Letter Re: What Retail Might Look Like at TEOTWAWKI

Dear Sir,

I feel like I have some insight to add to Jacob’s post about what retail may look like post disaster. I manage a warehouse for a DSD (direct store delivery) company. Here’s just a little bit of insight into what that is, since not everyone knows how stores get their merchandise: Many items are not stocked by the stores themselves. They never go through their own distribution network. Instead, companies (bread, snacks, soda, beer, pizza, et cetera) manage their own distribution and have their own trucks go to the store. We handle our own product from raw materials all the way to placing it on the shelves at retail.

I have a feel for how things will start to run out on the shelves, once people start panic buying and/or the distribution system starts breaking down. I have learned this over the course of a couple of blizzards or when there have been minor trucking issues that end up throwing the system out of rhythm.

There are many similar items stocked in a major grocery store. Let’s use milk as an example. (I do not deal with milk at work; it just seems like a good fit for this scenario.) Think of the different brands of milk. Then think of the different fat contents (skim, 1%, and so forth). Now think of the different sizes of containers (gallon, half gallon, and quart). These are all basically interchangeable, but people have their preference. Once their first choice is gone, they can easily switch to the next best thing for them. If they normally buy a gallon of 2% milk but that is unavailable, they will simply buy the half gallon size. Here is where the problem starts. With the short supply (or even perceived short supply) instead of buying two half gallons, they will most likely buy three or more, just to be sure they don’t run out. This puts a lot of pressure on the other sizes and styles of the item. Something that normally has a small sales volume suddenly has a huge amount of demand with little supply to support it. These secondary items will run out quickly, as they are not stocked in any kind of volume. Then the consumer has to start looking farther away from the item they originally wanted. Maybe the whole and skim milk, then things like rice or almond milk that have only a few units in the store at a time. After that juices, soda, and other items will go. It is amazing the different things that will sell, once a main item runs out. Something I have discussed with fellow warehouse managers that we all are amazed by is this phenomena “When you run out of something, you run out of EVERYTHING”.

Another thing to point out is the amount of time it takes to get back on track following a disruption in supply. Take a blizzard that shuts down a distribution center for a day. The way things work is that shipments are coming in constantly, but they are timed so that basically only the items projected to be necessary are delivered. There are not warehouses full of every item imaginable that can just be run out to a store. Now a blizzard not only shuts down the warehouse and its delivery vehicles, but it shuts down the trucking that supplies the warehouse itself. When the trucks do start moving they are going to be late and sometimes out of sequence. So, items that aren’t needed are coming in, and items that are needed are sitting in a yard somewhere waiting for a driver. The last time this happened to me, it took a full week for things to get caught up and for me to actually be able to supply the customers properly. That isn’t to say there was nothing available, but it was not the right items at the right time. It was a week’s worth of issues caused by a blizzard that didn’t even hit our state. It just shut down the transportation system. Now imagine if something serious hit. Stores would be wiped out, and resupply would be spotty at best.

Also, in a real disaster there is a very good chance that many delivery trucks simply won’t go out. There could be inventory sitting in warehouses that has no one willing or able to move it to the stores. Or there may only be certain routes that go out, so supply can be limited to certain stores, even though there is product enough to supply all of them.

A final thing I want to address is the amount (or lack thereof) of inventory waiting to fill shelves. Gone are the days of stores having big back rooms full of product waiting to be stocked. Our trucks go out to the same stores every day. Depending on the volume of the store being serviced, they can get deliveries as often as every day (or even twice a day in special circumstances). The entire inventory of the stores is contained on the shelves of the sales floor (with maybe a tiny amount of back stock composed of partial cases that wouldn’t fit on the shelves, or a few extra cases of fast-moving items that will be worked on days that there isn’t a delivery). Because inventory dollars are dollars that can’t be used for other things, there isn’t a big supply of this product farther along the supply chain either. We try to keep our supply at less than eight days worth. That is a deceptive number though, as some items move very slowly and need decent sized minimum orders, so they may have a few weeks worth on hand. The faster moving items (the things people actually want) can have two or three days of supply on hand at any given time. A big spike in demand, due to a disaster, will wipe that out VERY quickly.

Due to the nature of business and that no company wants to tie up dollars with “just in case” inventory, it really is up to the consumer to make sure they have the items they need in their homes before something happens. You cannot rely on stores having what you need once the panic buying has started. – Dave