Last week ICIC, a research and advisory group focusing on inner cities, released a new report on urban food systems.  It is a valuable and important report.  Its importance emerges both from its findings and from those most likely to read it.  Its value, in my judgment, is the potential to advance a meaningful dialogue between private and public sectors.

Among the ICIC findings:

The comparative analysis of food systems in Los Angeles, New Orleans and New York City finds both shared vulnerabilities and unique weaknesses that are a function of differences in each city’s food system and their exposure to different natural disaster risks. 

None of the cities were exposed to significant food processing vulnerabilities. Because of the global nature of the food system, a very small share of total food consumed in a city is processed and packaged locally. For example, if a major earthquake hit Los Angeles, some food processing plants would likely be damaged, but they are largely food exporters. The food consumed in Los Angeles, as is the case in most cities, is sourced from food processing plants across the country and world. 

All three cities face food distribution vulnerabilities because of the location of some warehouse supplier facilities in “at risk” areas. Los Angeles faces the greatest risk, with the vast majority of its warehouse suppliers subject to earthquake damage. In New Orleans and New York City, only local warehouse suppliers are at risk, creating greater risks for smaller grocery and corner stores, which rely more on local warehouse suppliers for their food supplies.

The ICIC report was developed with support from the Rockefeller Foundation's 100 Resilient Cities Initiative.  It is especially written for Chief Resilience Officers and their public sector colleagues. This is an important audience that heretofore has typically not given much attention to supply chain resilience.  It is immensely helpful to bring the issue forward.

Every engagement with reality is reductionist.  Reality is too profuse to be concisely captured.  It is now a mere cliche to note that our view of reality depends on where we are standing and our related angle of observation.

ICIC stands in the inner city. This is where ICIC has its expertise.  Given this angle, the observations reported are accurate.

I usually stand somewhere much closer to a big distribution center surrounded by trucks and plates of concrete spaghetti connecting my place to the inner city.  I see some other angles.  ICIC invited my contribution to the report.  I am interested -- sometimes surprised -- by how I was "heard".  But I need more time than I've had to constructively outline the differences.

At the FMI mid-winter meeting a new study of digital demand was released.  According to Nielsen, as early as 2025 online could constitute twenty-percent or $100 billion in sales of the US grocery market.  Makes sense to me.  And I have argued, the top competitors for these dollars will have a comparative advantage for every other sort of online retail.

According to Progressive Grocer:

Supply chain services provider McLane Co. Inc. has landed a service agreement with The Kroger Co. to service the grocery giant’s 787 convenience stores located across 18 states, under the Loaf ‘N Jug, Turkey Hill Minit Market, Tom Thumb, Kwik Shop and Quik Stop banners.

In mid-2016 I attended a so-called supply chain thought-leader summit where every other thinker in the room seemed sure that omni-channel marketing would be supported by omni-channel distribution centers.  Instead what I seem to to see is a decentralization and specialization of distribution functions and strategies.... ala this Kroger deal with McLane.

Interim measures? Maybe. But ten-of-millions are being invested in these specialized capacities and capabilities.

According to the Wall Street Journal and other media, Walmart has begun the long-expected cuts to its Bentonville headquarters staff.

Roughly 1000 lay-offs are likely.  The company has explained the cuts in with a focus on a long-term reduction in supply chain and logistics costs.

RetailDIVE quotes and comments:

But the dent in its supply chain ranks could undermine one of Wal-Mart’s core strengths: Its highly efficient brick-and-mortar-based distribution system. And it signals that Wal-Mart sees little growth for its brick-and-mortar operations, Nick Egelanian, president of retail development consultants SiteWorks International, told Retail Dive. 

"Wal-Mart clearly has decided at the board level that their growth prospects as a brick-and-mortar retailer are over — and when you decide that, you move to cut costs," Egelanian said. "They’re a very low-cost operator to start with. There's probably some excess, but this informs me that they don’t think they’re going to grow, because their core strength is their supply chain.

Walmart has also learned that the margin they can make on lower-cost SCM is not a sufficient comparative advantage online.  It is not yet crystal clear, but what could also be happening is a swapping out of old-think SCM talent to make way for new-think SCM talent.

I suppose this has been available for quite awhile, but I just noticed it:  Amazon has a glowing profile of its recent "no check-out" technology for physical stores.  See Amazon Go.

According to the H&M retail group:

... sales including VAT increased by 6 percent in local currencies in December 2016 compared to the same month last year. Converted into SEK (Swedish currency), sales increased by 10 percent. The total number of stores amounted to 4,379 on 31 December 2016 compared to 3,957 on 31 December 2015.

According to Reuters, reporting on H&M:

In November, its growth was roughly unchanged from October at 9 percent, missing expectations for an acceleration on the back of demand for winter clothes. H&M, which has the bulk of sales in Europe, has in the past year blamed several monthly sales misses on unseasonable weather. Like its rivals, H&M has underperformed Inditex, partly because the Zara owner has a supply chain that enables it to react more quickly to shifts in demand, making it less exposed to variations on weather.

Both H&M and Zara (Inditex) are leading purveyors of "fast fashion".  Each move at blinding speeds compared to Macy's or Walmart or almost any others.  But what analysts are now asserting is that while both are fast, the Inditex family is much more agile -- much better at quickly shifting direction -- in response to real-time consumer behavior.

Using information to drive this sort of shift is a key differentiation between supply chain management and logistics.

The National Retail Federation has looked hard at Department of Commerce data for the 2016 holiday season and highlights the following:

• Online and other non-store sales increased 12.6 percent unadjusted year-over-year.
• Sales at clothing and accessories stores increased 2.5 percent unadjusted year-over-year.
• Sales at general merchandise stores decreased 1.5 percent unadjusted year-over-year.
• Electronics and appliances stores’ sales decreased 2.3 percent unadjusted year-over-year.
• Furniture and home furnishings stores’ sales increased 4.8 percent unadjusted year-over-year.
• Sales at building materials and supplies stores increased 4.5 percent unadjusted year-over-year.
• Sporting goods stores’ sales decreased 1.7 percent unadjusted year-over-year. 
• Sales at health and personal care stores increased 6.7 percent unadjusted year-over-year.
• Sales at Department Stores decreased 7.0 percent unadjusted year-over-year.
• Food and beverage stores' sales increased 3.6 percent unadjusted year-over-year.

Overall retail sales increased about 4 percent over 2015.  Department Stores  lost big. Online won big.

How about mass customization won big, while something-for-everybody lost big?

According to Amazon:

Today, the company announced that it plans to create an additional 100,000 full-time, full-benefit jobs in the U.S. over the next 18 months. These new job opportunities are for people all across the country and with all types of experience, education and skill levels—from engineers and software developers to those seeking entry-level positions and on-the-job training. Many of the roles will be in new fulfillment centers that have been announced over the past several months and are currently under construction in Texas, California, Florida, New Jersey and many other states across the country.

According to the Seattle Times, also channeling Amazon's self-reporting:

The world’s largest e-commerce retailer said it employed 45,000 robots in some 20 fulfillment centers. That’s a cool 50 percent increase from last year’s holiday season, when the company had some 30,000 robots working alongside 230,000 humans.

Especially in contrast with the recent pull-backs by Macy's, Sears, and to a lesser extent Walmart, the transformation of retail toward e-commerce is accelerating.  It is worth remembering that as recently as 2010 e-commerce constituted barely four percent of the overall retail market.  It is now comfortably over eight percent... with plenty of room for growth.

According to the Singapore Straits Times, Global Logistics Properties (GLP) is seeking potential buyers:

Global Logistic Properties (GLP) said it is in talks about a possible buyout - an announcement that came on a day when the firm requested a trading halt and was queried over a surge in trading activity and its share price.It told the Singapore Exchange (SGX) that "it is in preliminary discussions with various parties in connection with a possible sale of the company".

According to Bloomberg:

The Singapore-based company sent out an information letter to targeted bidders at the end of last month and has asked for first-round offers by early February, according to the people. GLP attracted interest from suitors after announcing a strategic review in December, one of the people said, asking not to be identified because the information is private.

GLP is often identified as the second-largest owner of distribution centers in the United States.  It is the biggest such player in China, Japan, and Brazil.

The Singapore sovereign wealth fund currently owns a significant portion of the company. In December the Chinese sovereign wealth fund evidently made an unsolicited inquiry regarding a potential purchase, prompting the current move to solicit bids.

In both the United States and China the rapid expansion -- and unique operational requirements -- of ecommerce, has prompted a boom in demand for distribution facilities, especially those immediately proximate to dense urban areas.

The forthcoming bids will be a good signal of whether sophisticated investors perceive that demand will continue to exceed supply or if a property bubble is developing. 

According to Munich RE:

A number of devastating earthquakes and powerful storms made 2016 the costliest twelve months for natural catastrophe losses in the last four years. Losses totalled US$ 175bn, a good two-thirds more than in the previous year, and very nearly as high as the figure for 2012 (US$ 180bn). The share of uninsured losses – the so-called protection or insurance gap – remained substantial at around 70%. Almost 30% of the losses, some US$ 50bn, were insured.

• Both overall losses and insured losses were above the inflation-adjusted average for the past ten years (US$ 154bn and 45.1bn respectively).

• Taking very small events out of the equation, 750 relevant loss events such as earthquakes, storms, floods, droughts and heatwaves were recorded in the Munich Re NatCatSERVICE database. That is significantly above the ten-year average of 590.

• Some 8,700 lives were sadly lost as a result of these natural catastrophes, far fewer at least than in 2015 (25,400), yet within the ten-year average (60,600). The past year was thus the year with the fewest fatalities (after 2014, with 8,050 fatalities) in 30 years (1986: 8,600).

• The high number of flood events, including river flooding and flash floods, was exceptional and accounted for 34% of overall losses, compared with an average of 21% over the past ten years.

The World Business Council for Sustainable Development has produced a report and set of recommendations on Building Resilience in Global Supply Chains with a particular focus on climate-related risks.