Empty Shelves? – Understanding Supply Chains, Logistics, and Recovery Efforts…

By now everyone is familiar with the abundant pictures on social media of empty shelves in local stores.  Having some familiarity with the supply chain might help people to understand some of the challenges; and possibly help locate product. (Pics from Twitter)

There are essentially two types of distribution centers within the retail supply chain for most chain markets, food stores and supermarkets.  The first type is a third party, or brokered, distribution network.  The second type is a proprietary, company owned, distribution center.  Knowing the type of distribution helps to understand what you can expect.

If your local retail store is being replenished from a third party distribution center, you can expect greater shortages and longer replenishment times; we will see entire days of empty shelves in these stores.  However, if your local retail store owns their own warehouse and distribution network, the replenishment will be faster.  In times of rapid sales, there is a stark difference.

These are general guidelines: An average non-perishable distribution center will replenish approximately 60 stores.   Those 60 stores will generally not extend beyond 100 miles from the distribution center.  The typical company owned warehouse will have approximately 20 tractors (the semis) delivering trailers of goods to those sixty stores.

In this type of network… On a typical day a truck driver will run three loads. Run #1 Delivery-Return; Run #2 Delivery-return, Run #3 Delivery Return. End shift.

If every tractor is operating that’s a maximum capacity of 60 trailers of merchandise per day.  Many stores receiving more than one full trailer.

A typical store, during a non-emergency, will receive 1 full trailer of non-perishable goods three to five times per week.  However, under current volume the purchased amount of product is more than triple normal volume.  It is impossible to ship 180 trailers of merchandise daily to sixty stores with 20 fixed asset tractors.  This is where the supply chains and logistics are simply incapable of keeping up with demand.

Thinking about distribution to a 100 mile radius.  The stores closest to the distribution center will be delivered first, usually overnight or very early morning (run #1). The intermediate stores (50 miles) will be delivered second, mid-morning (run #2).  The stores furthest from the distribution center will be delivered third, late afternoon (run #3).

So if you live close to a distribution center, your best bet is early morning.  If you live in the intermediate zone, late morning to noon.  If you are in the distant zone in the evening.

The current problem is not similar to a holiday, snow event or hurricane. In each of those events typical store sales will double; however, during holidays or traditional emergencies the increase in product(s) sold is very specific: (a) holiday product spikes on specific items are known well in advance and front-loaded; and (b) snow/hurricanes again see very specific types of merchandise spikes, with predictability.

In the current emergency shopping pattern the total business increase is more than triple, that’s approximately 30% more than during peak holiday shopping.  Think of how busy your local store is on December 23rd of every year.  Keep in mind those customers are all purchasing the same or similar products.  Now add another 30%+ to that volume and realize the increases are not specific products, everything is selling wall-to-wall.

Perishable and non perishable products are selling triple normal volume.  This creates a replenishment or recovery cycle that is impossible to keep up with.  The first issue is simply logistics and infrastructure: ie. warehouse (selectors, loaders), and distribution (tractors, trailers, drivers).  The second issue is magnifying the first, totality of volume.

A hurricane event is typically a 4 or 5 day cycle.  A snow event might be 2 days.  The holiday pattern is roughly a week and all the products are well known.  However, the type of purchasing with coronavirus shopping is daily, everything, with no end date.

Once the store is wiped out, a full non-perishable recovery order might take four tractor-trailers of merchandise. In our common example, if every store needed a full recovery order that would be 240 tractor-trailers (60 stores x 4 per store).   This would need to happen every day, seven days a week, for the duration of the increase.  [And that is just for the non perishable goods]

That amount of increase is a logistical impossibility because: (a) no warehouse can hold four times the amount of product from normal distribution; (b) the inbound supply-chain orders to fill the distribution center cannot simply increase four fold; and (c) even with leased/contracted drivers doubling the amount of tractors and trailers, there’s still no way to distribute that much product.

Instead what we see are priorities being assigned to specific types of product that can be shipped to maximize “cube space” in outbound trailers going to stores.   A distribution center can send 100 cases of canned goods (one pallet) in the same space as 15 cases of paper towels or toilet tissue (one pallet).  So decisions about what products to ship have to be prioritized.

Club stores (ex. BJ’s, SAM’s, or Costco) can ship bulk paper goods faster because they do not carry a full variety of non-perishable items.  The limited selection in Club stores naturally helps them replenish; they carry less variety.  Meanwhile the typical supermarket distribution center has to make decisions on what specific goods to prioritize.

Nationally (and regionally) the coronavirus shopping panic is far outpacing the supply chain of every retailer.  Instead of a weeks worth of food products, people are now trying to purchase a months worth.  Every one day of coronavirus sales is equal to three or four normal days.

To try and get a handle on this level of volume we will likely see changes in operating hours.  Expect to see stores closing early or limiting the amount of time they are open every day…. the reason is simple: (1) they don’t have the products to sell over their normal business hours; and (2) they need to move more labor into a more compact time-frame to deal with the increases in volume.

Source: by Sundance | The Conservative Tree House

5 thoughts on “Empty Shelves? – Understanding Supply Chains, Logistics, and Recovery Efforts…

        1. Bone Fish Post author

          We are fast approaching a time when no one in their right mind will accept Federal Reserve Notes and their digital counterparts for physical gold and silver bullion.

          Liked by 1 person

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