Yesterday, I went for a major shopping spree to buy stuff for the new apartment. I finally decided to go to Tan Boon Ming outlet at Bangsar Village to make the order. After an hour, I spent RM21,040. The purchase includes; flat screen TV, fridge, vacuum cleaner, over, hob, fume extractor fan, microwave oven (two units), washing machine, dryer and dish washer. What surprises me is that I got an even better quote compared to the last time I went which was more than a month ago.
The same is not true with food and fuel. For these two classes of goods, the price increase was sudden and sharp. The question that we should try to answer is: Why is this discrepancy between durable consumer goods compared to perishables when it comes to inflationary pressures?
The best answer is: efficiency!
The process of manufacturing a consumer durable product has been perfected to such an extent that any inefficiencies has been kept to a minimum. The flexibility of the manufacturing process also helps the manufacturer revised its process when there is a market change to raw material or labour. As such, the final price of the finished good is inelastic to the price movement of the input materials.
For perishable goods, the opposite is true. Food manufacturing is directly proportional to available land. Moreover, it is usually tied to seasons. With changes in input costs, farmers are not able to change their farming process to meet the cost conscious needs of the consumers. Therefore, any changes in the input price gets translated immediately to the consumers. More often than not, the jump in price is more!
Therefore: How to "industrialise" farming process?
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