Posted on 03/17/2020 1:34:44 PM PDT by LibWhacker
Empty Shelves? – Understanding Supply Chains, Logistics, and Recovery Efforts…
By now everyone is familiar with the abundant pictures on social media of empty shelves in local stores. Having some familiarity with the supply chain might help people to understand some of the challenges; and possibly help locate product. (Pics from Twitter)
There are essentially two types of distribution centers within the retail supply chain for most chain markets, food stores and supermarkets. The first type is a third party, or brokered, distribution network. The second type is a proprietary, company owned, distribution center. Knowing the type of distribution helps to understand what you can expect.
If your local retail store is being replenished from a third party distribution center, you can expect greater shortages and longer replenishment times; we will see entire days of empty shelves in these stores. However, if your local retail store owns their own warehouse and distribution network, the replenishment will be faster. In times of rapid sales, there is a stark difference.
These are general guidelines: An average non-perishable distribution center will replenish approximately 60 stores. Those 60 stores will generally not extend beyond 100 miles from the distribution center. The typical company owned warehouse will have approximately 20 tractors (the semis) delivering trailers of goods to those sixty stores.
In this type of network… On a typical day a truck driver will run three loads. Run #1 Delivery-Return; Run #2 Delivery-return, Run #3 Delivery Return. End shift.
If every tractor is operating that’s a maximum capacity of 60 trailers of merchandise per day. Many stores receiving more than one full trailer.
A typical store, during a non-emergency, will receive 1 full trailer of non-perishable goods three to five times per week. However, under current volume the purchased amount of product is more than triple normal volume. It is impossible to ship 180 trailers of merchandise daily to sixty stores with 20 fixed asset tractors. This is where the supply chains and logistics are simply incapable of keeping up with demand.
Thinking about distribution to a 100 mile radius. The stores closest to the distribution center will be delivered first, usually overnight or very early morning (run #1). The intermediate stores (50 miles) will be delivered second, mid-morning (run #2). The stores furthest from the distribution center will be delivered third, late afternoon (run #3).
So if you live close to a distribution center, your best bet is early morning. If you live in the intermediate zone, late morning to noon. If you are in the distant zone in the evening.
The current problem is not similar to a holiday, snow event or hurricane. In each of those events typical store sales will double; however, during holidays or traditional emergencies the increase in product(s) sold is very specific: (a) holiday product spikes on specific items are known well in advance and front-loaded; and (b) snow/hurricanes again see very specific types of merchandise spikes, with predictability.
In the current emergency shopping pattern the total business increase is more than triple, that’s approximately 30% more than during peak holiday shopping. Think of how busy your local store is on December 23rd of every year. Keep in mind those customers are all purchasing the same or similar products. Now add another 30%+ to that volume and realize the increases are not specific products, everything is selling wall-to-wall.
Perishable and non perishable products are selling triple normal volume. This creates a replenishment or recovery cycle that is impossible to keep up with. The first issue is simply logistics and infrastructure: ie. warehouse (selectors, loaders), and distribution (tractors, trailers, drivers). The second issue is magnifying the first, totality of volume.
A hurricane event is typically a 4 or 5 day cycle. A snow event might be 2 days. The holiday pattern is roughly a week and all the products are well known. However, the type of purchasing with coronavirus shopping is daily, everything, with no end date.
Once the store is wiped out, a full non-perishable recovery order might take four tractor-trailers of merchandise. In our common example, if every store needed a full recovery order that would be 240 tractor-trailers (60 stores x 4 per store). This would need to happen every day, seven days a week, for the duration of the increase. [And that is just for the non perishable goods]
That amount of increase is a logistical impossibility because: (a) no warehouse can hold four times the amount of product from normal distribution; (b) the inbound supply-chain orders to fill the distribution center cannot simply increase four fold; and (c) even with leased/contracted drivers doubling the amount of tractors and trailers, there’s still no way to distribute that much product.
Instead what we see are priorities being assigned to specific types of product that can be shipped to maximize “cube space” in outbound trailers going to stores. A distribution center can send 100 cases of canned goods (one pallet) in the same space as 15 cases of paper towels or toilet tissue (one pallet). So decisions about what products to ship have to be prioritized.
Club stores (ex. BJ’s, SAM’s, or Costco) can ship bulk paper goods faster because they do not carry a full variety of non-perishable items. The limited selection in Club stores naturally helps them replenish; they carry less variety. Meanwhile the typical supermarket distribution center has to make decisions on what specific goods to prioritize.
Nationally (and regionally) the coronavirus shopping panic is far outpacing the supply chain of every retailer. Instead of a weeks worth of food products, people are now trying to purchase a months worth. Every one day of coronavirus sales is equal to three or four normal days.
To try and get a handle on this level of volume we will likely see changes in operating hours. Expect to see stores closing early or limiting the amount of time they are open every day…. the reason is simple: (1) they don’t have the products to sell over their normal business hours; and (2) they need to move more labor into a more compact time-frame to deal with the increases in volume.
And do what about it?
This panic was created by government and the media.
Be that as it may, right now we need to decide what to do with what's been handed to us.
If you think being perpetually angry is going to do any good, have at it.
Personally, this has all firmed up my resolve that when this blows over, and it will, we will be COMPLETELY ready next time.
I have always been a bit of a prepper at heart. Good training, I guess, from my mom who grew up during the Depression.
So when this thing started breaking in China, I was watching the reports and what they were doing and decided that if this came to the US, we could see a similar situation.
So I started stocking up in Feb of stuff I knew we would not want to do without.
It was just a matter of buying a little extra each time I went out. and storing it away. So when TSHTF last week, I knew we were ready and didn't have to panic or go out and panic buy.
I’m stocked up more or less. Could use a few things but could easily do without. I’m going out tomorrow because a few of the stores have implemented an hr each morning for 65 and over to shop. I’m not going for me I’m going for my daughter who has 3 kids at home now since the schools shut down. By the time she gets there the shelves are bare. And now she has a sick kid at home too with about 2 doses of children’s Tylenol left. It’s ridiculous. And I’m taking an elderly neighbor with me who didn’t stock up because they didn’t see this coming. So yeah I’m pissed at our governments, states and feds, and the media for creating this mess. And it took the stores too long to implement quantity control. They should’ve never let people take out baskets and trolleys loaded to the gills with them when they saw the rush starting. A cluster____ all the way around.
I tend to blame the stores more as they could have imposed limits much sooner when they saw the people starting to hoard.
No offense but this virus has been in the news for 3 months. Anyone could have stocked up 2 weeks ago with no issue. Ostriches waited until until it got real. It’s not everyone else’s fault. Simple planning was obviously needed. Crazy thought to be prepared. They said it for the last 6-8 weeks but let’s blame our neighbors, government, ....
These are the people that are so unprepared the bog down the system. Good luck helping them out. When my 3 kids were small, I never ran out of children’s medicine before I got more.
Self censorship on the rest of my thoughts.
I said the same thing.
Well you can blame all the unprepared people if you want but most people are not used to living in Venezuela or the Soviet Union. They’re used to being able to get what they need.
This is a really helpful comment for me. We run a small business with a good portion of our business in the tractor/trailer owner/operator world. We’ve been hoping transportation would actually get busier due to the need to resupply all the empty stores.
I usually spend about half my day on the phone with various owner/operator customers. Yesterday and today I’ve had radio silence so I figured things are either really good or really bad!
Very interesting article. ...Thanks for posting it all!
This should help some of the complainers better understand how commerce and supply chains work.
The article specifically only addressed non-perishable goods.
TP-ing happened to me 20 years ago when my next door neighbor had a son and daughter in high school. I had five large trees in front and they had none.
I think the kids used a twelve-pack of TP. I was using a hose to wet the paper and my neighbor came over, apologized and offered to help because she knew it was intended for one of her kids. I declined her offer and said I was a kid once.
btw... I bought my house 34 years ago. The neighbors had their house built one year later. They are the nicest neighbors I’ve had in my 77 years and a great Black family.
The water hose worked well on the low-hanging TP, but it took a heavy rain to get all that was very high.
I’ve never understood why people constantly buy cases or gallon jugs of WATER, unless a natural disaster like a hurricane is eminent or they are going camping.
I see people doing that every time I go to the grocery store.
My water comes from a faucet and doesn’t taste any different.
I think many others feel the same as you, TGKC.
Several articles the past few days about how gun sales are up.
I still haven’t scored and TP yet, nor tissues, but I’m finding other things to buy...usually on sale so there’s that....In bought Costco TP weeks ago so we are actually good...
Great question! Also funny.
I hope you make a lot of money for what you do....so many not working but in some areas, like trucking, grocery,nursing....its as much work as you want...
well we don’t want our truckers to get too tired or sick...they need rest too....
most people do not follow world events that closely...yes FR was well ahead of the curve but we’re just a small minority....
some of us buy the distilled water in gallon jugs for our cpap machines....
You just educated me. I wasn’t aware of that.
Still doesn’t explain why people buy cases of bottled water whenever I go to the grocery store.
It’s not like every community has water like Flint MI has/had.
At the worst it's a push.
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