From Navy Oil Tankers
to Amazon's Diapers
By Manley R. Irwin in
the Wall Street Journal
Amazon's online diaper
sales and the U.S. Navy's refueling protocol for World War II appear unrelated
and worlds apart. Nevertheless, they are both answers to an identical logistics
problem: How can an organization shorten the time between a customer's order
and a supplier's response?
Amazon competes with Wal-Mart, Costco, Target and Sears—all of which are mostly
brick-and-mortar retailers that have lobbied Congress to tax Internet sales.
Instead of fighting the proposed national tax, Amazon is seeking a way to
increase its response time to online buyers.
In the case of
diapers, this means encouraging a supplier such as Procter & Gamble to relocate its operations adjacent to
Amazon's warehouses. With co-location, both firms presumably can reduce their
shipping costs, better manage their inventories, and speed up deliveries.
Co-location also is
taking place in the automobile industry, driven by potential cost savings and a
desire to improve just-in-time delivery. General Motors for example, wants a Michigan parts supplier
to be near GM's assembly operations in Arlington, Texas. Chrysler requests its
suppliers to do the same in Belvidere, Ill. VW is pursuing a similar strategy
in Chattanooga, Tenn. Driven by potential cost savings and improved response
time, U.S. industry is showing signs of moving toward a clustered environment.
The U.S. Navy
experienced a similar logistics problem in the Pacific Theater during World War
II. In the early months of the war, the fleet engaged in hit-and-run tactics;
it had to return to Pearl Harbor, where its oil supply tanks were located. By
late 1943, however, the Navy launched an offensive in the central Pacific. As
the fleet sortied west, the geographical distance between consumer (fleet) and
supplier (Hawaii) widened. Refueling consumed a precious commodity—time. Ships
could be and were refueled at sea, but a shortage of Navy oilers imposed a
limit on the fleet's radius of action.
The Marine Corps
offered one logistic solution: seize an enemy-held island, convert the island
into an advanced base and, with the assistance of naval construction
battalions, construct oil-storage facilities for the fleet. That worked, but as
the Navy's fast carrier task force accelerated its Pacific offensive, it outran
the advanced base network.
By 1944, the Navy
introduced floating bases at Pacific anchorages. Commercial tankers from the
U.S. and Venezuela delivered fuel oil to the anchorage, storing oil in barges
and old tankers. That helped, but a gap between oil demand and supply
persisted.
The Navy turned
logistics on its head, dispatching three dozen oilers to meet carrier task
force units at prearranged locations in the forward area. Oilers now refueled
fleet units on the move in what became known as "Underway
replenishment." The results were dramatic. A carrier task force could
remain free from a fixed base for as long as three months.
At the end of the war,
U.S. naval officers interviewed their Japanese counterparts in a free-ranging
battle assessment. One Japanese naval officer put his comments succinctly:
"You came," he said, "far more quickly than we expected."
Fleet Admiral Chester Nimitz later termed the Pacific just-in-time supply chain
as his "secret weapon."
Naval historians would
describe Nimitz's logistic plan as a "fleet within a fleet." Amazon's
co-location has been called a "plant within a plant."
Amazon has already
pushed past the "plant within a plant," speeding deliveries to
consumers by initiating Sunday deliveries via the U.S. Postal Service. Its
ultimate aspiration—same day delivery of online orders—is more imaginative
still, and perhaps a potent response to the Internet sales tax that the
bricks-and-mortar retailers want to hobble them with.
Mr. Irwin is professor
emeritus at the University of New Hampshire's Peter T. Paul College of Business
and Economics.
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