The California Supply Chain Transparency Act became law in 2010.  Most of the law's requirements became effective on January 1, 2012.

Legislative intent focused on reducing slave labor and human trafficking in supply chains. Companies operating in California with annual revenues of more than $100 million are required to disclose how they (1) engage in verification of product supply chains to evaluate and address risks of human trafficking and slavery; (2) conduct audits of suppliers; (3) require direct supplies to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking of the countries in which they are doing business; (4) maintain accountability standards and procedures for employees or contractors that fail to meet company standards regarding slavery and human trafficking; and (5) provide employees and management training on slavery and human trafficking.

Earlier this month the first class-action lawsuit was filed under the Act. According to the National Law Review:

The complaint in the new Costco case spends about 40 of its 50 pages alleging that slave labor exists in certain fishing areas of Southeast Asia. About half of those pages are replete with photographs and quotations from multinational media and NGO documentaries and commentaries – about slavery, not about Costco...

And then, in what will be both a theme and an organizing principle in this new sort of litigation, the complaint boldly alleges a short sentence 42 pages into the depiction of a centuries’ old problem that multiple governments and NGOs are combating – that “Costco could remedy this situation by enforcing its supplier standards, which prohibit slave labor and human trafficking.”

Is it a supply chain  where each link is under the control of individually responsible parties?  Or is the supply-and-demand network a commons in which most conceptions of control are either very narrow or delusional?  What is the responsibility of apex consumers in the system? How can any such responsibility be most effectively exercised?

I've been traveling too much, hence the absence of new posts.  But travel teaches.  Last week I landed in Chicago where gasoline was selling at about $3.50 per gallon compared with about $2.35 in Virginia.

The cause was an unexpected maintenance issue at a big BP refinery in Whiting, Indiana.  After two weeks offline, the refinery was close to full capacity this Tuesday and prices are beginning to adjust.

Petroleum prices have recently been at a six year low and prices-at-the-pump across most of the nation reflect abundant supply.  Except where cheap product cannot be processed.

In California a February explosion at an Exxon refinery in Torrance that usually accounts for ten percent of the state's output has continued to suppress availability.  Gasoline prices in LA are even higher than Chicago.

According to the Wall Street Journal:

Supplies also are getting tight along the U.S. East Coast as a large fire broke out at a Delaware City refinery on Friday and operational problems cut into fuel production at plants in New Jersey and Pennsylvania, according analysts.

After running full-tilt for more than a year, American refineries appear to be hitting their limits, said Sandy Fielden, an analyst at energy market researcher RBN Energy LLC.

“Refiners have been running plants hell-for-leather to take advantage of strong margins,” he said. “It stands to reason that if you run any sophisticated plant harder and faster than normal—you are bound to end up breaking something.”

There are 140 refineries -- of various capacities -- in the United States. The map shows their locations (More from EIA). As with most products, availability is a function of production, processing, and transportation.  Interruption at any point reduces actual supply.

On the cusp of the back-to-school season and well-before the traditional surge for the holidays, trucking volumes popped during July. According to the American Trucking Associations:

The advanced seasonally adjusted For-Hire Truck Tonnage Index increased 2.8% in July, following a revised drop of 0.4% during June. In July, the index equaled 135.0 (2000=100), the second highest level on record. The all-time high of 135.8 was reached in January 2015.

And even as demand for trucking increases, the supply of truckers continues to fall behind. In an August 18 blog post Yossi Sheffi explains why he does not see a near-term solution emerging.

[Additional commentary and links at Homeland Security Watch]

The Final Project Report from the UK-US Taskforce on Extreme Weather and Global Food System Resilience outlines "urgent" challenges that arise both from shifting weather patterns and from structural characteristics of the global supply chain for food. According to the authors:

We present evidence that the global food system is vulnerable to production shocks caused by extreme weather, and that this risk is growing. Although much more work needs to be done to reduce uncertainty, preliminary analysis of limited existing data suggests that the risk of a 1-in-100 year production shock is likely to increase to 1-in-30 or more by 2040. Additionally, recent studies suggest that our reliance on increasing volumes of global trade, whilst having many benefits, also creates structural vulnerability via a liability to amplify production shocks in some circumstances. Action is therefore needed to improve the resilience of the global food system to weather-related shocks, to mitigate their impact on people. 

 The report is also a helpful example of the struggle to resolve two contentious intellectual angles on the problem. Is greater resilience more likely to emerge from greater redundancy and centralization or greater diversity and decentralization? I would argue for the latter over the former. But certainly these two binaries do not reflect the full range of choice.

Writing online at Forbes Business, Steve Banker has a great column on "The Next Revolution in Supply Chain Management."  Read the whole piece.

One key aspect that he sees emerging:

Enhanced risk management capabilities in the control tower. Minutes after a major catastrophe or impactful but less severe event occurs, a company should be able to draw a perimeter around an event epicenter and answer the following questions: What suppliers are included inside the perimeter? What components do I source from them? What products do they go in? Which customers will be impacted? What is my revenue at risk?

I agree. I also agree that today "only a few very large companies with advanced supply chain capabilities moving down [this] road."

Using the same tools that Mr. Banker outlines in his piece, some enterprises -- especially those related to water, food, pharmaceuticals, medical goods, and fuel -- are improving their capability to continue operating inside the perimeter. This is even less common, but especially critical.

On July 31 UPS and Coyote Logistics announced that Big Brown will buy the Chicago-based logistics/technology company for an eye-popping $1.8 billion. On August 5 XPO, another tech-leading logistics firm, saw its stock price plummet by ten percent in one day.  Meanwhile on August 7 Flexport -- a wannabe Uber for ocean freight -- announced a new round of VC funding.

Friday PwC released an overview of Merger and Acquisition activity in transportation and logistics:

Deal activity improved in the T&L sector in 2Q15, as volume and value increased both sequentially and year-over year. Driven by substantial megadeal growth (more than 36 percent compared to 1Q15), average deal value also increased, to $564 million. 2Q15 saw strong megadeal activity (valued at $1 billion or more), with nine deals valued at $23.6 billion, almost 69 percent of deal value for the quarter. 

What all this -- and much more freight-sector volatility -- indicates is the expanding role real-time data access and analysis is having and will continue to have on logistics. Rather than just moving stuff, logistics must increasingly anticipate and coordinate movement.  As much or more choreography as cartage.  Not just logistics, no longer supply chains, but complex adaptive networks of supply and demand.

Good Eggs, the VC funded farm-to-fridge online purveyor of locally grown foods, is pulling back from New York, Los Angeles, and New Orleans, to concentrate on the San Francisco Bay market-space.

In a blog post, CEO Rob Spiro explains:

What we didn’t fully understand when we started was that we were creating a new category that required a different approach to supply chains, logistics, and commerce – all of the pieces of getting food from local producers to the kitchens of our customers. It was, and is, complicated, way more complicated than we ever anticipated. We have learned so many lessons, many of them learned “the hard way” by making mistakes and seeing the consequences. As soon as we realize a mistake, we need to correct it, learn from it, and proceed onwards in service of our mission. When building a software business, hard lessons are learned in code and quickly corrected; when building a food and logistics business, hard lessons involve people, and partners, and are very hard to correct.

Mass production has defined economic progress for two centuries. Persistent sourcing, repeatable processes, and large volumes have reduced per unit costs, provided consistent employment, and delivered dependable quantity with minimum quality.

In most grocery stores, mass production still claims the most floor-space: Dry, bottled, and canned goods fill the middle of the store. Frozen foods are prepared and packaged in millions of units . So, sadly, are most tomatoes.  Minimum quality can be... well, minimum.

Precisely because these are commodity products, price and convenience become the crucial competitive attributes.  Home delivery?  "Free" home delivery?  Amazon Prime?  What Sears pioneered and Sam Walton improved, Jeff Bezos is perfecting. 

In response many are shifting to a very different game. Rather than mass production: mass customization.  

Whole Foods  has flipped the floor. Mass produced is restricted to a few narrow aisles, while a peripheral promenade features in-store prepared foods (or in-store finished foods) such as those pictured above.  Demand for prepared food is growing at twice the rate of other groceries. (See: War on Big Food)

This trend obviously has implications beyond food (and profound implications for supply chains). July 1858 is often marked as the beginning of mass produced shoes.  Have you visited NIKEiD?  Or Shoes of Prey?

Soon: Is product curation a form of mass customization?

MIT professor -- and supply chain consultant -- David Simchi-Levi, is launching a new start-up focused on supply chain analytics.  Many of the capabilities are built around the principles outlined in his most recent book: Operation Rules.

The cloud-based platform at the core of the new enterprise will feature:

• Supply Chain Network Design

• Multi-Echelon Inventory Optimization

• Supply Chain Risk Management (see prior June 28 post)

• Supply Chain Segmentation, a tool to classify and cluster suppliers, customers and more to facilitate predictive analytics.

See more at Opalytics

Since at least the arrival of railroads, retail markets in the United States have trended toward standardization and massification. Sears Roebuck & Co., Atlantic & Pacific Tea Company exploited the railway's potential for efficient distribution of large volumes. Sam Walton expanded  the size and number of his stores along the network of late Twentieth Century highways.

Amazon is, arguably, the same retail strategy organized around the "Inter-network" provided by modern telecomputing: the glories of the Sears catalog multiplied and expedited for a new technology.

But, at least in the US and other "advanced" economies, we may be nearing the close of comparative advantage derived from the having more and more of the same product-lines at lower prices.

Instead of massification, product curation is emerging as a key differentiation.  Certainly this is -- perhaps has always been -- the strategy of the very high end.  The strategy is turning down-market.

Last week Whole Foods announced it would go head to head against Trader Joe's with new smaller format stores.  This is an early skirmish in a battle for the future of urban grocery.

Soon to appear in affluent urban/suburban neighborhoods near you: many more Aldi's and the first North American Lidl's.  Like Trader Joe's (owned by the same German company that owns Aldi's) these stores will carry no more than ten percent of the SKUs as a traditional supermarket. But these are SKU's that are in high and sustainable demand.

Last week also saw A&P re-enter bankruptcy, probably for the last time.  The banner that founded no-frills cash-and-carry in 1912 is dying, even as it's original customer-facing format is the new rage. But it is a format with a radically new back-end.

Soon:  And more customization.