Depreciation Depreciation is the most powerful and variable factor in ICC Depreciation refers to loss of potential value over time Depreciation may not be linear at all Seasonal variation If you get the air conditioners in one month late they may be on the shelves for 10 months- very expensive Lots of stuff is seasonal! Spoilage Food is worth less than nothing after it spoils Depreciation may pertain to loss of value in the larger system, not just the cargo proper Airplane on ground factory halted troops die etc Obsolescence and Hits Rapid technical change can cause high depreciation Michael Dell says his computers depreciate 1%/week! Inability to deliver a hit product will result in a loss of sales Military version of obsolescence and hits pertains to war Value of time can be very, very great in wartimeDepreciation • Depreciation is the most powerful and variable factor in ICC • Depreciation refers to loss of potential value over time • Depreciation may not be linear at all – Seasonal variation • If you get the air conditioners in one month late they may be on the shelves for 10 months – very expensive • Lots of stuff is seasonal! – Spoilage • Food is worth less than nothing after it spoils • Depreciation may pertain to loss of value in the larger system, not just the cargo proper – Airplane on ground, factory halted, troops die, etc • Obsolescence and Hits – Rapid technical change can cause high depreciation • Michael Dell says his computers depreciate 1%/week! – Inability to deliver a hit product will result in a loss of sales – Military version of obsolescence and hits pertains to war • Value of time can be very, very great in wartime