Contemporary supply chain management works to minimize costs of excess capacity and inventory. The goal is to accurately anticipate demand so that supply is pushed Just-In-Time to precisely where consumer pull is present.
Because it is less costly to make and buy in bulk and precise prediction is not always possible, there is usually some upstream buffer stock. Mid-stream capacity is purposefully tight. Trucks and drivers are expensive, what you’ve got you want to fully utilize. Each firm’s last mile freight capacity is shaped to deliver to highly probable demand at full-flow velocity. Downstream stocks are intended to be just enough to supply each customer’s demand between deliveries.
Dollar General is currently — perhaps perpetually — in the process of supply chain streamlining. During a May earnings call CEO Todd Vasos said, “… our supply chain teams are primarily focused on ensuring deliveries are on time and in full and we are reducing the amount of inventory we carry… Our top priority in this area continues to be improving our rates of on-time and in-full truck deliveries, which we refer to as OTIF. Our distribution and transportation teams have taken aggressive action to improve their service to our stores, and these efforts have led to significantly higher OTIF levels compared to the same time last year.” In the same call the CFO emphasized, “Notably, total nonconsumable inventory decreased 19.1% compared to last year and decreased 22.5% on a per store basis. The team continues to do great work reducing our overall inventory…” (More and more.)
Depending on products, customer preferences, and investment resources (including human judgment), other firms will emphasize slightly different priorities, but delivering optimal flows at minimum cost is a nearly ubiquitous objective. The result is less waste, reduced costs, and more sustainable margins. This structural efficiency can, however, reduce options when demand suddenly shifts. The more volatile consumer pull, the less effective related push (for example 2020-2021).
In advance of a hurricane or blizzard or such, demand will surge. Grocers and fuel operators in particular have experience and protocols to increase supply into the face of anticipated demand. More deliveries are scheduled and, for grocery, the product mix can dramatically shift. The goal is to serve both pre-event and post-event needs. There is, however, seldom time or opportunity to engage many more trucks or drivers. The focus has to be on moving more with what is already on hand. To achieve this waivers of freight regulations can be very helpful, especially in advance. When a hurricane or blizzard is forecast, the supply chain “disaster” usually starts about 72 hours before the actual winds pick up. Allowing trucks to carry slightly more than usual and truckers to stay-on-the job slightly longer than usual will improve velocity and, therefore, volumes available.
Texas authorized Hours-Of-Service and weight waivers almost 48 hours before Hurricane Beryl’s Monday landfall. But for some reason these waivers were NOT widely communicated. Suppliers sent me notes describing the public sector communications process as “terrible”, “convoluted”, and “pathetic”. The frustrated reaction was, in part, anchored in disappointment. It is much easier to get intra-state waivers in a hurricane-ready state than federal-plus-multiple-state waivers from less experienced players. Freight carriers expect the feds and various southbound states to be passive and/or confused before a Florida landfall. Texas is very experienced with hurricanes. Texas is big enough that their single set of intra-state waivers will usually maximize flows across the entire Texas Triangle (Austin, Dallas, Houston, in-between, and near-by). Texas usually deploys and communicates much better than average. But not in advance of Beryl.
I’m sure this will be part of the Texas after-action for Beryl. Even more important in my judgment: If Beryl had been forecast at CAT3 or above, could freight waivers have been released — and effectively communicated — before Saturday, even as early as Thursday morning? What about when similar waivers are needed for North Carolina, South Carolina, Georgia, Alabama, Mississippi, Louisiana, and Tennessee to increase volumes and velocities when a major hurricane is forecast for south Florida? Or a major Northeast Blizzard? Or other rapidly emerging threats?