Made to Order

This post will consider goods and services produced only on demand, like food at a restaurant, and how they factor into the inventory of all goods for sale.

First, let us consider a doctor's visit. Say he provides check-ups in a fee-for-service private practice. How does the value of a check-up weigh on inventory? Let's say the check-up takes an hour which includes all documentation and reviewing labs, etc. If he saw 40 patients per week, that would equate with being employed full time. If there were a lot of cancellations and he only saw 20, that would equate with half-time employment. Either way, we can do a reverse rent on his monthly salary to calculate the price of his ghost slave. While most income people earn is spent on the maintenance costs of being human, in this case, he is a single doctor and his tastes are modest, so he generates plenty of savings. So, is his inventory value a reverse rent of savings per month? Hold that thought for a moment as we switch gears to cheeseburgers.

With cheeseburgers, raw materials of the final consumable is already in the inventory. One buys those when they place an order. What one also must pay for is the service that transforms buns, ground beef, cheese, lettuce, tomatoes, et. al., into a cheeseburger. The customer is buying the raw materials plus hiring the service that prepares it, as opposed to the doctor where one just pays for the service.

The service is the inventory item we need to consider, not the final product, and its price of the establishment is a function of its profitability. Made to order items, above and beyond raw materials, are factored into the inventory when their systems of production are bought and sold. The cheeseburger would not be added as an inventory item—only the store that makes it—unless, say, some were frozen and delivered to mini-marts for resale, at which point their prices enter the inventory independent of the value of the burger shop.

For a place like McDonald's, the system of production is continuously bought and sold through the sales of stock. Stock sales reflects the inventory contribution of its output. For a privately owned Mom and Pop outfit, the inventory price of its products are weighed at those times when the store itself is on the market.

Bottom line: cheeseburgers don't count toward inventory, only the establishment that makes them.

Restaurants, like people, have high maintenance costs, but unlike people, can legally be bought and sold and so factor into the inventory when they are up for sale, where price is a function of the profits they deliver.

Revisiting labor in this light, back to the doctor, to the degree he generates savings, treating an employee or service provider as a private contractor, he will have investment value to himself as the owner of his firm. So the worker has an "implied price" based on savings, just as the rental unit has an implied price for the landlord whenever occupants change. The difference is, for the worker, the occupant isn't going to change. He is off the market so does not factor into inventory.