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Week of 19 February 2024: Stop moving stuff

Email Jim at jim.thompson@ipulpmedia.com

Jerry Seinfeld has an old joke that goes like this. He is out driving in a rural area. He passes a log truck. Then he meets a log truck coming towards him. He asks, "If the people over here need logs and the people over there have logs, couldn't they just call each other up and avoid driving these logs all over the place?" It got a big laugh.

Of course, real life is not this simple. And within our industry, we do some of what Jerry is talking about--regular swapping goes on in linerboard and medium, saving a considerable amount of freight one incurs when "my trucks going one way pass your trucks going the other."

The stealth area of moving product is something else. It is the moving of products into and out of warehouses. Not only the movement, but the damage that is caused which incurs additional expenses.

On the one hand, my view is to make storage of products as painful as possible (don't build bigger and fancier warehouses). Unfortunately, rental warehouses, at first painful, become the norm after a while. For example, at one time, there was a mid-South mill that had over 50,000 tons of flash dried pulp stuffed in warehouses all over the Midwest because they could not sell it, it was inferior. On the other hand, the mill was out of process balance if they were to shut down the obsolete dryer. Eventually, the mill became an orphan and was shut down for a few years.

Others build or rent warehouses across the country to store products close to their customers, or at least that is their excuse. The idea is to ship products from the manufacturing site to the warehouses by rail, then deliver them out of the warehouse by truck. I often wonder if they have properly accounted for all the costs involved in this scheme.

Pretend your product is strawberries. These are regularly shipped from growers in California and Florida to markets in the northeast using team truck drivers. Maybe the margins on our products do not support such shipping costs. Or is the problem really that we are overproducing and want the excuse to stuff it in a warehouse, only to be written off in two or three years by the hapless successor to the current management?

You might conclude I am always suspicious of warehousing costs. Yet warehousing is extremely popular and profitable across all the space of human endeavors. Here in greater Atlanta, each feeder interstate coming into the metropolitan area is lined with these massive modern bonded warehouses for fifty miles. They keep building more. On a personal level, they have not stopped building personal storage warehouses, where many keep $500 worth of household goods at a cost of $200 - $300 month.

My opinion is our manufacturing warehousing is just as sloppy and wasteful as any other warehousing. You'll have to talk to me long and hard and come with plenty of verifiable data to prove your warehousing decisions make sense.

Be safe and we will talk next week.

________

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Members Opinions:
February 16, 2024 at 7:46am
I’m really glad to see someone else pointing out the inefficiencies of supply chains. You can calculate inventory turns from any annual report and see who does it well and who doesn’t.

Thomas Sowell made a joke too: which would reduce deaths due to auto accidents more? Air bags or a knife pointing out of the steering wheel?



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