According to Colliers International Group:

The supply chain renaissance being driven by e-commerce continues to push retailers, wholesalers and third-party logistics companies into newer and larger fulfillment centers in core markets throughout North America. In 2016, robust demand created record levels of development, which is now in equilibrium with absorption and providing a healthy amount of options for occupiers. In 2017, robust development will likely keep vacant inventory in line with the current rate, which will, in turn, slow the growth of effective rents for the foreseeable future and provide prospective tenants with more options at a stabilized cost. On the heels of the all-time-low 5.3% capitalization rate (cap rate) in 2016, we expect low cap rates to continue in 2017 thanks to the popularity of industrial big-box product with domestic and international investors.  

With key demand drivers intact, we expect that strong big-box fundamentals will continue in 2017. It’s clear that e-commerce will endure as a driving force of the industrial real estate market for years to come. Yet in many ways, such as supply chain management, e-commerce is still in its infancy and there is still plenty of room for even greater impact on the industrial market.

According to the company, for the fourth quarter of 2016 Walmart:

Total revenue was $130.9 billion, an increase of 1.0%. Excluding currency , total revenue was $133.6 billion, an increase of 3.0%. Walmart U.S. comp sales increased 1.8%, driven by a traffic increase of 1.4%. Neighborhood Market comps increased approximately 5.3%. E-commerce growth at Walmart U.S. was strong as sales and GMV increased 29.0% and 36.1%, respectively, including Jet.com and online grocery.

Growth is good.  Starting with something as huge and mature as Walmart, one percent growth is quite good.  A double-digit GMV increase -- Gross Merchandise Value -- is very good.  GMV usually does not include discounts, costs involved and returns of products.  So.. don't read "net sales".

I want to see more detail.  But this seems to reinforce other outputs that suggest the Jet.com purchase may be paying off.

UPDATE:  After looking at more detail, what stands out is an 8 percent drop in profits compared to the same quarter one year earlier.  Several commentators and news reports characterize this as "investing" in price differentiation.  Investors seemed to agree rewarding the company with a 3 percent surge in the stock price.

A February 27 report by Reuters gives more detail on how Walmart is "investing in price":

Spot checks by Reuters on a basket of grocery items sold by competing Aldi and Wal-Mart stores in five Iowa and Illinois cities showed Wal-Mart's bid to lower prices is already taking hold. Wal-Mart consistently offered lower prices versus Aldi, an improvement over recent analyst estimates that Wal-Mart's prices have been as much as 20 percent higher than Aldi on many grocery staples... 

The big box retailer also held meetings last week in Bentonville, Arkansas with food and consumer products vendors, including Procter & Gamble (PG.N), Unilever PLC (ULVR.L), Conagra Brands Inc (CAG.N), and demanded they reduce the cost they charge the retailer by 15 percent, sources said. 

Wal-Mart also said it expects suppliers to help the company beat rivals on head-to-head pricing 80 percent of the time, these vendor sources said. The wide-ranging meeting with suppliers - where Wal-Mart discussed other topics - was also attended by Johnson & Johnson (JNJ.N) and Kraft Heinz Co (KHC.O), among others, sources told Reuters. The consumer goods companies did not respond to Reuters requests seeking comment. 

These Wal-Mart moves signal a new front in the price war for U.S. shoppers, as the pioneer of everyday low pricing seeks to regain its competitive pricing advantage in traditional retailing.

 Optimizing volume-with-price can shave profit-margins, but preserves market-share and net revenues.

According to Reuters:

Wal-Mart Stores Inc for the first time will combine its own buying for products sold at its stores with purchases it makes for its website, sources said, a significant move to stamp out duplicate efforts as it consolidates buying operations to better fight Amazon.com... Wal-Mart has told some vendors it is seeking to make the buying process more efficient for itself and vendors, and improve coordination between its buying teams. It also wants to apply its bricks-and-mortar expertise in securing the lowest possible prices to its e-commerce business, according to the vendors,

Basically Wal-Mart will stop placing separate orders for online and offline channels.  There will be one Wal-Mart buy.

Big move. Smart move. Internal procurement-channels will be tough to rewire.  Important to long-term competitiveness.  Crucial to any really integrated omni-channel strategy.  Until now it has been mostly online and offline parallels.

Monday the CIPS Supply Chain Risk Index -- reviewing calendar year 2016 -- concluded, "A combination of economic nationalism, rebounding commodity prices and the growth of a burgeoning Chinese middle class is making long international supply chains a more risky prospect..."

John Glen, a contributor to the CIPS report, said,

Re-shoring supply chains will be an increasingly attractive prospect in the months to come. But, these are uncertain times for supply chain managers and there is no quick fix for the months ahead.It is more important than ever for supply chain managers to listen to their suppliers, develop closer relationships with them and to monitor any changes, so they can react quickly and ensure their supply chains remain resilient.

Many supply and demand networks are complex adaptive systems. High velocity demand tends to drive rapid adaptation and related emergence of complexity.

In many markets demand is increasingly time-sensitive.  A more agile supply network may quickly displace others... at least for a time.  Doing so again and again over time can totally transform the competitive landscape.  Apple Music?  Amazon? Uber? What's next?

Over the last thirty-plus years many supply chains have dispersed over long distances. This has allowed complicated products -- computers, phones, and more -- to benefit from widely distributed comparative advantages: assembling the best-of-the-best or least-costly-pieces depending on strategy.

Less complicated products -- clothing, for example -- have also sought piece-making advantages. But what worked when corporate buyers could plan and procure for "next season" is fast becoming a disadvantage. In the last quarter of 2016 Zara moved a winter coat concept to delivery in just 25 days. Eleven of those days were spent manufacturing 18,000 coats.

One way that fast-fashion and other high-velocity competitors are looking to enhance their agility is by relocating more of their supply chain components closer to more of their customers.  It is worth noting that whether this results in reshoring or offshoring depends on where consumer demand is growing.

The Reshoring Initiative emphasizes data positive for US sourcing: "The combined reshoring and related FDI trends continued strong in 2015, adding 68,000 jobs and bringing the total number of manufacturing jobs brought from offshore to over 249,000 since the manufacturing employment low of 2010."

A.T. Kearney is not convinced and sees offshoring as by far the more significant economic force.

But whatever the market-trends of the last decade, President Trump has communicated he will give top priority to reshoring, promising to reverse a generation-long trend.

In late January, Peter Navarro, director of the new White House National Trade Council, told The Financial Times, “It does the American economy no long-term good to only keep the big box factories where we are now assembling ‘American’ products that are composed primarily of foreign components,” he told the Financial Times. “We need to manufacture those components in a robust domestic supply chain that will spur job and wage growth.”

Responding to Navarro, the conservative columnist George Will explains (complains):

Americans streaming movies from Netflix (based in Los Gatos, Calif.) erase American jobs in movie theaters and DVD rental stores. Americans buying books from Seattle-based Amazon have caused many American bookstores to do what Borders’ (400 stores, 11,000 employees) did: disappear. Americans using San Francisco-based Uber are destroying many taxi drivers’ jobs. Evidently our protectors in the administration must believe this: The destruction of American jobs because Americans buy goods or services of some American companies rather than those of other American companies is benign. But the destruction of American jobs because Americans buy goods or services of foreign companies is intolerable.

Navarro has argued that externalities -- such as tax policy, currency values, regulatory constraints, and misbehavior by trading partners -- have distorted the comparative advantage of close-to-consumer supply chains.  Will seems to argue that aspects of consumer demand -- price-sensitivity, innovation, quality -- are perpetual sources of disruption, even the core of an innately chaotic system.

I perceive it depends on the specific product and the nature of demand for that specific product. Where and when demand is more volatile, less price-sensitive and  higher velocity, the costs of staying physically close to consumers will often generate comparative advantages.  Reverse characteristics will drive production to the lowest common denominator... wherever it can be found and delivered-from with reasonable assurance.  Demand decides.  But demand is highly variable.

According to CBRE and DCVelocity:

Driven by booming e-commerce sales volumes, developers are building an increasing number of mega-warehouses spanning 1 million square feet and above, with the Philadelphia and eastern Pennsylvania area leading the way, according to a report released (February 2) by real estate and logistics services company CBRE Inc.... From 2010 to 2016, 117 such facilities were built, for a total of 141.2 million square feet. By contrast, 99 facilities were built between 2003 and 2009, according to CBRE. The trend shows no sign of slowing: 29 more facilities are currently under construction, the report said. The key factor driving the trend is the need to house the sheer density of products flowing through online retail channels. As a result, e-commerce places much larger demands on warehouse space compared with other types of logistics operations. E-commerce users typically need two to three times the amount of warehouse and distribution space that traditional users do, because online fulfillment requires more inventory, labor, and automation.

Does this suggest increasing concentration -- or actually the opposite?  Is the supply chain system becoming more diversified and distributed as it adapts to e-commerce?  If so, is this a transitional or long-term system permutation?

According to the company, Kellogg's

... will begin to exit its Direct Store Delivery (DSD) network in the second quarter, transitioning the DSD-distributed portion of the company's U.S. Snacks business to the warehouse model already used by Pringles and the rest of its North American business. The new model will be transformational for Kellogg, reducing complexity and cost structure while driving growth and profitability for the company and its retail partners.

According to the Wall Street Journal the shift will involve closing thirty-nine US distribution centers.  Kellogg's products will be shipped to -- and then distributed from -- customer distribution centers.

The decision comes even as some food sector firms have indicated an interest in more DSD, in order to reduce both direct costs and elapsed time-to-consumer.  But many of these DSD innovations focus on either fresh product or high velocity product (ideally both), not the slower moving shelf-stable snack business.

In October I noted IBM and Walmart had begun an experiment to use Blockchain for supply chain management of pork in China. In November they began a US pilot where one packaged produce item is being piloted through the distributed ledger technology.  This morning a reporter contacted me -- a bit breathlessly -- about a rumor that Walmart has moved all fresh produce onto Blockchain.  I don't think so.  Not yet.  I think IBM PR resurfaced the November pilot and it is being misread and misheard.  But... right now I consider Blockchain-type tools to be the best bet for developing total transparency for demand and supply networks by tying payment to participation in the distributed ledger.

Last year I talked to several big grocery distributors serving dense urban areas in the United States.  I wondered what might be available to deliver to survivors of a catastrophic event: lets say a 7.0 plus earthquake followed by a long-term grid outage.

I was surprised.  Much more is on-hand than I had guessed.

Individual companies are understandably cautious with detailed information regarding volumes.  But above is what three big providers in a top-five urban area told me they had on-hand for a bit more than 2000 shelf-stable products (e.g. canned tuna, peanut butter, ramen).

The "projected ounces needed" is what the nearby principal jurisdiction estimated would be needed per day to serve 300,000 survivors.

So... not all of the shelf-stable products will survive the extreme event and 300,000 could be a serious under-estimate of need.  But still, 600 million ounces is a good start.

Until discovering this mother-lode of shelf-stable products close-at-hand, the local jurisdiction did not see how all the king's horses and all the king's men could ever secure that many calories in time.

Now the worry has shifted some from content to movement.  While the grocery distributors say the stuff will be available, they are not at all confident regarding their own ability to distribute, deliver, and allocate. Neither is the public sector.  But at least the problem is now better targeted.

All of this in more is given detailed attention in a new report: The Role of Groceries in Responding to Catastrophes.

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.

According to the MasterCard spending index:

U.S. retail sales excluding auto and gas grew 7.9% during the traditional Black Friday to Christmas Eve shopping season. The biggest winners this season were eCommerce and furniture, with double-digit growth, while electronics and men's apparel lagged well behind... eCommerce grew roughly 20% compared to last year. This is not a total surprise, as 70% of U.S. consumers report doing more research online than before...

According to Slice Intelligence, Amazon has dominated the holiday online spending consistently claiming in the mid-forty percent of overall eCommerce revenues.

And there were no systemic supply chain failures given the timing of Christmas and the absence of serious weather impacts involving dense population centers.

JANUARY 5 UPDATE:

Given the overall growth in retail sales, the holiday sales disappointments experienced by Macy's, Sears (and Kmarts) and Kohl's are especially significant.  Sears reports November and December sales were 12-13 percent less than last year. (!)

According to USA Today:

As temperatures plummeted, retailers' online traffic soared this past weekend as they entered the home stretch of the holiday shopping season. The last full weekend before Christmas and the start of Hanukkah proved to be a big winner for online shopping, with online traffic up 11% on Saturday, and 16% on Sunday, according to Verizon which tracked traffic on home-based Internet connections to the 25 largest U.S. online retailers

More on the Verizon Retail Index.

Tis the season to stress test last-mile delivery. One week remains till Christmas eve.

Friday, December 16 was FreeShippingDay, promoted as the last day to order and receive by Christmas without paying a premium.  I'm not yet seeing data on demand outcomes. Besides, there are still other options for "free" shipping.

Amazon is offering PrimeNow customers one or two hour delivery until midnight on Christmas eve.  Be sure to have milk and cookies to reward the poor guy/gal making last rounds.

Some suggest systemic problems have already emerged resulting in reduced on-time-delivery rates.  But UPS and FedEx insist that the network-as-a-network is meeting consumer expectations.

UPS expects to deliver more than 700 million packages this holiday season, a 14 percent increase over last year, US Postal Service anticipates a 12 percent increase and FedEx is forecasting a 10 percent increase.

My guess is that Sunday/Monday will see a peak for online orders. Anything shipped on Monday/Tuesday should make it home for the holidays. This temporal space between peak and target should support network efficacy.  This does not mean there won't be a last minute crisis.  Consumers are increasingly inclined to challenge the space-time continuum.

Lauren Freedman, senior vice president of digital strategy at Astound Commerce told the Wall Street Journal: "Holiday shoppers inevitably procrastinate... At the end of the day, they want to buy the stuff, and they want it fast. Now they just want it faster,”

MONDAY, DECEMBER 19 UPDATE:  USA Today has a good overview mostly repeating what is above... with a few more details.

In late November I was invited to Berlin to discuss food delivery in disasters.  There were eleven us from four different nations and several Germans.  

About eight years ago I began wondering -- worrying -- about the resilience of supply chains in major events: huge hurricanes, 7.0 plus earthquakes, pandemics and such.

Short of wide-area worst cases, I consider most contemporary supply chains to be self-healing. But I was not nearly as self-assured if and when the worst hazards involve the densest cities.

It seemed plausible to me that a combination of Just-In-Time disciplines, densities over 3000 persons per square mile, and increasing concentration at the distribution level could produce systemic fragility, especially when the electrical grid and telecommunications are out for several weeks.

So... if was especially interesting to meet in Berlin with others who have been looking at similar issues. We were a diverse bunch with varied experiences.  Our German hosts chose us partially to represent a diversity of views.  So we were all surprised to largely agree on the following outcomes:

1. Food supply vulnerabilities increase on the edge of demand and supply networks, especially when a dense population node (vertex) emerges at significant distance from other dense nodes (vertices). For example, Los Angeles is more vulnerable than New York City by virtue of the densities and distance of surrounding networks (among other reasons). 

2. Especially because of finding number 1, there is strategic value in identifying/ engaging sources of distribution capacity (contra retail capability) to assess and mitigate supply vulnerabilities before and during an extreme event. The distance and linkages and potential throughput of these system elements can reduce or increase vulnerability. 

3. There are crucial strategic and operational differences between urban (dense) and non-urban (non-dense) contexts in terms of food supply vulnerabilities. In both contexts, distance seriously complicates food supply resilience. But as density increases the impact of distance can be multiplied.

4. Supplying food to populations in transit (e.g evacuees departing or refugees flowing or emergency responders arriving) can be especially complicated. Distance and density are joined by velocity.

This interplay of density, distance, and velocity has been on my mind for awhile. But I had never before made a connection between my work in supply chain resilience and mass evacuation.

There will be an official report next year and I do not want to preempt it.  These are the shared take-aways I heard.  Others may have heard something a bit different.  

But to have entirely independent efforts reporting out findings that seem to corroborate my own findings has been very encouraging.  

Just-In-Time is not, per se, a source of greater fragility. A densely overlapping JIT network can, depending on its structure, be especially resilient.  But there are reasons to be concerned by islands of demand and supply that do not feature multiple connections with similar-sized proximate networks. The more dense the demand on such "islands", the more structural vulnerability.

Very nicely done piece from FiveThirtyEight (the Nate Silver site) focusing on the so-called Waffle House crisis indicator. Considerable attention to the Waffle House supply chain. Here's an excerpt:

“It’s a big deal for us to shut down, because we’re not used to turning everything off and turning the lights off and closing the door,” said Warner, who estimates that he has worked “more than 10” hurricane responses in 17 years. “So our goal is to open up as quickly as possible afterward. The operations team works with the distributor to get food ready to go in. The construction team lines up generators. If you have generators you have to have fuel, so we line up that.” 

On the edge of the predicted storm zone — which Stark monitors from a temporary “war room” assembled by putting mobile giant screens in a conference room — the company positions personnel who can swoop in: carpenters, electricians, IT specialists, a food-safety expert and someone to talk to local governments and law enforcement and soothe concerns about curfews. A little farther out, restaurants in other markets line up “jump teams”: spare personnel who volunteer to work in place of locals who might have evacuated or might need to repair their homes or care for family. In Hurricane Matthew, the company sent in an extra 250 people. 

“We say we throw chaos at chaos,” Mizell said.

Thanks to Lars for pointing me to this.

According to the Wall Street Journal:

Some of the biggest food suppliers in the U.S. are responding to a threat from e-commerce trends by muscling their way into the market for home delivery of meal kits. The food heavyweights including Tyson Foods Inc., Campbell Soup Co. and Hershey Co. aim to build their own distribution channels straight to consumers, the WSJ’s Kelsey Gee reports, and stem the loss of business as consumers shift away from packaged foods. The companies are working with online couriers to challenge companies like Blue Apron and HelloFresh that have carved out a $1.5 billion market delivering parcels of fresh ingredients and snappy recipes to homes. Experts warn that the market for “Uber for food” is crowded, however, and littered with failures. The mass-market companies have deep pockets, but they’ll have to figure out how to manage their new, highly tailored deliveries for consumers alongside traditional supply chains built for scale.

Above: Banana boat on the Amazon (the original) River

According to the Seattle Times:

Call it Amazon.com’s driverless store.

The tech giant has built a convenience store in downtown Seattle that deploys a gaggle of technologies similar to those used in self-driving cars to allow shoppers to come in, grab items and walk out without going through a register. 

The 1,800-square-foot store, officially dubbed “Amazon Go,” is the latest beach in brick-and-mortar retail stormed by the e-commerce giant, which already has bookstores and is working on secretive drive-thru grocery

In October Business Insider reported:

Amazon wants to open 20 brick-and-mortar grocery stores over the next two years, and the online retailer believes the US market has room for up to 2,000 of its Amazon Fresh-branded grocery stores over the next decade... Amazon is planning to operate a 20-location pilot program for its grocery stores by the end of 2018, in places like Seattle, Las Vegas, New York, Miami, and the Bay Area.

Amazon is a retail revolutionary, not just an online-retail pioneer.  It is reconceiving -- and rebuilding -- how demand is expressed and supplies are distributed/delivered.  As barges and boats once (still) use rivers, Amazon is creating its own digital stream.

Well, the early returns suggest that the increasingly digital cast of Black Friday (and the entire Thanksgiving holiday) has not curtailed buying on Cyber Monday. According to the Washington Post (owned by Amazon founder Jeff Bezos):

...e-commerce sales for the day were on track to soar 9.4 percent over last year. As of Monday morning, some $540 million had already been spent online, according to Adobe, whose software runs under many retailers' websites. And while Cyber Monday has long reigned supreme as the biggest day of the year for digital shopping, it faced a stiff challenge from Black Friday this time around. Retailers were on track to pull down $3.36 billion online on Monday, which would just barely edge out the $3.34 billion spent Friday.

Cyber Monday originated in the tendency of consumers to use their office computer networks to purchase whatever they could not find on Black Friday.  The shopping tradition has continued despite the rise of mobile and at-home network access... encouraged by extensive marketing and discounting. According to Adobe Digital Insights, "Mobile continues to drive the majority of visits to retail websites on Cyber Monday at 53 percent (44 percent coming from smartphones, 9 percent from tablets), while accounting for 35 percent of sales (25 percent smartphones, 10 percent tablets)."

According to Reuters: "Amazon.com Inc (AMZN.O) said it is on pace to have its "best Cyber Monday in history," and said orders placed on its mobile app are higher than last year. Wal-Mart Stores Inc (WMT.N) said purchases made on the Wal-Mart app jumped 150 percent this year." Some have speculated that Amazon generates roughly one-third of annual sales in connection with Cyber Monday.

MORE DETAIL FROM ADOBE DIGITAL INSIGHTS

Early results from Black Friday seem to confirm recent softening in US consumer confidence.

According to the National Retail Federation:

More than 154 million consumers will shop over Thanksgiving weekend, up from 151 million shoppers in 2015, according to the annual Thanksgiving weekend results survey released today by the National Retail Federation and Prosper Insights & Analytics.  Average spending per person over Thanksgiving weekend totaled $289.19, down slightly from $299.60 last year. With an average of $214.13 specifically going toward gifts or 74 percent of total purchases.

Retail spending continued to show a steady -- sometimes startling -- shift to online purchases. According to Adobe Digital Insights:

More than $5 billion ($5.27 billion) was spent online by the end of Black Friday, a 17.7 percent increase year-over-year (YoY). Black Friday set a new record by surpassing the three-billion-dollar mark for the first time at $3.34 billion (21.6 percent growth YoY) while Thanksgiving accounted for the remaining $1.93 billion. Black Friday became the first day in retail history to drive over one billion dollars in mobile revenue at $1.2 billion, a 33 percent growth YoY. 

Especially given the growth in mobile revenue, it will be interesting to see if we see a flattening of so-call Cyber-Monday spending.

Distributed ledger technology -- often referred to as blockchain -- is emerging as an important (potentially revolutionary) aspect of managing supply and demand networks.

Bloomberg reports:

With the blockchain, Wal-Mart will be able to obtain crucial data from a single receipt, including suppliers, details on how and where food was grown and who inspected it. The database extends information from the pallet to the individual package.“It gives them an ability to have an accounting from origin to completion,” said Marshal Cohen, an analyst at researcher NPD Group Inc. “If there’s an issue with an outbreak of E. coli, this gives them an ability to immediately find where it came from. That’s the difference between days and minutes.”

As blogged previously (10.24.2016), food safety is a big driver, but once implemented distributed ledger technology can advance plenty of other purposes.  TechCrunch has a nice short piece outlining the potential.

Source: Morgan Stanley, January 2016

Grocery is the crucible of supply and demand.  It is huge. Demand is diverse. Products are constantly proliferating.  Price-sensitivity is intense.  Many high-value products are innately perishable.  Competition is fierce.

The enterprise that can crack-the-code on grocery will also have the systems and discipline to compete in most other retail categories.  A dozen years ago when grocery distributor Fleming fell to Walmart (plus its own self-created problems), it signaled that Sears had finally lost the wider retail war.

Sears and Kmart, A&P and many more long-time players were locked into long-term leases in declining markets.  Most were still operating on circa 1980 supply chains. Walmart could pick and choose its new locations. Walmart pioneered the information and distribution tools that transformed distribution from push to pull.

Today the competitive center-of-gravity is online. While only about five percent or so of the current market, online is growing fast.  Morgan Stanley estimates that Americans will spend about $42 billion for online groceries this years, a 163 percent increase over 2015.

Supermarket News reports:

Amazon currently dominates online grocery in the U.S., but that's due in part to the relative slowness with which brick-and-mortar retailers have moved online.... That is changing this year as the two largest physical sellers of groceries in the U.S. — Wal-Mart Stores and Kroger, respectively — aggressively add "click-and-collect" capabilities allowing their customers to shop online and retrieve orders at local stores. Walmart through the second quarter was offering pickup in 60 markets and 400 locations; Kroger's ClickList offering had about the same number of locations through its second quarter.

Walmart is also partnering with Uber, Lyft, and other non-traditional players to test last-mile urban delivery.

According to a recent Harris poll, online grocery purchasing tracks with greater density:

• Millennials (36% vs. 31% of average Americans); 
• College grads (35% vs. 26% high school education or less); 
• Parents (37% vs. 28% of those without kids); and, 
• Those in an urban setting (38% vs. 30% suburban & 25% rural). 

These indicators happen to also track with greater affluence.

At the end of the last century Walmart transformed the grocery market in the United States by claiming twenty percent -- and more -- of baby-boomer parents in the suburbs and exurbs.  Now the fight is over a new generation in a new environment.

And while Walmart, Kroger, and others are stepping up their online offerings, Amazon is testing and targeting product variations specifically designed for affluent, time-constrained, quality-conscious urban consumers. According to several media reports including Bloomberg and the Washington Post:

AmazonFresh, is beginning home-delivery of “nitro” coffee, whoopie pies, Nepalese dumplings and other foodie fodder sourced from local micro-kitchens, food trucks and farmers markets to customers across a broad swath of the East Coast. The move allows mom-and-pop artisans to tap into AmazonFresh’s huge reach, placing their goods on doorsteps in hundreds of Zip codes up and down the mid-Atlantic within 24 hours of the order being placed. It means the tiny businesses — many of whom have sales of less than $25,000 a year — will be able to sell beyond the traditional farmers markets and brick-and-mortar storefronts.

This is partly going where your target consumers are at and it's partly about pushing your competitors into an expensive arms race. But it is also about setting up the greatest challenge conceivable and setting out to conquer it.  If you can make a profit on home-delivery of the latest foodie fad, you have the capacity to effectively supply any demand just about anywhere.

There's been another disruption of the Colonial Pipeline.  Depending on the damage -- unclear at this point -- this could be harder-hitting and longer-lasting than what was experienced in September. (See 9/26 post below.)

According to the Associated Press:

For the second time in two months, a pipeline that supplies gasoline to millions of people was shut down, raising the specter of another round of gas shortages and price increases. 

The disruption occurred when a track hoe — a machine used to remove dirt — struck the pipeline, ignited gasoline and caused an explosion Monday that sent flames and thick black smoke soaring over a forest in northern Alabama, Colonial Pipeline said. One worker was killed and five were injured. 

A September leak that spilled 252,000 to 336,000 gallons of gasoline occurred not far from the location of Monday's explosion. That leak led to days of dry pumps and higher gas prices in Alabama, Georgia, Tennessee and the Carolinas while repairs were made.
The cause of the leak still has not been determined, and the effects of the latest disruption weren't immediately clear. 

Colonial Pipeline, based in Alpharetta, Georgia, operates 5,599 miles of pipelines, transporting more than 100 million gallons daily of gasoline, jet fuel, home heating oil and other hazardous liquids in 13 states and the District of Columbia, according to company filings. Authorities have not said which type of fuel was involved in the explosion Monday. 

Plagued by a severe drought after weeks without rain, the section of the state where the explosion happened has been scarred by multiple wildfires in recent weeks, and crews worked to keep the blaze from spreading.

Reuters reports US gasoline futures are up eleven percent in anticipation of much tighter supplies between Atlanta and Baltimore.

Shortly before noon (CDT) on Tuesday, Colonial Pipeline reported, "Line 1, Colonial’s gasoline line, remains shut down. At this time, we anticipate Line 1 remaining down for the remainder of this week. Line 2, which transports diesel, jet fuel and other distillates, was restarted at approximately 11:00 PM CDT on October 31."

Friday, November 4 UPDATE:

The company says: "Based upon the latest information we have available, we now project a Sunday afternoon restart of Line 1."

Typically in cases like this, such projections are not made public without nearly 100 percent confidence.  If so, supplies of gasoline should remain sufficient for metro Atlanta, Charlotte, and most other locations.  There are some indications that the outcome of the September disruption may have diminished the public's tendency to hoarding behavior which is often the greatest threat to continuity of supplies.

Sunday, November 6 UPDATE:  As projected, Line 1 has been restarted.