joelogisticsbroker-blog

[joelogisticsbroker-blog]

Gender Inclusive: Rethinking the Restroom

Gender Inclusive: Rethinking the Restroom

Gender Inclusive: Rethinking the Restroom

“Our modern conception of public restrooms dates back to antiquity.”

– Gensler

My mom likes to remind me every now and again that when she was a kid, she had to take her business to the “outhouse.”  Between the imagined smells in the summer heat or “hovering” for fear of your backside getting stuck to the seat in the winter, I’m forever thankful…

[joelogisticsbroker-blog]

3 Last-Mile Trends You Should Be Excited About.

3 Last-Mile Trends You Should Be Excited About.

  This year, online retail sales will approach the $500 billion mark, reflecting another double digit increase in online sales growth and yet another knock at the door of carriers looking to solve “The Last Mile.”  In my head, I start to hear the song For Whom the Bell Tolls.

The Last Mile accounts for roughly 28% of total delivery cost. As long as consumers expect more in less time and margins…

[joelogisticsbroker-blog]

5 Ways to Increase Supply Chain Visibility

5 Ways to Increase Supply Chain Visibility

  There are three main issues companies encounter when dealing with supply chain visibility (SCV): 1) Sharing information across links in the supply chain. 2) Interruptions in the supply chain (demand, weather-related, etc.). 3) Picking out the most useful data as a product goes from A to B.

Simply waiting for blockchain to improve visibility and reporting is not a reasonable expectation for any…

[joelogisticsbroker-blog]

4 Drivers Behind Workplace Design You Need to Understand.

4 Drivers Behind Workplace Design You Need to Understand.

Let me tell you a quick story then I’ll get to the crux of the post, I promise. Recently, I completed a 3 day fast with my wife.  The first 36 hours were brutal, but I began to understand that it wasn’t my stomach that was hungry.  It was a perception of hunger rooted in my state of mind.  As I sat there in ketosis, I quickly came to the realization that I spend a lot of time unnecessarily…

[joelogisticsbroker-blog]

Be Proactive or Eat Dust: The Case for Sustainability in the Supply Chain

Be Proactive or Eat Dust: The Case for Sustainability in the Supply Chain

Changes in technology, processes and business practices are changing so rapidly that it can be perceived as a lot of people throwing sh** against a wall to see what sticks.  Knowing this, a safe “corporate” response might be, “Let’s sit here, have a picnic and see what sticks, then we’ll jump on that bandwagon.”  I often hear things like, “We’ve always done it this way”, “This is how it worked at…

[joelogisticsbroker-blog]

5 Steps That Will Make Your Business Partnerships Flourish in 2018

Last year I posted an article on Industry Outlook: The Role 3PLs Will Play in Supply Chain Transformation.  Part of that post reflected on how third party logistics providers (3PLs) are moving away from a traditional transaction based relationship to reciprocal partnerships that instead take a strategic hand-in-hand approach.  The problem here is that the two sides don’t always see eye-to-eye on…

[joelogisticsbroker-blog]

A Long Term Play for Better Healthcare Starts with the Supply Chain

I’ve seen my fair share of hospitals over the last few years and am incredibly grateful for the quality of healthcare we have at our disposal.  However, after NICU stays for both of our boys, a brief ICU stay for my wife, baby humidors, IVs, midnight ER visits, and multiple knee surgeries for my wife, please forgive me if I don’t get giddy about making another visit.  I digress.  Hospitals rely…

[joelogisticsbroker-blog]

3 Reasons Why Retailers Should Pay More Attention to Their Backroom

Thanks to just-in-time inventory management practices, speed of delivery and readily available product distribution, the backroom of your typical retailer has steadily shrunk over the last decade.  This is true for clothiers, fast food, and most other retailers looking to maximize profits and utilize the space to effectively support front end marketing strategies. That said, effectively utilizing…

[joelogisticsbroker-blog]

4 Reasons "The Maker Movement" Will Redefine Traditional Manufacturing in the U.S.

4 Reasons “The Maker Movement” Will Redefine Traditional Manufacturing in the U.S.

My Dad and I met for lunch recently, and he showed me plans for a custom potting bench he had already designed and built for my mother.  Before I get too far, I should say that it is a beautiful piece and received rave reviews from the ladies at bridge club (nice work Pop). He wants to market the product online and was looking for pointers from a trusted Xennial on website design, marketing and…

[joelogisticsbroker-blog]

China's Economic Petri Dish: Why Alibaba Will Revolutionize "New Retail" and Become the World's 5th Largest Economy by 2036

China’s Economic Petri Dish: Why Alibaba Will Revolutionize “New Retail” and Become the World’s 5th Largest Economy by 2036

If you are Amazon, a major brick and mortar retailer or retail focused real estate developer, this post is your wake up call.  In 2012 Jack Ma, founder of Alibaba made an aggressive $16 million (100 million RMB) wager on the future of Chinese retail with Wang Jianlin, head of Dalian Wanda Group, a leading privately-held conglomerate (major retail developer) based in China. Ma has consistently…

[joelogisticsbroker-blog]

Blockchain 101: Supply Chain Risks and Rewards

Blockchain 101: Supply Chain Risks and Rewards

Despite the hype, Blockchain is not a “silver bullet” answer to all the problems supply chain faces today.  Instead, I think the value of Blockchain will be fully realized after a cumulative progression of new technologies and market disruptions (e.g. 3D printing, AI, big data, IoT) lay a more stable foundation for Blockchain to gain acceptance.  This post explores the basics of Blockchain…

[joelogisticsbroker-blog]

“JETSOOOOON!!!” calls Mr. Spacely from a monitor somewhere in George Jetson’s office. George immediately jumps into a human sized pneumatic tube, arriving seconds later so the berating can continue in person.

The Concept of the Hyperloop seemed far-fetched in 1963 when The Jetsons first aired. However, we are quickly approaching an inflection point between conventional transit systems and futuristic transit capability and design, and Hyperloop could put us at George and Judy Jetson’s front door.

What is a Hyperloop?

In theory, the Hyperloop could leave San Francisco, CA and arrive in Los Angeles, CA in 30 minutes (383 miles).  I was a skeptic until I read through Elon Musk‘s white paper design study. Follow Elon on Twitter (@elonmusk).

Here is a brief post covering some of the interesting facts about Hyperloop technology and a few ways it could affect the commercial real estate landscape.

This slideshow requires JavaScript.

The Hyperloop concept was initially created by Elon and his team to provide a better, cheaper solution to the California High-Speed Rail Project (CHSRP), which has fallen under heavy scrutiny for costs estimated at $84 million per mile over the proposed 800 mile route.

Instead of a rail system, Hyperloop is designed as a high speed/low pressure tube system set above the ground on pylon structures.  The system would be solar and battery powered using the same technology we’ve seen in the Tesla Model S.

I’m not going to geek out on why they chose a low pressure system other than it follows the science behind improved aerodynamics for jets flying at high altitudes.  The low pressure system also addresses issues that arise from the Kantrowitz Limit.

Overall, Musk looks at Hyperloop as a fifth form of transportation going beyond the conventional road, rail, air and sea transit systems we use today.  Musk goes on to say that any massive investment in our transportation infrastructure should be faster, safer, costs less, immune to weather, sustainable, self-powering, earthquake resistant, more convenient and not disruptive to those along the route.

“The Hyperloop (or something similar) is, in my opinion, the right solution for the specific case of high traffic city pairs that are less than about 1500 km or 900 miles apart. Around that inflection point, I suspect that supersonic air travel ends up being faster and cheaper. With a high enough altitude and the right geometry, the sonic boom noise on the ground would be no louder than current airliners, so that isn’t a showstopper. Also, a quiet supersonic plane immediately solves every long distance city pair without the need for a vast new worldwide infrastructure.  However, for a sub several hundred mile journey, having a supersonic plane is rather pointless, as you would spend almost all your time slowly ascending and descending and very little time at cruise speed. In order to go fast, you need to be at high altitude where the air density drops exponentially, as air at sea level becomes as thick as molasses (not literally, but you get the picture) as you approach sonic velocity.” – Elon Musk (Hyperloop Design Study)

Hyperloop Misconceptions:  “Ru-roh Rorge”

Pneumatic tubes are a great way to visualize how Hyperloop might work, but it is completely wrong from a design and engineering standpoint.  The fans required to push air through a pneumatic tube system over 350 miles long would create too much friction and require too much energy to facilitate.

Vacuum tubes with electro magnetic pod suspension is equally as unsustainable as scaled up pneumatic tubes.  The ability to maintain a true vacuum is hard enough maintain in laboratories and would be impossible to achieve, much less maintain, over a 350 mile stretch.

How much does it cost?

There are two designs of the hyperloop.  A smaller passenger design and a larger design that allows for passengers and larger cargo.  The cargo version of the hyperloop is slightly larger to accommodate cargo loads (i.e. cars, equipment, freight etc…), but the increased cost is relatively minimal.

The estimated cost to build a Hyperloop from San Francisco to Los Angeles (approx. 383 mi) comes in around $15.5 million per mile for the passenger version and $19.6 million per mile for the larger cargo version.  This is a fraction of the cost California will encounter with the CHSRP, which is expected to cost $64 billion when it’s completed ($84 million per mile).

Why is it so much cheaper?

By putting the tube system up on pylons requires much less land acquisition and infrastructure components. Rail systems typically require a cleared area 100′ wide  to build up the ground for the track system.

Since the pylons take up less space, it becomes more feasible to follow the path and infrastructure of major interstates like the I-5 from LA to San Fran without causing too much disruption.

A pylon system would be much less disruptive to farmers and rural communities that often times have to go miles out of their way to cross rail and highway systems.

The tubes can be built off site and installed in sections, which would be connected using an orbital welding system which cuts down on labor costs and essentially becomes a plug and play system (think easy like Lincoln Logs).

The main power for driving the pods comes from the batteries in the pod itself and is supported by solar arrays along the tube.

The pod rides on a cushion of air (think air hockey table) that is powered by a Tesla Model S battery that has been “rolled flat.” The pod only uses energy to maintain velocity 10% of the time otherwise it is coasting on air.  See the chart below reflecting energy requirements of other transit systems.

What does this mean for commercial real estate?

Hyperloop Stations would see restaurant and retail success similar to major airports by capitalizing on captive passenger traffic and tourism.

The capacity for each pod to carry up to 7500 kg in cars and cargo will provide a streamlined solution for LTL freight and distribution routes in markets with access to a Hyperloop cargo station.

Areas surrounding Hyperloop stations would be prime real estate for regional distribution and third party logistics firms.

 Since this is an open source project, I wouldn’t be surprised to see dedicated FedEx, UPS, Amazon, Wal-mart and other branded pods dedicated to freight and distribution with a hub near each Hyperloop station.

Passenger rail systems will not survive in markets served by a Hyperloop since the cost to use Hyperloop will be around $20 for a one way ticket (Amtrak from Kansas City to Saint Louis is more than twice that amount).

Industrial rail will transport heavier equipment and systems not supported by Hyperloop from intermodal and manufacturing facilities.

Hyperloop technology is still in early test phases, but since it began as an open source project, there is a lot of interest in developing the technology from groups around the world.  While I’ve focused on the LA to San Francisco, there is more speculation that the first loop will be completed in Europe.

Elon Musk and Sir Richard Branson have partnered in developing Virgin Hyperloop One,  and competing group Hyperloop Transportation Technologies (HTT) are also pursuing their own version of the Hyperloop.  I look forward to updating this post as more development comes to light.

I would highly recommend reading Elon’s design and specs information referenced below.

Please keep the conversation going and leave a comment or share with a friend!

Thanks for reading!

Other Resources:

https://newatlas.com/missouri-hyperloop-25-minutes/51604/

https://hyperloop-one.com/blog/introducing-virgin-hyperloop-one

https://science.howstuffworks.com/transport/engines-equipment/hyperloop.htm

https://en.wikipedia.org/wiki/Hyperloop

https://www.smithsonianmag.com/innovation/hyperloop-latest-innovation-pretty-much-series-of-tubes-180955735/

California High Speed Rail Project (CHSRP)

SpaceX Hyperloop

Elon’s White Paper on Hyperloop Design and Specs

Hyperloop: Design Lessons From George Jetson "JETSOOOOON!!!" calls Mr. Spacely from a monitor somewhere in George Jetson's office. George immediately jumps into a human sized pneumatic tube, arriving seconds later so the berating can continue in person.

[joelogisticsbroker-blog]

Autonomous Trucks Vol. 2: Two Infrastructure Changes You Haven't Considered.

Autonomous Trucks Vol. 2: Two Infrastructure Changes You Haven’t Considered.

Most discussions around autonomous vehicles focus on cars that move people from A to B, but when you consider the benefits of automating truck travel, automating systems for tracking product and the infrastructure necessary to support autonomous freight transit, the idea of autonomous cars quickly becomes secondary. Most commercial cargo traveling less than 500-600 miles is transported using…

[joelogisticsbroker-blog]

LUXLOCK: The Internet of Product (IoP) and "The Barbell Effect" in Action.

LUXLOCK: The Internet of Product (IoP) and “The Barbell Effect” in Action.

Earlier this year, I made some predictions in Innovate or Die: 5 Omni-channel Strategies Amazon is Trying to Outrun.  As a part of those predictions, I talked a little bit about the “barbell effect” and how there would be a dichotomy between luxury/high-end, customized, boutique firms that offered a unique customer experience for a premium and hyper-local/convenience based omni-channel models…

[joelogisticsbroker-blog]

Lease Administration Guide: Recommended Programs, When to Use and What Comes After.

A guide to the ins and outs of selecting and implementing a lease administration program.

From my experience, most executives in charge of managing a company’s real estate portfolio are highly adept at communicating with departments across the organization for their direct responsibilities.  Additionally, they are in charge of a thousand other things.  For starters, they fill roles on special projects, work directly with clients, deal with off-site employees and often report directly…

[joelogisticsbroker-blog]

It has been said that smartphone devices are designed to provide a level of gratification on par with drug use or gambling, which piqued my interest.  After doing some basic research I quickly realized there are some interesting parallels between a Fortune 100 supply chain and a drug cartel.

The success of the iPhone would not have been possible without Apple’s top ranked supply chain, and many could say the same for the creative ways cartels have been able distribute (cocaine) over the last 40+ years.

In this post, I am going to highlight areas of the supply chain for Apple and NARCOS that give each group a stranglehold on their markets of choice.  While I do not condone illegal drug trafficking, I thought it would be an interesting exercise to compare the two groups in order to highlight some of the creative techniques and practices they use to distribute their products.

Basic Economics and Market Positions:

Users

It is estimated that there are 700 million iPhone users worldwide.

Over 255 million people used illicit drugs last year.  More specifically, that’s 1 out of every 20 people ages 15-64.

Vendors/Suppliers

Apple utilizes 156 suppliers and vendors to make and distribute the iPhone.  78 million units were shipped out in 2016.  Nearly all of Apple’s finished products are manufactured in China and then shipped out of China’s 7 major ports along with 95% of the world’s consumer products.  Raw materials for iPhone come from all over the world.  Amazon has roughly 300,000 vendors/suppliers.

NARCOS utilizes 265,000 hectares (654,829 acres) of coca bush farms spread throughout three main countries (Colombia, Peru and Bolivia).  There are six Mexican cartels that NARCOS uses to transport and distribute product to the US and Europe.

Costs of doing business

It cost around $224.80 for parts and manufacturing to make the iPhone 7.  Apple sells the basic model for $649 which is a 189% profit before shipping and handling.

It costs approximately $780 to make a kilogram of cocaine in Columbia.  You can buy the cocaine in Columbia for approx. $2,200 per kilogram, which results in a 149% base profit.  As the cocaine moves north, the price of the cocaine increases to $27,000 per kilogram once it reaches New York City and doubles when it gets to Europe.

Market share and value

Apple controls 42.9% of the US smartphone market.

98% of the cocaine produced in the world comes from South America (Colombia, Peru and Bolivia).

Total estimated value of cocaine produced (1,237 tons) in 2016 is $239 billion.  It is estimated that out of the 1,237 tons, 250 (18%) will be seized by authorities worldwide bringing the actual value realized to $196 billion.

Value of Apple’s global market share at 18.3% as of Q4 2016 is roughly $86 billion.

Supply Chain Comparison:

Apple’s Basic Supply Chain

NARCOS Supply Chain

Sourcing/Manufacturing: 

Colombia, Peru, Bolivia and Central America/Cocaine is typically assembled in the country where raw materials (coca bush) are sourced – South America.

Warehousing: 

Intermediate warehouses via FedEx, UPS in small quantities; Stored in private warehouses owned by shell corporations; hidden in storehouses, buried in sealed lockers.

Distribution Tactics:

Wholesalers/Network Carriers – Cocaine is often hidden in legitimate goods until they can be extracted – See Los Pollos Hermanos, potato chips or salsa containers for good examples.

Human mules have been known to put drugs in their orifices or swallowing sealed containers to transport cocaine over the border.  In one extreme case, a woman was caught with cocaine filled breast implants.

Analyzing data from 2011 to 2016 from the Department of Homeland Security (DHS), the Government Accountability Office (GAO) identified a total of 67 cross-border tunnels, 534 ultralight aircraft incursions and 309 incidents involving panga or recreational boats during that period.

Below is a picture of several homemade submersibles that were used to traffic drugs into the US.  Power boats and recreational vehicles with hidden compartments have also been used on a regular basis to get product across borders.  

Direct Sales Force – This group involves your local, low-level drug dealer offering direct to consumer sales.  Here’s a good interview with one such dealer.

Most of the “Direct Sales Force” could be considered outside contractors as they typically do not have a gang affiliation or relation to a specific cartel.  You will not see any of these folks become the next Pablo Escobar.

Returns:

The purity of the product is a huge driver for return customers. So while typical return logistics do not play a part in NARCOS’ supply chain, quality and reliability are critical to the longevity of a drug cartel.

Regulation:

I had the opportunity to speak with a representative of a US drug enforcement organization and was asked to keep their identity and organization confidential. Here’s what they had to say.

“These guys will use whatever method they can to get the drugs over the border, and they use systematic methods to identify flaws in the system.  Once they find something that works, they flood as much product as they can through that particular channel until it closes up.  I expect we’re capturing less than 50% of what’s coming in to the US.  They bring it over in cars, semis, mail, mules, boats, drones and planes, and it comes down to a numbers game.  For every load that gets seized, I’ll bet 6 or 7 make it through.  

That numbers game works from our end as well.  If we can get a good lead or a wire tap, we’ll knock down loads (seize drugs) left and right from the same organization.  

Word travels quickly though, and the cartels are always watching us, too.  So when we start knocking down loads, couriers will get word to use I-80 instead of I-70 or jump to the I-90 corridor, and it becomes another game of “cat and mouse.” 

Drug cartels even have seasonality:  “They operate like any other business, following trends of what works and capitalizing until there is a shift in the market or enforcement.  They even take a break for Christmas, pushing as much product as they can the first of December, cutting prices like a car lot pushing out last year’s inventory.  By the time the second week of December rolls around nearly all trafficking stops completely until the second week of January.”

I appreciate you humoring me in this post as I really enjoyed stepping outside my box on this one.  That said, taking legality and other moral differences out of the equation leaves quite a few similarities between a fortune 100 company and a drug cartel.  At the very least, you’ll know more when then next season of NARCOS comes up on Netflix.

  References:

http://www.wsj.com/ad/cocainenomics-the-logistics.html

http://www.businessinsider.com/carlos-lehder-pablo-escobar-and-the-history-of-the-medellin-cartel-2016-8

https://medium.com/@njmnmims/7-business-lessons-from-pablo-escobar-the-man-behind-the-greatest-drug-empire-c3182beb8294

http://www.cnn.com/2009/CRIME/04/16/creative.drug.smugglers/

http://gizmodo.com/5988877/13-shockingly-creative-ways-drugs-have-crossed-the-border

http://www.sliptalk.com/drug-smuggling/

http://www.insightcrime.org/news-analysis/us-report-on-alternative-drug-smuggling-tactics-undermines-border-wall-logic

http://www.craveonline.com/mandatory/1059752-the-12-most-ridiculous-drug-smuggling-tactics-ever

https://news.vice.com/article/drug-trafficking-meth-cocaine-heroin-global-drug-smuggling

http://www.drugabuse.net/drug-policy/drug-trafficking-statistics/

http://www.unodc.org/doc/wdr2016/WDR_2016_ExSum_english.pdf

https://www.unodc.org/wdr2017/field/WDR_2017_presentation_lauch_version.pdf

https://logisticsmgepsupv.wordpress.com/2015/03/12/logistics-in-drug-trafficking-organizations/

http://www.akha.org/content/drugwar/mccoy/04.htm

https://expandedramblings.com/index.php/iphone-statistics/#.WdPlJ2hSw2w

http://fortune.com/2017/03/06/apple-iphone-use-worldwide/

https://www.recode.net/2017/6/26/15821652/iphone-apple-10-year-anniversary-launch-mobile-stats-smart-phone-steve-jobs

http://www.supplychain247.com/photos/is_apples_supply_chain_really_the_no._1_a_case_study/1

https://www.theguardian.com/world/2017/jul/14/colombia-cocaine-united-nations-figures

https://drugabuse.com/library/cocaine-history-and-statistics/

http://www.live5news.com/story/16937198/testimony-claims-drug-ring-used-fedex

Smartphones are like drugs?Let's take a closer look @ supply chains supporting Apple & NARCOS. It has been said that smartphone devices are designed to provide a level of gratification on par with drug use or gambling, which piqued my interest. 

[joelogisticsbroker-blog]

3 Things You Should Know About Changes to NAFTA

3 Things You Should Know About Changes to NAFTA

Recently, the US began negotiations with Canada and Mexico to revamp some major areas that make up the North American Free Trade Agreement (NAFTA).  The changes that will come out of these negotiations will have a ripple effect across the supply chain.

Since NAFTA was signed into action in January of 1994a lot of things have changed. The explosion we’ve seen in trade activity and global sourcing…