Skip to content

OM in the News: Too Much Toilet Paper

April 16, 2021

After a year in which toilet-tissue shortages left consumers scrambling for squares, sales are plummeting to below pre-pandemic levels. writes The Wall Street Journal (April 14, 2021). Recent sales fell more than 4% from the same period a year earlier, before the spread of Covid-19. The decline, which comes even though legions of Americans continue to work and attend school from home, indicates last year’s stockpiling is starting to have an effect on sales.

toilet paper

“You never knew when you weren’t going to be able to get it, so every time we went out we got some,” said one New Rochelle, N.Y. woman. “They just kept amassing.” She still has 54 rolls, stored in various places throughout her home: in a guest room, the back of a linen closet, the laundry room in the basement. (This is embarrassing–I just counted that my wife and I have 66 rolls in our closet and laundry room!)

Demand for toilet paper shot up in the outbreak’s initial weeks, doubling in the second week of March, and remained elevated throughout most of 2020. Americans spent more than $11 billion on toilet paper last year, up from $9 billion in a typical year.

A rush on other household staples, from disinfecting wipes to paper towels, led to equally or more-severe shortages of those products. But none triggered consumers’ anxieties as much as toilet paper. Walmart’s CEO, on a “Today Show” appearance in April 2020, urged consumers to stop buying so much toilet paper.

Tissue used in office bathrooms is generally built at different plants, and funneled through a different supply chain, than toilet paper sold to consumers at stores. So the sudden drop in demand for public-restroom quality tissue didn’t lead to a supply surplus of the higher-end stuff. Meantime, whereas companies were able to more quickly increase capacity for cleaning products, hand sanitizer and other in-demand items, doing so for toilet paper was less feasible given that making toilet paper in bulk requires 4-story-tall machinery that costs billions of dollars.

Classroom discussion questions:

  1. Relate this article’s topic to our discussion of the “bullwhip effect” in Supp. 11 of your text.
  2. How many of you also hoarded toilet paper last year?

OM in the News: The Amazon “Factory” and Unions

April 13, 2021

All of our students are knowledgeable about Amazon, its growth, its products, and its hyper-wealthy chairman, Jeff Bezos. Many may have followed the news about the recent attempt to unionize at Amazon, starting with the Bessemer, Alabama, fulfillment center. The New York Times (April 12, 2021) takes an interesting perspective on the story, tracing the Bessemer facility to its origins as steel plant in the mid-20th century that provided middle-class lives to its workers. Now defunct, the steel factory is still a “factory”, writes The Times, but of a different sort, with Amazon paying $15 per hour, double the federal minimum wage.

That is not the kind of pay that seems likely to help again build a thriving middle class. And Amazon jobs are looking more and more like the future of the U.S. economy, with the company growing from 750,000 to 1.3 million workers in the past 18 months.

amazon book

A new book about Amazon, called “Fulfillment,” points out that Amazon’s warehouse jobs have a lot in common with the industrial jobs of the past. They are among the main options for people who graduate from high school or community college without specific job skills. They are also physically demanding and dangerous.
Fulfillment reminds us about the injuries and deaths that came with old factory jobs, and documents the similar risks that warehouse jobs can bring. Jody Rhoads was a 52-year-old mother in Carlisle, Pa. Her neck was crushed by a steel rack while she was driving a forklift in an Amazon warehouse, killing her. (“We do not believe that the incident was work related,” an Amazon manager reported to the government, falsely suggesting her death was from natural causes.)
One former Amazon worker adds: “Amazon is reorganizing the very nature of retail work — something that traditionally is physically undemanding and has a large amount of downtime — into something more akin to a factory, which never lets up.” And rather than working in teams of people who are creating something, warehouse workers often work alone, interacting mostly with robots.

Classroom discussion questions:

  1. Why did the Bessemer workers soundly turn down the union organizing effort?
  2. How do fulfillment center jobs resemble factory jobs? How do they differ?

OM in the News: McDonald’s Un-Location Decision

April 11, 2021

Fewer people want to eat their meals at Walmart, writes The Wall Street Journal (April 10-11, 2021).  For years Walmart and large restaurant chains like McDonald’s enjoyed a mutually beneficial relationship. The retailer delivered a steady stream of diners, and the eateries provided rental profits and a reason for shoppers to stick around stores. Walmart and McDonald’s first started working together around 1994. At one time, Walmart allowed McDonald’s to be the exclusive restaurant when it was present in a store. 

But those bonds have frayed as more shopping goes online and fast-food restaurants depend more on drive-through windows for sales, a feature Walmart locations don’t have. The pandemic has made indoor dining unappealing—or prohibited—for many shoppers, accelerating the split.

mcdonald's

So McDonald’s is closing hundreds of restaurants located in the huge retailer’s stores, the last vestiges of a 30-year-old experiment between the companies. (At its peak, there were 1,000 McDonald’s restaurants inside Walmarts). The closures could pose a challenge for Walmart, which has long counted on revenue from restaurants leasing space inside its stores. That is different from some competitors such as Costco, which runs its own restaurant space selling inexpensive pizza and hotdogs. Retailers hope food service inside store walls draws shoppers to linger longer or give workers a place to eat while taking a break.

McDonald’s locations inside Walmart stores are generally less profitable than stand-alone restaurants, in part because they lack a drive-through, the main source of McDonald’s sales. And customers at times loaded up on refills and condiments, diluting margins. Even before the pandemic, Walmart shoppers increasingly preferred to shop and leave or buy online. Around a third of restaurant sales inside stores come from Walmart employees.

To compensate, Walmart plans to open more Domino’s, Taco Bell, Ben’s Soft Pretzels, and Ghost Kitchens Brands locations to fill the space.

Classroom discussion questions:

  1. Why is McDonald’s un-locating?
  2. Are there any downsides to replacing McDonald’s with chains like Domino’s or Pizza Hut?

OM in the News: Making Vaccine Bottles

April 8, 2021

Combating the Covid-19 pandemic is at the top of the global agenda. Providing vaccines to populations around the globe means providing 8 billion doses—with only one for every person in the world. In addition to the availability of the vaccine, a decisive factor in the race against time is the accessibility of the glass vials. Producers of the vials are massively ramping up their production so as not to become the proverbial bottleneck in the supply chain, reports New Equipment Digest (April 6, 2021).

vaccine

However, medical-grade vaccine vials are not standard glass tubes. They are all made of the special glass borosilicate and require customized production lines. For example, the glass must be resistant to a wide range of chemicals and temperature changes and must not contaminate medicines. Any interaction between the container and the liquid inside must be prevented, as any chemical interference could affect the vaccine. Even the smallest scratch, crack or fissure can render an entire batch unusable, contaminate the line during the filling process or even lead to a machine standstill.

The demands on manufacturers are enormous: it is not only a matter of producing large quantities quickly but also of maintaining particularly high-quality standards. So what is needed is very fast quality control with high reliability in defect detection. One solution is vision systems, our topic on page 296 in Chapter 7. Powerful cameras can capture images of 120 vials per minute to be inspected for dimensional accuracy or surface condition with very high precision. Defects such as cracks, scratches, chips, inclusions or stains are detected with an accuracy of 0.1 square millimeters. Intelligent software enables accurate fault description analysis and classification. Testing takes place at various points in the manufacturing process, such as directly after the bottles have been formed or shortly before packaging.

Classroom discussion questions:

  1. What are vision systems and why are they a useful OM tool?
  2. Which of the quality control tools in Chapter 6 (Figure 6.6) of your Heizer/Render/Munson text could vial producers employ?

Guest Post: Project Management in the Mississippi River Wetlands Reclamation

April 5, 2021

This month, Prof. Howard Weiss discusses project planning. Howard is a recently retired Temple U. colleague.

A massive coastal restoration project in Louisiana could test whether new wetlands can be created
faster than they’re disappearing under waves and rising seas according to Scientific American (Mar 11,
2021).
The goal is to deposit land-building sediment to restore much of the 2000 square miles of marsh along the Louisiana coastline that has already been lost and the forecasted 4,200 additional square miles that will be lost over the next 50 years if no action is taken.

This $1.5 billion project was first proposed over 7 years ago and is in the second step of Project Planning, “Define the Project,” as indicated in Figure 3.1 of your Heizer/Render/Munson textbook. The goals have already been set
 Time: Over one year, beginning in late 2022
 Cost: $1.5 billion – $2 billion
 Performance: Redirect more than 12% of the Mississippi River’s flow into a marsh over the next 50 years. The capacity will be 75,000 cubic feet per second.

The project definition stage is very complex as seen in the following steps that must be described for
this project:
 Planning process including general description of implementation
 Analysis tools used including cost/benefit analysis, benchmarking
 Stakeholders involved in planning
 Authorization for goals
 External operating environment factors and effect on plan
 Formulation of objectives variables
 Building strategies including capacity, organizational structure, resources needed, timeline
 Accountability – identify performance indicators for each objective
 Fiscal impact of plan including operating budget and capital outlay budget

This is not the first coastal restoration project. The projects are of two types – restoration projects and
risk reduction projects. Louisiana’s Coastal Protection and Restoration Authority (CRPA) has begun over
150 projects in 20 parishes (counties) and over 60 miles of barrier islands. Of course, as we have seen in Chapter 8, “Location Strategies,” attitudes and pollution are important considerations. Project opponents argue that
the fish industry would be greatly affected because the balance of fresh and sea water would change.

Teaching Tip: Videos May Improve Student Learning

April 2, 2021

Jay, Chuck, and I have long been proponents of using videos to supplement classroom teaching and on-line lectures. Our free learning package includes 46 company videos that we created to specifically match our text. We have also filmed about eighty 4-20 minute mini lectures, one for each Solved Problem in the book, that walk students through the steps to solve problems similar to the ones they will tackle for homework. In addition, we have added a dozen video interviews with recent grads who each talk about their OM careers and provide advice to future grads. Our upcoming 14th edition will include 10 Excel model-building videos.

video2

So we were not surprised by a new research study (in Review of Educational Research) that concludes that supplementing existing content with videos can raise student scores. When students got videos in addition to their existing classes, the effect was strong– moving students from a B to an A.

Videos were found to be more effective for skills development, like our Solved Problem videos, than for knowledge transmission. On a skills assessment, they improved student scores by about five points out of 100. For learning knowledge, videos were about as good as existing teaching methods, increasing student scores by about two points. “Shifting the ‘explaining’ bits to videos allows the rich, interactive work to take up more of the precious face-to-face time with students” state the authors.

Videos might be more effective than face-to-face classes because students are able to engage at their own pace and in their own time. The results were robust across different teaching methods (such as lectures, tutorials, and homework) and types of video (such as case demonstrations and recorded lectures). The authors also believe that videos are effective for teaching skills development because videos often show situations more authentically than lectures can, by providing real-life demonstrations instead of artificial class presentations.

“Even after the pandemic ends, college instructors will find value in incorporating videos into their teaching,” says the report. “Ensuring that those videos are of high quality will provide significant long-term benefits.”

OM in the News: The Rise of the Self-Driving Truck

March 31, 2021

Whatever type of vehicle arrives at the Bay Area headquarters of Aurora, the team can have it running without a driver in just 12 weeks. The transformation involves pulling apart the dashboard, fitting the vehicle with a stack of sensors and computer systems, then installing a “single umbilical” cord to communicate between the vehicle and the self-driving technology.

Aurora has integrated its robotic “Driver” into eight types of vehicle since its founding in 2017. But its system is proving most successful in heavy-duty trucks, which are now a main battleground for autonomous technology as the mass rollout of robotaxis falters. Partnering with Volvo Trucks, Peterbilt, and Kenworth, with a combined US market share of more than 50%, Aurora is a big force in driverless trucking.

truck2

The business case for disrupting the $800 billion U.S. trucking market is clear, writes the Financial Times (March 31, 2021). Two-thirds of America’s consumer goods are transported to market by truck, but laws limiting drivers’ shifts to a maximum of 11 hours mean longer journeys often take several days.

On average 20% of miles driven are empty and not generating revenue, but still generating gas emissions and pollution. The potential for automation to drive consolidation could be easily as big as for cars, as trucks drive 170 billion miles on U.S. highways every year.

Until recently, Silicon Valley has been slow to react to the opportunity. Since Google launched its self-driving car project in 2009, robotaxis have been the sector’s focal point.

A major benefit of self-driving trucks is that the technology they require is simpler to develop. For a driverless ride-hailing service to exist, the car needs to take passengers anywhere in the city. That would require continual mapping to stay up to date, whereas 18-wheelers spend the bulk of their time on the same highways. “It’s basically a straight road where you’re not really even shifting gears, much less having the opportunity to run into a building,” said one industry expert.

Classroom discussion questions:

  1. Why is the potential so great for self-driving trucks ?
  2. What are the weaknesses in using self-driving long-haul trucks?

OM in the News: Intel Speeds Up Its Chip Revival

March 29, 2021

Intel is making major plays in the field of semiconductor manufacturing, reports Industry Week (March 24, 2021). The California company announced it would spent $20 billion on two new semiconductor factories in Chandler, Arizona. The plants are expected to employ 3,000 people in “high-tech, high-wage” manufacturing jobs.

Intel’s plan is to challenge rival chip manufacturers around the world like Samsung of South Korea and TSMC of Taiwan, which currently produce many of the computer chips used in electronic products from cell phones and laptops to electric vehicles and refrigerators. The U.S. now accounts for just 12% of global semiconductor manufacturing capacity, down from 37% in 1990, as other countries have subsidized their chip makers.

intel

The $20 billion plants will produce Intel’s “first large-scale foundry operation,” and it has plans to pick more sites for foundries in the U.S. and Europe.

Semiconductor foundries, like those operated by TSMC, typically produce chips designed by outside customers, like Qualcomm or Apple, which don’t have chip production facilities of their own. Intel already designs and produces its own chips, but its new foundry business will allow other companies to leverage Intel’s production lines and proprietary chip construction techniques.

The move to enter the semiconductor foundry field comes at an opportune time for Intel. GM, Ford, and Honda, among other automakers, have run into vehicle production bottlenecks caused by a shortage of semiconductors. That shortage, in part, has been driven by an increased demand for computer electronics during the very pandemic that crushed vehicle production in the spring of 2020 that automakers are currently trying to recover from. 

Classroom discussion questions:

  1. Why did semiconductor production shift to Asia?
  2. Why is the U.S. government now trying to strengthen chip manufacturing in this country?

OM in the News: A Ship, A Canal, and More Supply Chain Woes

March 26, 2021

It has been a string of disruptions for global supply chains. A Texas freeze that closed the world’s largest petrochemical plants. A worldwide shortage of semiconductors. A fire in Japan at one of the world’s largest auto chip makers. And now a ship grounding in the Suez Canal, closing off traffic in both directions.

Meanwhile, the U.S. economy is recovering rapidly and seeing its fastest expansion in over 30 years, writes The Wall Street Journal (March 26, 2021). This is increasing pressure on the globe-spanning supply chains that multinationals rely on to make everything from bikes to furniture. (It has been months since my local Wal-Mart has been able to stock adult-sized bicycles, by the way).

The Suez Canal is a vital trade route for tankers carrying oil and natural gas, along with container ships moving manufactured goods such as clothing, electronics and heavy machinery from Asia to Europe and the other way around. Around 19,000 vessels crossed the Suez in 2020, with some 39 large cargo ships transiting daily. There are currently 70 northbound ships stuck, outside the canal, along with 79 southbound ships.

evergiven

Operators occasionally divert ships from the canal to the Cape of Good Hope around the southern tip of Africa to avoid bottlenecks, but such sailings take 2 weeks longer and add $450,000 in costs per voyage.

The Ever Given, sailing from China to Rotterdam with 20,000 containers on board, got stuck in the narrow 120 mile canal earlier this week. Facing high winds, the bow of the ship became wedged deep into one side of the canal, requiring dredging. The ship needs to be lightened by taking off fuel, ballast water and, possibly, a portion of its container cargo. With no cranes high enough along this stretch of canal, helicopters are the only option. 

About 55,000 containers are shipped daily from Asia to Europe, meaning massive port congestions when the canal is finally cleared.

Classroom discussion questions:

  1. What technique in Supplement 11 of your Heizer/Render/Munson text can be used to deal with such supply chain risks?
  2. Table 11.3 lists 10 risks to supply chains. which apply to today’s shortages?

Teaching Tip: Explaining a Crossover Chart

March 25, 2021

The Wall Street Journal (March 23, 2021) tackles a question in many minds, namely, are EVs better for the environment than their gas-fueled counterparts? The researchers find that Teslas generate 65% more carbon dioxide emissions than the Toyotas (because of the metals needed for lithium-ion batteries) before they roll off the assembly lines. Then the tide starts to turn and we hit crossover at 20,600 miles driven. The RAV4 burns gas, refined from crude oil. The Tesla refills with electricity, which still burns coal but is getting cleaner each year with more renewables and natural gas. By 200,000 miles, the lifespan of a typical car, the emissions comparison is no longer close.

wsj article

How quickly the U.S. fleet of 280 million cars and pickups switches to EVs will have a huge impact on the country’s overall emissions. They currently contribute 17% of the U.S. total.

We think this graph may pique your students’ attention when you cover crossover charts in Chapter 7, Process Strategies, or when you discuss life cycle ownership in Example S2 in Supplement 5, Sustainabilty.

Classroom discussion questions:

  1. What assumptions are made in this analysis?
  2. When do you think EVs will take over for gas-powered vehicles in the U.S.?

OM in the News: Vaccine Manufacturing in U.S. Races Ahead

March 23, 2021

Covid-19 vaccine manufacturers are ramping up production, churning out far more doses a week than earlier in the year, progress that is accelerating mass vaccination campaigns in the U.S., writes The Wall Street Journal (March 22, 2021). This is good news and is a followup to our blog (March 21, 2021) how making Covid vaccines is taking away from production of other important drugs. This is a nice place to introduce Figure 7.1 (the four process strategies) to your students.

After a slow start, Pfizer and Moderna have raised output by gaining experience, scaling up production lines and taking other steps like making certain raw materials on their own. Pfizer figured out how to stretch scarce supplies of special filters needed for the vaccine production process by recycling them. (The filters remove certain components from the vaccine during production.) And the company added more high-speed vial-filling lines to its plants.

pfizer2

Moderna took 3 months to make the first 20 million doses of its vaccine last year, but now it is making roughly 40 million a month for the U.S. The U.S. monthly output for the authorized vaccines is expected to reach 132 million doses for March, nearly triple the 48 million in February.

Moderna wasn’t able to produce at maximum capacity right out of the gate because of the need to introduce new equipment and processes in stages. It was still training newly hired workers and encountering issues like equipment malfunctions and holdups in getting replacement parts such as filters. It is planning to further speed output by boosting the number of doses in each vial to 15 from 10. “There has not been a single week since we started that we have not had issues,” said a company exec.

Some 2.5 million people in the U.S. are vaccinated daily on average, up from about 500,000 in early January. The increased output should be enough to fully vaccinate 76 million people in the U.S. in March, 75 million in April, and 89 million more in May.

Classroom discussion questions:

  1. Which process in Figure 7.1 of your Heizer/Render/Munson text best fits the vaccine manufacture?
  2. What factors had made the vaccine so difficult to produce?

OM in the News: Scramble to Produce Covid Vaccine Derails Supply of other Drugs

March 21, 2021

The unprecedented effort to manufacture Covid-19 vaccines is disrupting supplies of other critical medicines in the U.S., including treatments for infectious diseases and injectable drugs that prevent blindness. Pfizer has told U.S. hospitals to expect interruptions to supplies of four of its products — an antibiotic, a steroid and two types of testosterone — according to The Financial Times (March 19, 2021). The drugs require some of the same ingredients and manufacturing capacity as the Covid-19 vaccine that Pfizer has co-developed.

covid

Pfizer warned of “short-term supply interruptions to medicines due to increased vaccine production” and stated that hospitals should “anticipate some disruptions” in the second half of the year. The company said that it aimed to deliver approximately 2 billion doses of its Covid vaccine globally by the end of 2021.

This comes as the U.S. tries to boost vaccine supplies in order to fully reopen its economy. The government has invoked the Defense Production Act to ensure that vaccine makers get the drugs and production capacity they need. But the use of that Korean war-era powers has left a third of pharmaceutical firms scrambling for ingredients, equipment or space on production lines.

Other groups involved in medicine production and distribution are also struggling. Schott, one of the world’s largest glassmakers, warned that there was a wait of 12- 18 months for new orders of glass vials. That shortage is affecting almost every type of injectable drug in the U.S., including chemotherapy, insulin and other medicines that are found in crash carts in ERs, ICUs, and surgical suites in hospitals.

Catalent, a contract manufacturer working for the vaccine makers Moderna and Johnson & Johnson, is also prioritizing large orders of injections over other treatments, meaning thousands of patients have had to do without Tepezza, a treatment for thyroid eye disease.

Classroom discussion questions:

  1. Chapter 13 of your Heizer/Render/Munson text lists 5 capacity options used as aggregate planning strategies. Which could Pfizer and others employ today?
  2. What are the advantages and disadvantages of each option you named?

OM in the News: The Global Supply Chain Is a Mess

March 19, 2021

Supply chain woes mounted world-wide for makers of everything from cars and clothing to home siding and medical needle containers, reports The Wall Street Journal (March 18, 2021). The extreme Texas weather and port backlogs compounded problems for manufacturers already beset by pandemic disruptions.

Toyota and Honda were the latest multinationals to chime in about setbacks, with the two auto makers planning to halt production at plants in North America. Toyota cited a shortage of petrochemicals, manufacturing of which has been hobbled by last month’s Texas freeze. Honda pointed to a combination of port issues, the semiconductor shortage, pandemic-related problems and the crippling U.S. weather. Samsung, one of the world’s largest smartphone and chip makers, was just forced to idle two chip factories in Austin, Texas, representing 28% of Samsung’s total output.

ships in port of la

The disruptions underscore how several forces are coming together to squeeze the world’s supply chains, from the pandemic-driven rise in consumer demand for tech goods to a backlog of imports at clogged California ports to U.S. factory outages caused by weather woes. They are creating cost increases and delays for numerous industries. The disruptions, which come as the U.S. and other economies are beginning to lurch toward normalcy, show how messy the reopening of business is proving to be a year after pandemic’s onset, and how vulnerable supply chains remain.

Last month’s freeze in Texas was the latest plank on the pile. The state is home to the world’s largest petrochemical complex, which turns oil and gas and its byproducts into plastics. The February freeze triggered mass blackouts that shuttered plants, many of which remain offline.

Meanwhile, the California ports of Los Angeles and Long Beach (shown in the photo), which together handle more than a third of U.S. container imports, remain inundated from an inventory restocking drive that began late last year and has picked up steam in 2021. Lengthy backlogs that at one point left some 40 vessels anchored offshore waiting for dock space. 

Classroom discussion questions:

  1. What are the major issues confronting global supply chains?
  2. What options do companies have when dealing with multi-week backups at U.S. ports?

OM in the News: Using Blockchain to Trace Your Clothes

March 14, 2021

Labor exploitation, like environmental degradation, is baked into fashion supply chains around the world, writes The Financial Times (March 13, 2021). One contributory factor underlying these issues is a lack of traceability: most brands work with so many layers of middlemen that they don’t actually know who is sewing their garments, much less who’s dyeing the fabric or picking the cotton. Researchers at the Transparency Index (which ranks clothing brands based on how much they know and disclose about their own supply chains), say companies have a “total lack of knowledge about where the components of their products are being made, and at what cost to people and the environment”.

Hence a more technological approach to trace apparel supply chains: block-chain. U.K.-based Fibretrace is offering something unprecedented: a way to store supply chain information within the very fibres of a garment.

Here’s how it works: a bioluminescent ceramic pigment as fine as dust is added to the fibres at the beginning of the supply chain (for cotton, it’s added in the ginning stage, when the cotton fibres are separated from their seeds; for synthetics, it’s added at the fibre production stage). Each batch of pigment is created according to a unique “recipe”, which acts almost like a serial code.

Then, at each stop in the supply chain — dyeing, weaving or sewing — the fibre is scanned and that facility then adds new information about what they did to the fibre to a secure blockchain. The pigment is so safe for humans that it’s classified as an “edible product.” The cost: roughly 3 cents for a T-shirt.

Although being able to track a supply chain doesn’t necessarily ensure it will be free of forced labor or manufacturing practices that are bad for the planet, traceability is a very useful first step.

Classroom discussion questions:

  1. Describe how blockchain works in general, and in this industry in particular. (Hint: see page 453 in your Heizer/Render/Munson text)
  2. What other tools do brand name garment firms have to control supply chain sourcing ethics?

.

OM in the News: Amazon and the Choke on NYC

March 9, 2021

When the pandemic gripped New York City, it propelled an enormous surge in online shopping that has not waned, writes The New York Times (March 4, 2021). But it also highlighted the need for an unglamorous yet critical piece of the e-commerce infrastructure: warehouse space to store and sort packages and satisfy customer expectations for faster and faster delivery. Amazon today has 12 warehouses in NYC and more than two dozen in the suburbs, totaling over 7 million sq. ft. Having warehouses in the city is more cost effective and can trim roughly 20% off delivery expenses compared with deliveries that originate in New Jersey. No other large competitor has a single warehouse in the city.

The onslaught of e-commerce has meant a flood of delivery trucks crowding streets and vying for limited parking, resulting in 500,000 parking violations

While New York’s narrow streets, chronic traffic jams and brutal lack of parking are all formidable challenges, the city also has a severe shortage of warehouses just when they are most needed to properly grease an efficient delivery system. Roughly 2.4 million packages are delivered in the city every day, nearly half a million more than before the pandemic, And 80% of deliveries are to residential customers, compared with 40% before the outbreak.

The online shopping boom will only worsen problems like congestion and pollution that were already bad before the pandemic, sending flotillas of delivery trucks across the city and flooding sidewalks and lobbies with packages. The e-commerce demands also place added pressure on warehouse workers and drivers to fulfill and deliver orders on time, as customers now expect. Just-in-time delivery and last-mile delivery means you need to be very close to customer to provide the level of service that people now expect.

Classroom discussion questions:

  1. Why is Amazon investing in so many warehouses in the area?
  2. Will online demand drop after the pandemic is under control?