Three weeks ago, I wrote a column titled "The Thin Supply Chain Line," which argued that we are seeing supply chains that for now are mostly managing to keep grocery store shelves filled with food and other products - with the exception of course of toilet paper.
But it is a complex process across numerous supply chain functions, from global sourcing to store replenishment, to keep that flow of goods happening - and right now the supply chain line is stretched very thin indeed, with many pressure points and risks.
So for a while in this weekly column I am going to report on the past week's news and developments in the thin supply chain line - because who can think of anything else right now?
Gilmore Says.... |
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The Washington Post reported this week that, not surprisingly, grocery workers increasingly fear showing up for their jobs.
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The supply chain operates in the context of the business and economic environment of the day. And right now, that environment is precarious, with very ugly numbers released on multiple fronts.
You may have seen some of these highly publicized numbers, but the bad news includes:
US manufacturing output in March fell 6.3%, according to the latest monthly numbers from the Federal Reserve Bank. That it turns out was the largest monthly decline since February 1946. Automakers shuttering plants was a major but far from only factor.
The Commerce Department on Wednesday said retail sales plunged 8.7% in March, making it the biggest monthly decline since the government started tracking the data in 1992. And that overall drop came even with some retail segments remaining strong: grocery store sales were up a whopping 25.6%, while general merchandise stores (which I believe include the mass merchants such as Walmart) saw revenues up 6.4%, and drug store sales rose 4.3%.
The rest of retail is in ruins. Will JCPenny stores ever open again? The already troubled retailer missed a $12 million debt payment due this week, though it has a 30-day grace period. Overall, more than 190,000 US stores have temporarily closed, accounting for nearly 50% of US retail square footage. How many will come back?
The International Monetary Fund this week projected a decline in global GDP of 3.0% in 2020. That may not sound like all that much, but it would actually be the worst annual result since the Great Depression. By contrast, in January the IMF had forecast a global GDP expansion of 3.3% for this year, so the total swing is more than 6%. In the Great Recession, global GDP fell only in 2009, and then by less than 1%.
OK, swinging back to more direct supply chain news, I have been warning since I started doing this series about possible worker infections at meat processing plants - and that has proven the case in a big way.
Giant Smithfield Foods, the world's largest pork provider and interestingly now owned by China, has seen an amazing 644 workers at last count become infected with the virus at a plant in South Dakota - the world's largest pork processing facility.
It is now infinitely closed, and Smithfield has also closed plants in Iowa and Missouri due to workers infections.
Other meat processors like Tysons Food, Cargill and JBS have also closed plants.
The plant closures at Smithfield and others are "pushing our country perilously close to the edge in terms of our meat supply," company CEO Kenneth Sullivan said in a statement this week.
Meanwhile in manufacturing, apart from food companies, automaker Ford said this week it is testing wearable social-distancing devices. A small group of volunteers at a Ford factory in Plymouth, Michigan, is trying out watch-like wearables that vibrate when employees come within six feet of each other.
Changes like this and many others are likely to remain with us for a long time, clearly if the crisis is not killed one way or another soon.
 On the global supply chain, you may have seen this, that ocean container carriers are voiding sailings and idling ships in record numbers, as demand for shipping falls rapidly like most everything else. The analysts at Alphaliner say carriers will void more than 250 scheduled sailings in Q2, a huge number. Yet, the Wall Street Journal reports that large megaships with capacity of 20,000 or more TEU often sail now less than half full. If there is even any sort of "peak season" for container shipping this year, it is likely to be a very weak one indeed.
However, you may not have seen that thousands of crewpersons manning cargo ships are literally stuck at sea. Why? Because replacement crews can't or won't come to relieve them.
"Replacing crews is a complicated operation that involves flying a total of more than 100,000 sailors industrywide around the world every month to connect with ships at far-flung ports," a Wall Street Journal article says. Now, that flow of workers has largely stopped.
Thousands of seafarers can't travel to man ships, leaving growing numbers of crews around the world exhausted and facing illness at sea. Yikes.
On the distribution front, Wired magazine interviewed nine Amazon workers, mostly fulfillment center or delivery employees, and found mostly a tale of woe.
Said one FC worker in Illinois, relative to disinfecting processes at the site: "I feel that there's no effort, and they're not taking it seriously. They kept saying they were doing extensive cleaning, extensive cleaning - they weren't," he or she said, adding that "There aren't enough wipes and spray; one wipe is used to clean four people's stations. I said something to my manager, and he just shook his head and said, 'It's better than nothing.'"
The other interviews were along the same basic lines.
Meanwhile, at the end of the thin supply chain line, the Washington Post reported this week that, not surprisingly, grocery workers increasingly fear showing up for their jobs.
"Some liken their job to working in a war zone, knowing that the simple act of showing up to work could ultimately kill them," the article said, adding that "Now workers across the country are staying home or quitting altogether."
What happens if that trend continues? At least 1,500 supermarket workers throughout the country have tested positive for covid-19, according to the United Food and Commercial Workers International Union. That could soon mean more empty shelves - and in some cases, stores shuttered for some period of time. For how long? Who knows.
That led Kroger CEO on Tuesday to call for the temporary official "first responder" designation be givn to grocery workers that would improve their access to still scarce personal protective equipment (PPE) such as masks. I am all for it.
The thin supply chain line continues to hold on, though with many risks, as I hope I have convinced you. I again had enough material to write two other similar columns this week.
Want to interview Dan Gilmore on the Thin Supply Chain Line? Reach him at dpgilmore1000 at gmail.com.
What are you thoughts on the "thin supply chain line?" Is it the right term for the times?Let us know your thought at the Feedback section below.
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