Earlier today the Senate passed its version of the Stimulus Bill and will begin work with the House to reconcile their two versions.  In both versions, and most likely in the final version, the states will be given some latitude in how portions of the funds are spent.  Governor Kaine in Virginia has set up a website to solicit ideas from Virginians on how the state spends those funds. I think its a great idea.  After all, this is $830 billion of taxpayer money that is being allocated.  We might as well have some say in how its spent.  Go to the website and make your voice heard Virginia.

The website is www.stimulus.virginia.gov .

The latest Port Tracker report issued by the National Retail Federation and IHS Global Insight contains an ominous forecast for 2009 container activity at American ports.  The report has 2008 TEU volume down 7.9% and projected that the first half of 2009 will be 11.8% off 2008 levels. December 2008 marks the 17th straight month of year over year declines at domestic ports.

“2008 was one of the most challenging years retailers have seen, and all indications are that 2009 won’t be any better,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “Unfortunately, cargo volume at the ports reflects retailers’ anticipated sales, and NRF expects that sales will get worse before they get better. Retailers are only going to import what they can sell.”

While the Port Tracker report only looks at inbound cargo, the current state of the dollar doesn’t hold out much hope for exports pulling us through this time.  2009 will be an interesting year to watch for ports.  As we are seeing in Charleston, shippers are taking a very hard look at the cost of operating in each port.  I would suspect we will see more realignment of routes to more cost effective locations.  The upside to a down economy is that it forces everyone to look at their entire supply chain and be as efficient as possible.  When we emerge from the recession, the lessons we are learning now will help us all be more profitable in the long run.

The Link: LINK

The Story: Logistics Management ran a very interesting article on the online retailer Zappos.Com and how they overcame their order fulfillment issues by using robots.  As the company grew beyond being just an online shoe retailer, it struggled with how to be efficient in fulfilling orders when the items were not the consistent size of a shoe box.  The solution they came up with was a robotic system made by Kiva Systems Inc.  In this system, the robots roam the DC and bring bins of items back to the pickers.  A laser then highlights which specific item is to be picked and a monitor shows the quantity.  The robots do not use wires, rails, or laser for guidance.  Instead, Zappos put bar coded stickers on the floor and the robots read those.  Also, the system stores the larger bins throughout the DC based upon the order characteristics of the items in the bin.  A particular bin does not have a “home” in the DC.  If it’s items are hot this week, the robots don’t take it very far from the picking stations.  If it’s items are frequently ordered with another item, those two bins are stored next to each other.  In all, it seems like a very efficient system and if Zappos decides to leave the building, it can easily be taken with them.

The Analysis: The story brings up a number of interesting issues as it relates to the future of warehouse design.  According to Zappos, one issue with the Kiva system is that it does not go vertical.  All of the bins reside on the warehouse slab.  For years, clear height has been a driving force in the warehouse industry.  Anything under 24′ is considered class “B”, less functional space.  32′ clear is the de facto norm for new construction and 40′ and 50′ are not unheard of.  However, with one of these systems, even an 18′ clear building can be brought into the 21st century.  It would be interesting to run the analysis to see if the cost savings of leasing an older facility and the increase in worker productivity would offset the cost of the Kiva system.  Zappos claims the system is so efficient that it can have an order ready for shipping 12 minutes after the user hits the “submit order” button.

This army of robotic workers can also operate in total darkness.  Zappos only has to light the picking area.  This has the obvious effect of reducing the electrical usage, but also works to reduce the buildings heat load.  Do I smell a LEED point in there somewhere?

If you knew you were constructing a building for an automated user, what other design specs would you change?  It’s only a matter of time before more and more DC’s become completely automated.

This one has been a pet peeve of mine for a while, so you’ll have to endure my ranting.  As we head deeper into 2009 and more and more data points are released we, as users of the data, need to be careful of relying too much on year over year comparisons.  I can’t tell you how many articles I read where some statistic is 2008 numbers are down XX% from 2007 and YY% off 2006 numbers.  OK, it makes for an attention grabbing headline, but what does it really tell us?  Not much.

I think we can all agree 2008 numbers probably aren’t going to be very good (in any industry).  But we have to keep in mind that 2006 and 2006 were very good years for most businesses.  Any comparison between 2008 and 2006 & 2007 is going to be negatively skewed, even more so that the data would suggest.  I could be down 15% from 2007, but still be exceeding an 8% compounded annual growth rate over the past 5 years.  Does that mean my business is suffering badly?  No, it means I’m doing quite well. We need to take a longer term view and put 2008′s numbers into a complete historical context to fully understand their implications.  It may not sell as many newspapers or generate as many clicks or diggs, but it will allow for a more meaningful interpretation of the numbers.

Any statistician will tell you that you need to throw out the outliers before you begin your analysis.  For many industries and many comparisons, 2006 and 2007 were outliers and not indicative of long term sustainable growth assumptions.

The Link: LINK

The Story: This is a very well written article about the far reaching effects of Circuit City filing for bankruptcy protection and announcing it will liquidate.

The Analysis: It’s difficult to fully understand the extent of the Circuit City pain.  For instance, those 40,000 workers that have lost their job will spend meaningfully less money in their communities than when they were employed.  They’ll be more cost conscious of their grocery bill (Wal-Mart over Ukrops).  They’ll wait to take a vacation, or buy a new car.  They certainly won’t be buying a new house anytime soon (I would guess).  So yes, the CC suppliers, newspapers, etc. will certainly feel a modicum of pain.  But the ancillary businesses that served their employee base will suffer just as much.  They may not be able to pin it directly to this bankruptcy or that one, but they will certainly feel the effects in their revenues.