The Supply Chain Matters blog provides our weekly capsule of news reports that have implications for various industry supply chains. With COVID-19 coronavirus news once again on the rise, we provide this feature to assist our readers in their efforts to keep updated on noteworthy developments.
Topics and Companies included in this capsule update include:
Paper Towel Shortages
Aluminum Can Shortages
Amazon Granted U.S. FAA Approval for Commercial Drone Fleet
Amazon and Smartphones in Trees
Continued Shortages of Paper Towels Across the United States
The Wall Street Journal indicated last week that after the COVID-19 coronavirus sparked a run on paper towel supplies across the United States, retailers still cannot keep adequate inventory to meet ongoing consumer demand.
On average, 21 percent of household paper products were out of stock at U.S. stores on August 9, according to shopping analytics data from IRI. According to the report, consumer demand remains 25 percent higher than pre-pandemic levels.
The report indicates that the long-established model for paper towel production has been anchored in just-in-time inventory and production processes which emphasizes ordering just enough material for a day’s worth of output. Since supplies of raw paper pulp, as well as the finished rolls are bulky and take up lots of space, a lean continuous supply chain model is the most efficient for the industry. Across trucking transportation segments, trailer-loads of paper towels take added time to unload or re-load and with limited or detailed scheduling of dock door availability, truckers tend to shun such loads because of the added wait times.
Because of the high cost and rather long lead times for specialized production machinery, producers reportedly have no plans to increase production capacity. Instead, producers such as Georgia Pacific, Kimberly Clark and Procter & Gamble have cut down on SKU product selection to reduce line changeovers. P&G managed to restart idled production equipment located at a facility in Albany Georgia.
Meanwhile, retailers continue to provide orders that average 25 percent higher than pre-pandemic demand levels.
A Global Aluminum Can Shortage
The Wall Street Journal published a further report indicating that the demand for metal cans, specifically aluminum, during the ongoing pandemic is motivating can producers to boost production capacity.
The report indicates that accelerated demand stems from consumers drinking more at-home vs. bars and restaurants, as well as cans being lighter than glass containers. Aluminum cans further have higher recycling tendencies on the part of consumers and households. Whereas beer can be bulk shipped to bars in kegs, individual consumer needs now stem from canned varieties of beer. Cited is research data from MRI indicating that U.S. retail sales of aluminum drink cans increased 24 percent by volume in March and have continued to grow. The shortage is not only in the U.S. but is reportedly occurring across Germany and the United Kingdom.
Consequently beer and beverage companies continue to scramble to secure added supplies of cans. Global producer Ball Corp. indicated that demand is crazy, and that the producer is running two added production lines in the coming weeks. Ball and other producers are also importing cans from other global regions.
The can industry as a whole is reportedly not viewing increased demand as a one-off. The Can Manufacturer’s Institute, a U.S. trade body indicates that new capacity to produce 12 billion more cans is expected to be in place by the end of 2021.
Amazon Granted U.S. Federal Approval for Commercial Drone Fleet
This week, Amazon received U.S. FAA Part 135 air carrier approval to utilize drones to deliver packages for its fleet of Amazon Prime Air Drones. However, a number of subsequent steps remain before widespread use can be anticipated.
According to reporting from Bloomberg as well as The Wall Street Journal, the online provider has been testing drone flights at sites in Canada, Austria and the United Kingdom as well as other international locations but can only perform customer related tests involving the U.S. and the United Kingdom.
The online platform provider is one of three to receive such certification. Others include Wing Aviation, owned by Google parent Alphabet, and UPS Flight Forward.
Wing has partners FedEx and pharmacy chain Walgreens. In October, UPS was granted FAA approval to fly drones under regulations similar to airlines, to include the use of delivery drones at hospital, corporate or academic complex campuses.
Bloomberg indicated that current U.S. regulations do not permit autonomous drone flights without on the ground safety measures and designated safety observers.
Amazon and its competitors must reportedly hurdle additional regulatory and technical hurdles before drone handled packages can be seen in various geographies. That includes documenting pilot-training programs and other operational procedures.
Last week, Supply Chain Matters called reader attention to Aquiline Drones, aiming to be one of the first significant scale U.S. based designer and manufacturer of various commercial drones, as well as fostering a commercial drone pilot training and small business development program.
Amazon Drivers Hanging Smartphones in Trees
Bloomberg reported this week (Paid subscription or metered view) what was described as: “A strange phenomenon emerging near Amazon.com Inc. delivery stations and Whole Foods stores in the Chicago suburbs; smartphones dangling from trees.”
According to this report, delivery drivers are placing such phones close to where Amazon deliveries are to originate in order to trick Amazon’s technology as to the proximity of available drivers for specific deliveries. The report indicates that after several devices are placed in a tree adjacent close to an originating fulfillment facility, drivers then sync their own phones with those in the tree and then wait for a pick-up order. Drivers are reportedly competing for Amazon’s fast-delivery Instant Offers, which require immediate response by an available driver. The goal is to get a spit-second jump on competing drivers.
With jobs diminishing and demand for Lyft or Uber shared rides also on the decline because more workers reside in residence, competition for Amazon Flex work has stiffened since many drivers now rely on such services for personal income. A compelling statement in this report: “Much the way milliseconds can mean millions to hedge funds using robotraders, a smartphone perched in a tree can be the key to getting a $15 delivery route before someone else.”
Bloomberg indicates certain technology experts as indicating that the drivers may be garnering the assistance of an expert quite familiar with Amazon’s algorithms, while Amazon itself is now actively investigating the matter and would not comment further.
From our lens, it is said that technology reduces competitive barriers, and in this specific report, it appears that applies to many.
This concludes our September 2 2020 COVID-19 Industry Supply Chain News Capsule. As the news cycle warrants we will continue such updates initially on a bi-weekly cycle. Readers can also access our August 19 edition of this COVID-19 news capsule series.
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