Ran across this interesting story on Walmart’s logistics problems today: http://www.dailykos.com/story/2013/11/03/1252691/-There-is-mold-in-your-food-and-nobody-cares

When most of us think of logistics snafus, we think of empty store shelves. If only it were so simple… Logistics is the science of the river like flow of goods, screw it up and you can have droughts, and worse yet floods. And at the WalMart in question, both empty shelves and overflowing back rooms at the same time!

And that story of Walmart’s busted logistics brought back memories of twice bankrupt Hostess Brands. Now back in the late 70s Hostess’ logistics were state of the art… Basicly the old timers remembered previous year’s sales for a given date and market, made an educated guess of how much to bake and whether to schedule an extra truck and driver, and they generally got it about right. “About right” was less than double digit percentages of bread returned stale, but they had thrift stores to take care of that. Empty shelves were considered a big success, even though empty shelves meant we’d run out of bread and maybe missed some sales.

By the early 80s our Hostess bakery had a minicomputer and soon an IBM PC, and I was doing stats for my grad school classes on a glorified calculator. After having done some multivariate correlation stats, I dreamed of putting Hostess new computers to work… Pour in a bunch of previous years sales stats, current trends, etc.. and I could predict snack cake sales for fishing opener weekend with a lot more accuracy. Promotions like the Beefsteak Bread debacle that had us making extra truck trips just to haul out the stale bread? Just use past promotional sales as a baseline, then use realtime data from the supermarket scanners to update production and delivery plans. But we didn’t have real time scanner data in the 80s, and the computers got wasted on billing, payroll, and designing shelf displays.

Now you’d think eventually all that data would have been sliced and diced, and by the dawn of the new century we’d have been scheduling production and deliveries with all that lovely big data. But Nooo… Since the 1950s Hostess had spent more money distributing bread than baking it, and after closing dozens of local bakeries those logistics costs rose even more. I remember doing the numbers on a bakery they closed and sold- The revenue from the sale was eaten up in but two years by additional transportation costs to bring bread from surviving bakeries hundreds of miles away.

Now around the time of their first bankruptcy Hostess dreamed up a logistics scheme called “path to market”. While it had elements of what I’d dreamed of in the 1980s like demand responsive production and delivery, it was more an attempt to bust the delivery driver’s union than improve logistics. The Teamster drivers saw it for what it was, and the only place it was implemented was in the Memphis area where the delivery drivers were represented by the baker’s union. It didn’t work there, the executive who promoted it was hired by Hostess Cake’s new owners where she’s still pushing it, and from what I’m hearing of Hostess’ empty shelves around the country, it’s not working now either. Meanwhile, Hostess drivers burned up fuel and dollars driving around the country with half full  trucks right up to the shutdown because Hostess management didn’t know any better. You can make a slim profit hauling semi trailer loads of bread a couple hundred miles, but not hauling half  loads 500 miles and more.

Like Hostess, WalMart was once known for it’s logistics genius. Walmart had their own dedicated fleet of trucks, built up a dedicated cadre of drivers by paying above average wages and benefits, built state of the art warehouses, and every bar code that crossed the scanner signaled the system to make and ship another one. That’s no longer exactly the case, as numerous media articles in less than the last year have testified. On the road and in the stores, you can see the difference in the details… WalMart trailers pulled by the lowball carrier Du Jour, and empty shelves that were once perpetually stocked.  And you can see a common thread- Shifting of work from well paid career professionals to lowball carriers that let a load sit for days because they won’t pay enough to attract and keep qualified drivers. The same logistics lunacy is taking hold at the Postal Service, which is keeping on the clock carriers and customers waiting ’til noon for mail while management thinks they’re saving money replacing morning opening and afternoon closing truck trips  with just one mid day truck.

Fortunately, someone still knows logistics… UPS. To give an example, one night during holiday peak season our sorting center lost all power to the sorting machinery around midnight. Within a few minutes UPS’s career building maintenance techs figured out that repairs would take hours, so a contingency plan was quickly put to work. Drivers headed to the down sorting center were diverted to the metro areas other two centers, and everyone with a CDL got into a truck and hauled the unsorted parcels at the center to the other centers. And like everything UPS, they did it to the point of overkill- I was one of the last drivers dispatched to the other center, and by then there weren’t any loads left. But UPS didn’t cheap out, and sent me “TO” (tractor only) to the other center. UPS wasn’t dumb… After a cup of coffee the other center found me a couple trailers that needed to get to the intermodal yard by the 4 am or so cutoff to make the next train.

Yup, that’s the secret… While UPS and other successful businesses are “overstaffing” with “overqualified” workers, Hostess and now WalMart are running so fashionably “lean” that they can barely survive a day when nothin’ goes wrong… And when things go wrong (as they always will) they crash. Will WalMart be the next big bankruptcy? Wouldn’t surprise me at all…