Donny Rouse walking through his company's Denham Springs supermarket after this week's historic flooding in South Louisiana. Rouses Market is supplied by Associated Wholesale Grocers, mostly out of its Pearl River LA facility (north of New Orleans, near Slidell).  Rouse told The Shelby Report that they hope to have the store re-opened for business in eight to twelve weeks.

According to the Times-Picayune:

Seventy-eight miles of Interstate 10 remained closed Monday afternoon (Aug. 15) because of historic flooding in south Louisiana. The state Department of Transportation and Development said all eastbound and westbound lanes were closed along a 67-mile stretch between U.S. 165 at Iowa and Interstate 49 at Lafayette, as well as on an 11-mile section between Siegen Lane in Baton Rouge and Louisiana 73 at Dutchtown.

I-10 is a major coast-to-coast highway, carrying as many as 55,000 vehicles on the average day on the longer of the two closed stretches, according to state traffic counts. The closed section nearer Baton Rouge averages 117,000 vehicles per day. For long-distance motorists, the nearest east-west interstate highway is I-20 in north Louisiana -- 200 miles away. 

Flood waters also caused the closure of eastbound Interstate 12 between Airline Highway in Baton Rouge and Juban Road near Denham Springs. Westbound I-12 was closed between Airline Highway and Interstate 55 at Hammond. 

More than 280 highways were closed around the state.

Associated Grocers, C&S Wholesale Grocers, and AWG all have major distribution centers along Interstate-12.  All are located in parishes encompassed by the federal disaster declaration.  According to the Washington Post:

“I’d imagine that at least half of our employees were affected in some way. We have many of them that have basically lost everything,” said Emile Breaux, President and CEO of Associated Grocers, a major food wholesaler in Louisiana. 

Breaux had employees coming to work the day after their houses were destroyed with just the clothes on their back. They were ready to work — both for the paycheck but also because they needed to work to help the community start picking up the pieces.
For his part, Breaux said he and anyone else who didn’t flood went home and pulled everything they could out of their closets, “and started our own little garage sale of sorts in one of our conference rooms.” 

“We started renting hotel rooms,” he said, “getting them personal care and personal hygiene items.” They also started serving meals to employees and their families. The breakroom, still with air-conditioning and cable TV, began to fill with the sounds of camaraderie.

According to the Baton Rouge Business Report:

At LeBlanc’s Frais Marché, an independent supermarket supplied by AG, owner Randy LeBlanc says the lack of personnel has been his biggest challenge by far. He estimates about 50% of his employees are out, either victims of the flood or helping family members who are. 

Similarly, at Calvin’s Bocage Market, at least 20 employees were unable to come to work today. Owner Calvin Lindsly was restocking shelves, while his family members were working the checkout lines. 

So far, supermarkets that are in operation are managing to keep up with demand for many items, though not all. Water is in short supply, as are bread and chips. LeBlanc says AG has done a much better job restocking his store than have the national vendors. Also running low are paper products and cleaning supplies. 

“It’s a little unusual to be running low on dry goods but maybe people know they might not be able to get back out for a while,” LeBlanc says. “Plus a lot of dishwashers aren’t working so paper plates and paper cups are going fast.”

Making a very bad situation even worse, the Baton Rouge Food Bank's 170,000 square foot warehouse was essentially taken out by four-feet of flooding.

Healthcare Ready is reporting the operational status of pharmacies in the flood-ravaged south-central United States.  Above is a screen capture as of early Tuesday morning.  The updated map is available here: https://www.healthcareready.org/rxopen

This is one of several emerging tools to track and report demand nodes in disasters.  Similar efforts have been undertaken for fuel stations and grocery stores.

Healthcare Ready is a program of the pharmacy industry to strengthen healthcare supply chains through collaboration with public health and private sectors by addressing pressing issues before, during, and after disasters.

Good piece by Farhad Manjoo in the New York Times.  He and I basically agree that Amazon is unlikely to reduce use of UPS and other third-party logistics providers... even as it increases internal delivery capacity.  Based on recent discussions and research, Manjoo concludes that drones are a fundamental piece of Amazon's long-term strategy. Drones may be the only way for Amazon to continue meeting customer expectations as other transportation avenues approach gridlock.  Manjoo makes an interesting case that drones are one way to do an end-run on the realities set out by the Department of Transportation's report  Beyond Traffic 2045.  One quick quote: "...if we don’t change, in 2045, the transportation system that powered our rise as a nation will instead slow us down. Transit systems will be so backed up that riders will wonder not just when they will get to work, but if they will get there at all. At the airports, and on the highway, every day will be like Thanksgiving is today."

DigitalAttackMap shows DDOS indicators for August 11, 2016 at 0700 Eastern. Click to enlarge.

According to Bloomberg, the National Counter-Intelligence and Security Center is launching a new effort focused on the intersection of cyber-threats and supply chain vulnerabilities.

U.S. intelligence officials are planning to provide information including classified threat reports to companies about the risks of hacking and other crimes tied to the supplies and services they buy... The program will be targeted toward U.S. telecommunications, energy and financial businesses, so government threat reports may soon be offered to companies such as Verizon Communications Inc., Duke Energy Corp. and Bank of America Corp.

Several years ago -- well before all the well-publicized corporate hack-attacks -- the supply chain lead for a huge player in the health care sector told me that what he feared most was an intrusion that did not take down his systems, but corrupted data exchange.  Plans were in place for total failure.  But maliciously manipulating the system could have much more insidious results and seriously complicate recovery.

Some details are available from the NCSC here and here.  The FBI also has some recommendations here (PDF).

It is also worth mentioning: About four years ago another member of the US intelligence community -- NOT NCSC -- assigned a team to assess risks to the global supply chain with a particular focus on US economic security.  I was one of several private sector folks who received their first brief. We were then divided into small groups of five or six to talk through suggestions.

As soon as the door closed to the conference room for my small group the guy from US Steel started laughing, joined enthusiastically by the guy from Boeing.  The rest of us merely smiled or shook our heads. "What a joke," one of us finally said. "I know undergraduate interns that have a better handle on supply chain risk."

Supply and demand networks are complex adaptive systems.  This is not a reality easy to understand, much less defend.  While we can welcome the help, we should not assume quick sophistication.

With the Walmart-Jet.com deal decided (if not yet sealed), some thoughts on what could happen and the implications for supply chains.

I am still not convinced this is the right acquisition to spur Walmart's ecommerce ambitions.  But with the purchase Walmart picks up at least three important assets:

1. Marc Lore the founder of Jet.com is a successful ecommerce strategist and start-up leader.  No one has a better handle on what works.  No one is more innovative or prudently risk-taking in developing new ecommerce tactics and techniques.  He has a good handle on technology, supply chain, and finance.  He has gathered a good team.

2. Jet.com has an online tool that (in my words) gives consumers the ability to optimize their pull-signals around the current strengths of the supply network. So, for example, the more proximate the consumer to a Point-of-Distribution, the less costly the item. The more products that can be shipped in a single delivery, the lower the total price. Voluntarily forsaking free-returns saves more money. You see the logic. I have not seen data that totally convinces me that this software is generating more sustainable "pull".  But I'm guessing (hoping) Walmart has seen enough to be confident of future implications. I agree with the logic. (Here's how the Associated Press described the tool: "Jet.com is built on a real-time pricing algorithm that determines which sellers are the most efficient in value and shipping and adjusts prices based on what items are in the checkout cart, as well as how far the desired products are from the shopper's home. So as shoppers throw items in their cart, they're encouraged to add more to build a more efficient cart and buy items labeled "smart cart" for more savings." You can also read Jet's own explanation.)

3. Jet.com allegedly has grown quickly among younger, affluent, urban audiences. Media reports suggest that about 350,000 new customers per month have recently been accessing Jet.com. As a privately-held start-up we don't know much for sure, but -- again -- I'm guessing there was enough of a beachhead among a set of consumers Walmart does not usually engage that the value proposition made sense in Bentonville.

There are other assets.  But are these big three worth roughly $1.1 billion each?

It depends on what happens next.  From a branding and merchandising perspective Jet.com will probably do better the more it is separated from Walmart.  Yet from a supply chain perspective -- and especially from procurement and last mile fulfillment angles -- this connection with the world's largest retailer could be very helpful.

Amazon's Prime program could be characterized as preserving the magic of the supply chain.  After you pay the annual subscription, products magically appear.  The customer can be delighted by a Sunday afternoon delivery that cost "nothing."  Profound bliss.

Jet.com's "real time savings" program involves the customer in making choices to match need-and-capability, earning savings as products and delivery options are selected.  Instead of magic, rewards for virtue, restraint, and intelligence. Deeply satisfying.

In today's world there may be substantial markets -- not just micro-markets -- for both kinds of consumer experience.

RMS -- once upon Risk Management Solutions -- has identified ten high-risk maritime ports identifying those it claims are most at risk for the greatest insured loss.

PORTS AT RISK FOR HIGHEST LOSSES(500 year estimated catastrophe loss for earthquake, wind, and storm surge perils)

		Estimated Marine Cargo Loss in Billions USD*
1	Nagoya, Japan	2.3
2	Guangzhou, China	2.0
3	Plaquemines, LA, U.S.	1.5
4	Bremerhaven, Germany	1.0
5	New Orleans, LA, U.S.	1.0
6	Pascagoula, MS, U.S.	1.0
7	Beaumont, TX, U.S.	0.9
8	Baton Rouge, LA, U.S.	0.8
9	Houston, TX, U.S.	0.8
10	Le Havre, France	0.7

* Losses rounded to one decimal place

That the Ports of Los Angeles and Long Beach are NOT on the list is both a bit surprising and good news.

Last weekend a colleague passed along a report from May that I had missed.

Delivering in a Moving World: Looking to our supply chains to meet the increasing scale, cost and complexity of humanitarian needs was developed by Sara Guerrero-Garcia (Kuehne Logistics University), Jean-Baptiste Lamarche (ACF), Rebecca Vince (Plan International), Stephen Cahill (WFP) and Maria Besiou (Kuehne Logistics University).

According to the report, sixty to eighty percent of humanitarian response budgets are consumed by supply chain costs.  How to ensure both efficiency and effectiveness of supply chains is obviously a fundamental issue.  The authors have attempted to frame the issue around sometimes neglected ground truths.

A couple of long quotes from the report on the role of  private supply chains in civic and public crisis response:

The humanitarian sector should leverage both sectors’ capacities by establishing long-term collaborations with the private sector that recognises the role of the private sector as an enabler of humanitarian work at local, regional and international levels. This collaboration can be improved by establishing integrated partnerships based on cross-functional planning as a better reaction to a crisis can be ensured by having the private sector involved in the preparedness phase. These integrated partnerships could manifest in pre-agreements on virtual stocks, priority access to production information, stockpiles and service capacity, for instance in future health pandemics. They may also include the development of virtual supply chains, innovative technological tools to improve the accuracy of the demand forecast and the establishment of local partnerships. In order to meet large scale response needs, in particular pandemic health crises, we will also need to improve the management of upstream supply chains which will call for a better coordination, transparency and integrated data sharing. 

Later in the document is this recommendation:

Strengthening Local Networks: The paper also touches on the challenges ahead to maintain and improve coordination and collaboration in an increasingly populous and complex aid community. As well as the recommendations made above, there is a need to further expand multi-sector local logistics networks, which would bring together the private, public, local civil society and other logistics practitioners. These networks would need support to bring preparedness onto their agenda and scenario plan for future responses. These networks should not be explicitly ‘humanitarian’ networks, but, as resonated earlier in the paper, break down those silos of humanitarian and non-humanitarian and private sector groups to form a function-oriented community of practice.

There is also attention to using cash distribution to stimulate and restore market-based channels. The authors affirmatively quote  Ian Ridley, senior director of World Vision, who advocates for  a humanitarian response which is “as local as possible, and as international as necessary”.

All good.  All helpful.  And it is worth some further attention to differences between private, civic, and public sectors in terms of purposes, worldview, command-and-control, and alternative attitudes toward different facets of risk.

For example, what is a meaningful operational definition of "integrated partnerships" as used above? Given the differences between sectors is this a realistic goal?  Might "agile" or "adaptive" or even "pre-planned" partnerships be more realistic?

On Sunday, August 7, just off Mt. Vernon Place in Baltimore, next to that extraordinary neo-Gothic Methodist Church, I encountered an Amazon van and driver making a delivery.  I should have taken a picture with the Washington Monument glorious in the background.

Two hours later -- after a great lunch -- I encountered a second Amazon van and driver in the 1000 block of North Charles street.  This is (badly) pictured above.  I waited for the driver/delivery guy to exit the frame (he was on a cell phone trying to find his customer and cast me a look of considerable concern).

Both of the packages were carried very lightly, no more than 12x12x18 inches each.  Books? Shoes? Shirt? Scarf?  I almost asked, but I doubt the carrier would know and certainly shouldn't tell. The two Sunday afternoon deliveries were made on the eastern edge of the 21201 zip code area.  Population density 12,298 per square mile.

Wealth and poverty are tightly mixed in this part of Baltimore.  But the median household income for the smallest census tracks in this zip code does not exceed $57,000 and just a few blocks west can plunge to $21,000.

There is a gigantic -- million square foot -- Amazon fulfillment center in SE Baltimore just north of Point Breeze.  Maybe eight miles from the second delivery location. Still I was surprised. Should not have been. I need to get out more.

Density+Proximity=Delivery.

The whispers and rumors were finally "confirmed" on Wednesday at the Wall Street Journal website. The Thursday newspaper included a front page story on negotiations involving the potential purchase of Jet.com by Walmart.

The start-up online retailer has been operating for less than one year, but the purchase price is expected to exceed $1 billion. (See a May 2016 profile by Money Magazine).

If a purchase is concluded.

The combination is conceived as contributing to Walmart's effort to compete more effectively online. I don't think the purchase of Jet.com would help much.  I am concerned it could hurt Walmart's strategic transformation.

Maybe there's some secret sauce. Maybe I'm blind to something fundamental. But from my angle Jet.com could be an expensive distraction and the price tag for the distraction would end up being a multiple of whatever purchase price is eventually negotiated.

Walmart surged to success during the final years of mass markets, especially rural and exurban mass markets. It was a pioneer in applying contemporary supply chain management concepts and technology to efficiently deliver a wide assortment of products at lower-than-competition price-points, but with sustainable margins because of its SCM advantage.

Since the 1980s Walmart has effectively adapted to the shifting demand-pull of it customer base as wage stagnation and the rural-urban growth divide each exacerbated.  I doubt that Bentonville ever set out to "own" the lower and lower-middle income non-urban brackets.  But in responding to its customers, this is often where Walmart has ended-up.

Amazon emerged during the death knell of mass markets and the proliferation of micro-markets, the availability of online retail to find and serve these micro-markets, and the growth of an affluent, time-constrained, largely urban customer-base ready to try... buy... and drive retail trends. Piper-Jaffray has found that 70 percent of Americans with household incomes above $112,000 subscribe to Amazon Prime.

Seattle is different than Bentonville. Each have their charms, each their strengths and weaknesses. One is much better predisposed than the other to claim affluent, urban, online shoppers. (Jet.com is headquartered in Hoboken, New Jersey.)

I don't see how buying Jet.com shifts this landscape. Walmart and Amazon are each great at SCM, finance, behind-the-scenes technology, and most other fundamentals.  Walmart is burdened with serving a huge customer base that is -- arguably -- disadvantaged in embracing the future.  If Walmart customers demanded fast-fashion, Walmart would deliver and probably do so better than Zara.  But that's not what Walmart customers are communicating in their billions of daily pull-signals. Of course Walmart is paying attention.

The powerful pull-signals of their largely lower-to-middle income, non-urban customer base seriously complicates the ability of Walmart to innovate in terms of online merchandising, branding, and culture... where the battle for the future of retail will largely be decided.

Despite this profound challenge, I think Walmart could still have a long-term advantage over Amazon... largely because of its supply chain strengths. But not if it is distracted from addressing the strategic center-of-gravity.

MONDAY, AUGUST 8 UPDATE:

Walmart announced this morning that an agreement has been reached to purchase Jet.com for $3.3 billion.  The Wall Street Journal has a related report and analysis.

According to DCVelocity, UPS has confirmed its intentions to "fully" automate thirty key nodes in its system.  The most recent comments were made by Myron Gray, head of US operations, during a call with financial analysts on Friday, July 29.  DCVelocity reports that the transition will involve, "a four-year program that will yield 20 to 25 percent in productivity improvements per facility by the time the work is done in 2020."  About sixty percent of current volume moves through the targeted nodes.