1 - American Memory

210
To illustrate the extent of this impact, I submit for the record a
copy of a study conducted in early September 1974, by the Bank of
Hawaii Business Research Department [see p. 214]. An examination
of the repli^ submitted bjr a variety of businesses dealing in consumer
and industrial commodities revealed that the average inventory car-
ried year-romid was 103 days. Asked what inventory they would
carry if assured that a west coast shipping interruption would last
no longer than 10 days, the average of the replies of the respondents
to this question was 68 days—or a saving of 35 days because of such
an assurance.
Further, 70 percent of the respondents said they are affected year-
round because of a lack of such assurance; 19 percent said they take
the risk of building inventory only when the possibility of a shipping
interruption looms; and only 11 percent said they are not affected by
shipping interruption threats.
The 70 percent who said they are affected on a year-round basis
reported that their average inventory valuation was over $2,615,000
and that a guarantee that shipping from the west, coast would not be
interrupted for more than 10 days would enable them to reduce inven-
tory valuation to an average of about $1.8 million^—or a reduction of
31 percent.
Considering the high warehousing and financing costs in Hawaii, a
31-percent reduction in valuation and a 34-percent reduction in inven-
tory days, if extended across the entire commodity spectrum, would
mean a savings of tens, if not hundreds of millions of dollars annually
to Hawaii's consumers.
Permit me to cite another study, one made by the C. W. Shafer Dis-
tributing Co., an appliance and television wholesaler in Honolulu,
with a copy of the complete material presented on September 14,1974,
submitted for the record.
The 40 cents per square foot per month for warehouse space in
Honolulu compares with 6 cents per square foot per month in San
Diego. Warehouse space can be found in Honolulu at less than 40 cents
per square foot, but anything below 30 cents is virtually impossible to
find. The Shafer survey indicates that the same kind of operation in
San Diego has an inventory investment of $100,000 as compared to
an inventory investment of $300,000 in Honolulu. The survey also
states that an appliance distributor's expenses in Honolulu average
15 percent more than for distributors on the mainland. An example
cited is a color television set selling for $500 on the mainland which
has to be priced at $575 in Honolulu.
Mr. Shafer reported to me that the passage of H.R. 7189 would
enable his company to reduce its standard 90-day inventorv to 60 days
and his inventory investment from $300,000 to about $200,000. Further,
his interest expense would drop from $39,000 to $26,000 or less and
warehousing costs could decline from $4,800 per month to $3,200 per
month. The savings on warehousing and interest costs alone would
reduce his cost of doing business in the range of $32,000 to $35,000 per
year—or almost 3 percent of his annual sales figure of $1.2 million.
I conducted a poll of five major printers in Honolulu (August 1974)
and learned that their average paper inventory is 5 months. I assure
this committee that no printers on the mainland would consider ware-