start with a bit of science. Deciding how much we should store and why we do it is called “Inventory Management” in the business world. There are 3 basic reasons for keeping reserves: 

3 basic reasons to keep reserves

1. Time

Very often there is a time lag between the production of a resource and its consumption (e.g. for the next process in your production chain). This means you have to store resource for the next production cycle, or other form of delayed consumption.

2. Uncertainty

You can’t ever be sure, what will happen in a couple of minutes/hours. In case of war, you often need resources to supercharge your military unit production. You might also run out of some resource (in many games there is at least one limited resource – e.g. Capitalism II), and the reserve will keep you running until you get a new source. Depending on the game, there are different sources of uncertainty, and there is always the uncertainty of your knowledge – you may simply not know the game well enough to take all crucial factors into account. In practice it means: the better you play, the lower your reserves may be, and the more efficient your economy is.

3. Economies of scale

Supplying resources as they are needed, thus minimising the amount of goods stored, is theoretically the ideal solution. However, in the real world (and a lot of computer games, e.g. X3:TC) it is much more efficient to transport goods in bulks, e.g. full transporter is more efficient per unit transported, than a 1% full transporter. Actually in games it usually means it is exactly 100 times as efficient. This means, that the supplier and the consumer must store at least one full transporter at the moment of shipping and delivery.

3 basic types of stock

Another important aspect to consider when determining the size of your reserves is the type of stock you are thinking of. In games there are 3 major types of stock:

1. Raw materials

Flying mammoth in Skyrim

Skyrim got that mammoth hunting part almost right! Instead of mammoth hunting grounds they gave us mammoth hunting skies, but it’s still worth fighting over (under) it!

These are the backbone of your economy. The importance of raw materials is clear, when you consider the history of mankind. First we fought for good hunting grounds to find those elusive mammoths, later we fought for gold, iron and coal. Now we kill each other for oil.

This is well-reflected in games. Heck, everything that is important to us (war and resources certainly are!) is reflected in games and “conventional” art. What we can learn from this is, everyone wants your resources, and especially the raw materials!

Therefore you should always consider the risk of losing the access to these suddenly. This means, that it would be wise to store enough resources to keep you going until you find new sources. In case of big economy and geographically scattered resources, it might not be realistic (or required) to store, say, a month’s supply of oil. For example:

If U.S. had 25% of its oil in Alaska, 25% in California and would be buying 50% from other countries (assume them friendly and supportive), and both Alaska na California were well protected, it is unlikely they would be both captured by enemy at the same time.

Production chain

Nice, fully working production chain pumping out cars, tanks, broomsticks and sports equipment.

See, where I’m going? Think of your strategic resources (raw materials), consider their importance and risk (both economical and military), and decide, how large your reserves should be. And remember, raw materials can be used to make lots of things. You can use the same iron to make a car and a tank. But once you make 1.2 litre engine for VW Polo, you can’t really use it for propelling 40-tonne tank. Actually, in real life, you can’t even use the same steel for both! (remember that steel is an alloy including iron) This means you can always use your raw materials for any

Production chain

You’ve lost the access to iron. You can’t make new cars, and the military parade is a bit disappointing this year, but you can still defend with broomsticks and golf clubs!

purpose you needed at this particular moment. Anywhere further down the manufacturing cahin, and your options are limited.

2. Work-in-process (WIP)

Your options are limited now. If your factory making 1.2 litre engines fails, you can still make your tanks. The further down the chain you are, the less importance te chain-breakage has. Only the branches depending on this branch are affected, while products resulting from other branches are unaffected. actually you have even more resources for your tank engines until you fix the issue with 1.2 litre engine factory!

For many reasons (e.g. technology level difference) these are less important to your opponent, than the raw resources. He might simply not be able to use it. Therefore he is less likely to attack a broomstick-manufacturing facility, than your coal mines. It is also easier for you to build new broomstick facility, than find a motherload of coal.

Production chain

1.2 litre engine factory down. Can’t make cars, but you can still fight. You can’t make 1/4th of your final products, so that’s not that bad.

All these factors mean that work-in-process reserves should typically be much smaller, than raw materials resources. Try not to freeze too much resources in the final production stages, since these reserves are extremely inflexible!

3. Finished product

This one is easy – do not store it at all. You either want to sell it, or use (consume) it. If selling, it’s obvious you want to get rid of these ASAP. If you want to use it, start doing it straight away! E.g. if you build new military units, let them start their duties. If you don’t, it means you might have built them later, and make something useful instead. You have just wasted your precious time (the importance of the time in games will be discussed later in the series) and resources.

You simply have no reason to store these. Even more, the final products are the most expensive (and inflexible) goods to store in your production chain! They cost you the resources (and therefore other opportunities you might have followed instead) plus the value added by all the processes down the chain. You never make something, that is worth less, than what you have to put into it!

This is it for today. One more note: inventory management is closely linked to extremely important aspect of process management. I will discuss it in detail later on in the series. Stay tuned!

Adam “Fanatyk” Wojciechowski

P.S. I’m waiting eagerly for your own ideas, discussion and quality critique!

This article is a part of our series “Gamers, get your suits on!” on application of management skills and common sense in computer games. You can find the rest of articles here (including part 1 of this article)

About The Author

Adam "Fanatyk" Wojciechowski
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I am a co-founder, admin and manager of this site. From time to time I also write articles here. In real life, I am doing my Masters degree in Mechanical Engineering with Management at the University of Edinburgh. Besides gaming I am an avid cyclist, fountain pen enthusiast and windsurfer.

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