A great article by DEREK THOMPSON
It is right on target about the reasons– they are supply chain reasons. Amazon covets the urban locations to speed up deliveries; but it would be fantastically complex to procure and engineer these one at a time. With the Whole Foods locations, they now have drop-off points for overnight delivery, and mini-warehouses for food items, especially those that need ‘fresh’ or ‘frozen’ treatment. $14 billion is cheap in terms of accessibility to a population, say within a circle of a given radius.
Perhaps we should rate warehouses and depots by a distribution of the number of customers in a unit of area.
The retailer’s $14 billion bet isn’t just about the future of food. It’s about becoming the one-stop shop for your entire life.
Source: Why Amazon Bought Whole Foods – The Atlantic
A nice piece of research on another approach to reducing the economic impact of imbalances between supply and demand in retail. The approach is a two-phase ordering policy. The ‘steady’ phase places EOQ-like regular orders to cover some base level of demand. The ‘balancing’ phase (my terms) orders extra in some periods, perhaps in a more expedited fashion, to handle the peaks and valleys of actual demand. It amounts to decomposing the demand stream into a steady part and a peak-and valley part, and matching the supply technique to the portion of demand in each ‘frequency’.
The expectation is that problems of promotions, outlet overstocks and shortages, and massive inventory-building on the part of consumers will be addressed at lower cost. The simulations seem to tell the students that the effect on cost will be positive!
It’s a unique approach, executed for a real business, and therefore rates a careful look. I hope it shows up in a published paper with a heuristic for deciding how to partition the demand forecast.
Article from Supply Chain Management Review
Here’s the article in SCMR where the news was posted.
Supply chain professionals are often confronted with the challenge of managing highly volatile customer shipments resulting from the bullwhip effect. This volatility leads to supply chain-wide inefficiencies, high operational complexity, low service levels and substantial costs.
Source: Does Lean Leveling Reduce Shipment Variability? – Article from Supply Chain Management Review
A neat video source about supply chain and logistics. News, case studies. If you have time to watch a lot of video (I don’t), this might be good for you.
DC VELOCITY is the market-leading media brand serving the informational needs of logistics and supply chain managers and executives with comprehensive coverage of all aspects of logistics including internal logistics within a distribution center or warehouse, external logistics relating to the transport of goods and freight, the overarching information technologies that support and integrate the two, and the strategies that optimize logistics.
Source: Logistics Videos – DCV-TV – DC Velocity