Race Season Budget - Budgeting For The Supply Chain

In order to go racing you need lots of items. These include everything from racecar parts to the soft drinks your team drinks at the track. When you step back and really consider everything you have to have to prepare the car, load it, get it to the track, support the car and the crew at the track, then get back home again, there is a mountain of stuff required.

The supply chain is the pipeline through which you get the things you need. It can be viewed through the whole picture or it can be broken down into more easily digested parts. From a high level, it's easier to consider what you need to support the car at the shop and the track.

Whether you are running a Street Stock or a Nextel Cup car, the supply chain is based on a global network of companies supplying each other with various components in order to make the parts you will need. This supply chain is where all the stuff you need to race each week comes from. There is a good chance that you have components on your car that were sourced from a global perspective even if you are running an American-made car and not an import car. This applies to the Street Stocks at the local bullring, the karts at the local track and the Legends Cars.

In fact, there is not a single racecar without at least one part from someplace else. Most of us do not have to contact suppliers overseas or deal with all of the import and export regulations and the massive global shipping issues. For the most part, we are getting our parts and supplies from domestic suppliers who may be dealing with the global end of the supply chain. That does not mean you will not be affected by the global logistics or the costs involved. As the end user, you will be the one paying the bill any way you consider the situation.

Let's look at this from a simple perspective. You may race on a local dirt track and one of the many consumable parts you use each week are tear-offs. You may not consider a tear-off a part, but in the truest sense of the word it is a part from the perspective of a supply chain, and is no different than a piston or a quart of oil. Each week you may go through a package of tear-offs, and you can multiply that by the 20 times a year you race, creating a personal demand for 20 packages of tear-offs per year. Let's say for the sake of simplicity that a package of tear-offs is $3. That means you will consume $60 worth of tear-offs each season.

Now, we need to look at where we get our tear-offs. Do we make a trip to the local racing parts supplier during the week and purchase a package of tear-offs when we are buying other parts? Or is there someone at the track who sells them? The point is, you need the tear-offs to go racing.

So, what happens if the local shop quits carrying tear-offs? Or the parts guy at the track takes a vacation or forgets to bring them to the track? Or the manufacturer misses a shipment to your supplier? There are several scenarios that could mean you're out of luck. Either you have to develop a second source, or you go without. You do have options, however. The supply chain is a very complex network of different companies that are interdependent. This interdependency makes a simple product like tear-offs seem a bit more complex than we would normally consider.

Since tear-offs are a low-cost item it may make sense to make one purchase for the entire amount you'll need for the season. That's an affordable option considering the $60 price tag, so it becomes a low-impact decision. While this is a simple example, it drives home the point that we need to plan and/or understand the methods we use to procure parts. We need to understand our parts needs on a weekly, monthly and yearly basis in order to truly understand our supply chain. The supply chain in this case deals more with where we purchased the product rather than the expenditure on a particular item.

We need to keep in mind that while it may make sense to make a season's buy on an item like tear-offs, it may not make the same financial sense to make a season's buy on items like tires. This is from a logistical perspective, not considering any cost benefit that we may be able to glean from that activity. There are several reasons why this may not be a good idea. Tires have a shelf life and you want the freshest tires you can get, and the cost of making a seasonal buy may not fit into your monthly budget for the car.

Why should we inventory tires in the first place? Tires are expensive and buying a season's worth may cost more than you could save. Even if you get a discount on a large purchase of tires, do you really save any money? This question drives me to an illustration I like that uses the "warehouse store" mentality.

At a Sam's Club or Costco, you can get a smoking deal on a gallon of pickles. But do you really need a gallon jar of pickles? You might be money ahead just buying a smaller jar of pickles and restocking as you need them. You run the risk that they will be past their peak before you use all of them. If they do go bad, you have not really saved any money, either over the short- or the long-term. Plus, you have to store the gallon jar of pickles in your refrigerator. Now you have less room for the stuff you really need to restock each week.