If BFR, then why FalconHeavy?

[Jouni]

Reducing the marginal costs does not mean that doing the same number of launches/year gets substantially cheaper. It means that doing more launches/year is not substantially more expensive.

SpaceX is a company with high added value. They design, manufacture, service, and operate their rockets themselves. They even design and manufacture many of the components. In such companies, most of the costs are fixed. If they run a facility at 25% capacity, they have to pay almost as much as for running it at 100% capacity, because most of the costs are fixed. They can only save substantially by closing down the entire facility. There is potential for both high profit when the sales are good and for high losses if they invest in more capacity than what they need.

Subcontractors are the standard way to transform fixed costs into variable costs. Instead of manufacturing Falcon 9 lower stages on their own, they could buy them from a subcontractor. Using subcontractors is expensive and unpredictable,  but the subcontractor is now the one who has to take the risks with investments and overcapacity. If SpaceX needs 4x less lower stages than in the previous year, they simply buy 4x less lower stages, and the subcontractor has to deal with the consequences.

[Lisias]

5 hours ago, Jouni said:

If SpaceX needs 4x less lower stages than in the previous year, they simply buy 4x less lower stages, and the subcontractor has to deal with the consequences.

Being one of them taking the risk of seeing the subcontractor selling similar parts (as the very same would be probably forbidden by contract), cheaper (as he's fighting for incoming) for your adversaries, allowing them to better compete with you and eroding your chances of retaking the market in the next period when things get better.

You can't have the pie and eat it too. In order to mitigate some risks, you need to take others: "Choose your poison" - literally.

[Wjolcz]

5 hours ago, Jouni said:

Subcontractors are the standard way to transform fixed costs into variable costs. Instead of manufacturing Falcon 9 lower stages on their own, they could buy them from a subcontractor. Using subcontractors is expensive and unpredictable,  but the subcontractor is now the one who has to take the risks with investments and overcapacity. If SpaceX needs 4x less lower stages than in the previous year, they simply buy 4x less lower stages, and the subcontractor has to deal with the consequences.

Isn't this exactly how the space shuttle worked? NASA would order components and because there was no other option (when it comes to choosing subcontractors) the prices were sky high because the subcontractors could demand whatever the price they wanted as there was nobody else to go to if NASA wasn't happy with the price.

I'm not an expert but to me it seems like controlling all the stages of production is the best way to keep the prices low. If they suddenly did this they would end up charging more and more instead of less.

Edited May 14, 2018 by Wjolcz

[tater]

8 hours ago, Jouni said:

Reducing the marginal costs does not mean that doing the same number of launches/year gets substantially cheaper. It means that doing more launches/year is not substantially more expensive.

SpaceX is a company with high added value. They design, manufacture, service, and operate their rockets themselves. They even design and manufacture many of the components. In such companies, most of the costs are fixed. If they run a facility at 25% capacity, they have to pay almost as much as for running it at 100% capacity, because most of the costs are fixed. They can only save substantially by closing down the entire facility. There is potential for both high profit when the sales are good and for high losses if they invest in more capacity than what they need.

Subcontractors are the standard way to transform fixed costs into variable costs. Instead of manufacturing Falcon 9 lower stages on their own, they could buy them from a subcontractor. Using subcontractors is expensive and unpredictable,  but the subcontractor is now the one who has to take the risks with investments and overcapacity. If SpaceX needs 4x less lower stages than in the previous year, they simply buy 4x less lower stages, and the subcontractor has to deal with the consequences.

A few things:

1. The workforce is to build F9 cores for at least 2 years of solid work (30-40 F9s).

2. The workforce has to build F9 stage 2 for as long as F9 is flying, or until they figure out reuse.

3. The composite people only need to work until they get 30-40 interstages built, and however many COPVs, plus as many fairings as they need considering reuse there.

4. The workforce that churns out a Merlin a day will still churn out engines, except they will be Raptors after a little over 2 years (that will be the ~400 Merlins they need).

The point of reuse as it relates to F9 vs BFR is that reuse allows the same workforce to transition to making BFR (what Musk has said it was for). The engine staff will start making Raptors. Same facility, same workforce. The fairing and interstage people (composites) will start working on BFR, which is also composite. The people making metal tanks... those people are the ones with some job security issues, or they get transitioned to composites.

Assume launch cadence stabilizes somewhere near the value for this year, which is ~30. They will build all the boosters they need for the next 300 flights in ~2 years, during which time their metal workforce is 100% utilized. After that, assuming S2 is never recovered, a fraction keep making S2 and MVac, and the rest either work on BFR, or they have to be let go.

[mikegarrison]

5 hours ago, Wjolcz said:

I'm not an expert but to me it seems like controlling all the stages of production is the best way to keep the prices low. If they suddenly did this they would end up charging more and more instead of less.

It's not my area of expertise either, but I will point out that all airplane manufacturers today make extensive use of subcontractors. Either they are all fools, or there is some benefit.

[wumpus]

4 minutes ago, mikegarrison said:

It's not my area of expertise either, but I will point out that all airplane manufacturers today make extensive use of subcontractors. Either they are all fools, or there is some benefit.

Everything I've heard was that Boeing really overdid it for Dreamliner (subcontracted the entire plane) and this nearly turned into a disaster (it often made much more economic sense for subcontractors to blame other subcontractors than to fix the problems).  Don't forget that the subcontractor-based infrastructure grew up in an environment of multiple airline manufacturers which was hugely influenced by military purchasing requirements (which often require specific subcontractors).  Musk may have rightly decided that he could afford a "clean sheet of paper" approach to building spacecraft, and that the less bits of the rocket controlled by subcontractors (the way the Military Industrial Complex has always done it) the better.  It isn't clear that you really could build an airplane this way, but there is certainly less infrastructure for rockets.

[Jouni]

3 hours ago, tater said:

Assume launch cadence stabilizes somewhere near the value for this year, which is ~30. They will build all the boosters they need for the next 300 flights in ~2 years, during which time their metal workforce is 100% utilized. After that, assuming S2 is never recovered, a fraction keep making S2 and MVac, and the rest either work on BFR, or they have to be let go.

You are assuming a best-case scenario. No boosters are lost in accidents, every booster can be reused as many times as planned, there are no unforeseen issues that require changes to the boosters, and so on. In a more realistic scenario, SpaceX must maintain Falcon 9 production capacity until they can offer something else to their customers. This requires facilities dedicated to Falcon 9 production and workforce that is prepared to do Falcon 9 work at short notice.

[tater]

11 minutes ago, Jouni said:

You are assuming a best-case scenario. No boosters are lost in accidents, every booster can be reused as many times as planned, there are no unforeseen issues that require changes to the boosters, and so on. In a more realistic scenario, SpaceX must maintain Falcon 9 production capacity until they can offer something else to their customers. This requires facilities dedicated to Falcon 9 production and workforce that is prepared to do Falcon 9 work at short notice.

Whatever, it's not like they will throw away the tooling. The entire point of block 5, and also fairing recovery is to free workers to engage in BFR work. The F9 factory is a short drive (well, anywhere but LA a short drive, maybe an hour+ in LA, lol) from the BFR facility. Any workers capable of either activity can alwasy be sent to the facility where they are needed. In addition, S2 production is much the same as S1, and that assembly line cannot go down, as they need some 300+ S2s (assuming no recovery, ever). They have already said (Lambert, in an AMA) that they can make a booster every 14 days. Assuming reuse, and the higher figure (40 boosters), at worst this shifts some S2 workers for a little while to make a new booster. Doesn't seem like a big deal.

The whole point according to Musk was that when they recover fairings, the composites people (fairings), won't have to make fairings any more, and can work full time on BFR. Presumably some of the F9 people will be trained on those techniques going forward. If not, the payroll will eventually decrease, or they have to hire more composites people at the expense of Al tanks people.

The engine shop can do both (they already are, after all), switching as needed (they can make an engine a day). The idea is that they save all that labor, so that the labor can be used to push BFR forward.