New Hubs Arise to Serve 'Just in Case' Distribution

[cpzilliacus]

N.Y. Times:  New Hubs Arise to Serve "˜Just in Case' Distribution

Major storms like Hurricane Sandy and other unexpected events have prompted some companies to modify the popular just-in-time style of doing business, in which only small amounts of inventory are kept on hand, to fashion what is known as just-in-case management.

The shift has led retailers and logistics companies to alter supply chains by adding distribution hubs, according to the CoStar Group, a real estate research firm in Washington. In turn, the hubs are creating real estate opportunities in markets on and off established distribution paths, including growth in markets outside the traditional seaport hubs on the East and West Coasts.

Just-in-case planning helps retailers keep merchandise on store shelves in the event a supply chain disruption affects one of the major distribution markets. Hurricane Sandy affected the ports of New York and New Jersey, for example, and the 2002 lockout of International Longshore and Warehouse Union workers from West Coast seaports delayed the unloading of container ships for months.

[mgk920]

Walmart is well known for being first in line with convoys of truckloads of relief stuff after such events, with their numerous distribution centers.  They also allow the company to quickly and nimbly restock if a single store has a run on any certain item, so it benefits them on a day-to-day basis, too.

Mike

[kphoger]

I'd sure be hesitant to take a job at a newly created hub, for fear that, once the company's bottom line started to fall, they'd decide it wasn't really worth it to build the new hub after all.

[Brandon]

Some hubs though are much larger than others.  Where I am, Joliet area, is rapidly becoming such a hub due to the location of two very large intermodal rail terminals (BNSF and UP), as a third smaller one (CN) on the way.  Walmart built a very large warehouse distribution center here several years ago after the first such intermodal terminal (BNSF) was built.

This is, bringing it back to roads, one of the major driving forces behind the Illiana Expressway, far more so than the proposed airport.

[Duke87]

Having things more distributed is more secure against unforeseen disruptions. If everything is made at one factory (see: New Zealand's recent Marmite crisis) or only a few factories (see: the Eggo waffle shortage a few years ago), something causing a shutdown makes everything grind to a halt. But if you have ten factories, temporarily losing one for any reason isn't going to have a significant impact on your business.

I speak of production here, but the same is true of distribution.

Any good engineer will tell you: having redundancy in your system is good!

[cpzilliacus]

I speak of production here, but the same is true of distribution.

Absolutely  correct.  Also true of high-voltage electric transmission networks, which are a form of "distribution."

Any good engineer will tell you: having redundancy in your system is good!

Also absolutely correct.  Highway network and rail transportation network redundancy is always good.

[kphoger]

Also absolutely correct.  Highway network and rail transportation network redundancy is always good.

Translation:  More highway lanes good, single-track mainline bad. 

[cpzilliacus]

Also absolutely correct.  Highway network and rail transportation network redundancy is always good.

Translation:  More highway lanes good, single-track mainline bad. 

Single-track mainline railroads really put a constraint on the number of trains that can use it.

A good lesson point was the Baltimore Central Light Rail Line, which had some pretty long single-track segments after it initially opened in the 1990's.  Train headways were severely constrained (I think the minimum headway allowed was about 20 minutes). In the mid-2000's, all of the single-track sections were replaced with double track, which allowed much better service.

Getting back to mainline freight railroads, a lot of them abandoned one track starting in the 1950's and continuing through the 1970's because they did not have the traffic to justify double-tracking.  In at least some cases, I understand that the railroads have come to regret those decisions now.

[kphoger]

There's nothing like riding Amtrak and having to wait on a siding for a freight train to go by.
I miss the Chicago area and its triple-track mainline.

[mgk920]

Also, because the railroad operating companies also privately own their own infrastructure and in many or most states it is property taxed, they have another incentive to have as little redundancy as possible - in most of those states tracks are taxed as business personal property and equipment.  The fewer tracks, the less property tax liability.

It makes no sense to me from a national security and interstate commerce standpoint and is another big reason why I would strongly work to separate the operating companies from the infrastructure.



Mike

[NJRoadfan]

Any good engineer will tell you: having redundancy in your system is good!

Except it goes completely against "just in time shipping" and all the stuff those MBA types are taught about "leaning out operations".