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The Legend of the 24/7/365 Supply Chain

The Legend of the 24/7/365 Supply Chain

A popular myth, still told around some campfires, is “The Legend of the 24/7/365 Supply Chain.” Now, common sense is all it takes to see this has never been the case, and unless the laws of physics are somehow superseded by the concepts of metaphysics, it’s not likely to ever be the case. All you have to do is walk through a typical aisle at any Walmart store. The retail giant has long been applauded for its supply chain proficiency, driving numerous initiatives, from EDI to RFID to green labeling, which all share the same goal: selling as many products as possible. And yet, you’ll find empty shelves and out-of-stocks everywhere you look.

All the rage at the recent ProMat trade show was multi-channel distribution, making it possible for retailers like Walmart, Amazon, Macy’s and others to improve their efficiency at the distribution center level by enabling the same DC to fulfill orders for any channel you can think of, whether it be for an entire chain of stores, catalog orders or single orders from consumers. And yet, no matter how quickly the warehouse control systems fire off the algorithms to engage the automated guide vehicles to pull the orders, the thought that technology and automation will ensure that your favorite brand of cold medicine will be there on the retail shelf, on the day that you need it, is still a fantasy. Customers are unpredictably fickle, but they’re also annoyingly insistent on getting what they want when they want it.

Which makes the news that the U.S. Postal Service plans to curtail, and perhaps completely cease, Saturday mail delivery as of August 2013 just another piece of evidence that the supply chain does indeed sleep, and sleeps often. Far from working 24/7/365, the USPS will effectively be working on something more closely resembling 10/5.5/285 (the 5.5 indicating that the USPS will still delivery packages on Saturday and keep some branch offices open that day).

In explaining the cutback in service, Postmaster General Patrick Donahoe said (apparently while keeping a straight face), “The Postal Service is advancing an important new approach to delivery that reflects the strong growth of our package business and responds to the financial realities resulting from America’s changing mailing habits.” The USPS claims that their market research (most of which seems to have been conducted three years ago) indicates that 70% of U.S. consumers (among those polled) support the switch to 5-day service. I would like to see exactly how that poll question was worded; I suspect it ran somewhere along the lines of, “Which of these would you prefer to see: Would you rather see the price of a First Class stamp be hiked a nickel a year for the next 20 years, or would you rather give up Saturday delivery to your home?”

Given that the USPS reported a record $15.9 billion loss for FY2012 and has already laid off 28% of its employee base, there probably weren’t too many options left, other than maybe to petition the President for an emergency bailout (ObamaMail, perhaps). Donahoe claims that the USPS is currently losing $25 million per day. In any event, while the country digests this latest bit of news, consider that FedEx posted a $2 billion profit for FY2012, while UPS had a profit of just over $800 million after swallowing a huge amount in the aborted TNT takeover. So it apparently is still possible to make money in the delivery business... just not one overseen by US politicians.

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