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My brain should not be left un-chaperoned

My brain got bored last night and started in on thinking about airlines. I tried to distract it using various methods but it insisted on thinking about airlines. Fuckin' brain.

Airlines are facing some pretty heavy problems here in the era of expensive oil. Some of these problems are self-inflicted. Southwest and Continental were smart enough a couple years back to start aggressively hedging the price of oil. As a result, they aren't (presently) getting killed like pretty much everyone else. Doing this was such a no-brainer it isn't altogether surprising that the airlines missed it ('cause they're pretty good at missing no-brainers). It's like they believed their bullshit spin on how they were dying due to the cost of labor and unions are evil, etc. that they forgot to look at what actually could kill the business model. Which turned out to be, duh, oil. It's hard to fathom that the price oil was something only a very small number of airlines realized was the critical input for them and, as such, they should engage in some serious risk management to protect themselves as best they can from shocks to the price of said input.

As with some of the supply chain stuff I was prattling about the other day, the spike and ongoing upward trend in the oil price is, in fact, slamming airlines but some bright kids are gonna figure out that, as with any business shock, there are opportunities to kick the tar out of your competitors.

New Orleans Story - Audio Version

Hey, y'all. I've had the great good fortune to be able to work with a couple of groups here in Minneapolis over the last 8 or so months. Over yonder you can find the Rockstar Storytellers. The Rockstars have a super mega show coming up on July 15th (and the scheduling Gods willing I'll be able to be in town that night and join 'em).

The other group is the Radio All-Stars. This group, headed up by Dave Mondy, Allan Staples, and Melissa LaCasse, is moving toward creating a kinda Prairie Home Companion but updated...cooler, hipper, and really, really good. Back in April I got to do one of their shows and told a story about New Orleans I'd never gotten to do in front of an audience before. Turned out pretty good. It's a big ass file. Like, 10 meg or so. But I think, or hope, you'll find it worth the wait. And, you know, thanks to the Radio All-Stars for doin' what they do.

Hookin' for Gas Cards at the SA

In Minneapolis the big convenience store chain is called Super America, blessedly truncated to SA by the locals. Super America is such a ridiculous name. Dating myself, I can't help but think of Captain America, the cartoon. When Super America Waves It's Mighty Shield..etc. I mean, if I drove up into Canada and saw a sign for something called Awesome Canada the last thing on earth I'd expect to see would be a convenience store.

At the SA nearest my house I've seen this woman a few times. When I first caught a glimpse of her I thought she must be very young...long platinum hair and skinny as a rail wearing a neon pink halter and skin tight jeans. Upon closer inspection...she's one of those women who could be anywhere from 30-50...probably closer to 30 but the hard miles she's logged make her look closer to 50. She was never in the store, always just outside it. Never seemed to be doing anything.

Late last week I pulled into the SA. The guy in the space next to the one I took was sitting in his big ass and shiny new SUV, arms stretched out along the top of the back rest, head leaning back, eyes closed. Weird. I went in and transacted my business. Came out. Got in the car. Looked over. Dude was tensing up. Caught motion just above the window line. Thought to myself...no...that dude is not getting a hummer in the parking lot of the SA at 5pm on a Thursday. Absolutely not.

The head in his lap pops up. I see long platinum hair. She wipes her mouth with the back of her hand. He hands her something and she immediately hops out of the car. Holding a freshly purchased Super America Gas Card. She more or less skips over to her usual position by the door and takes up her station, ripping the packaging off the card and stuffing it in the back pocket of her ridiculously tight jeans. Looking quite pleased with herself.

SUV dude hurriedly puts himself back together and sees me staring at him. He flips me off. Apparently, I was invading his privacy. He screeches out of the parking lot, nearly running over some poor college kid walking back to his car.

As I pulled out I saw one of the SA folks come out and start yelling and wagging her finger at Platinum Woman. With my window down I could hear Platinum Woman screaming back, cussing and cackling as she sashayed away. The SA employee was shouting something about calling the cops if she came back.

Last night, a little after midnight, I saw Platinum Woman at a different SA, a few miles away. Hanging out by the door. Same outfit. It occurred to me she is always wearing the exact same outfit. As I walked up to the door the harsh light outside the store revealed on her weathered face every long mile she's traveled and every bad choice she's ever made. I heard a male voice behind me say, "Hey." She looked over that way.

A couple minutes later as I walked out of the store I saw her getting in his car. He was parked in the darkest spot, the most remote space on the lot. I had this momentary thought that I should tell somebody...the SA folks in the store maybe. And then I thought, no.

Yeah, it's weird and all. But I figured life is bad enough if you're hooking for gas cards in a convenience store parking lot.

Hmmmmm...

Been thinking alot about the rising prices of oil and food, the drop in real estate, and the tightening of credit. 'Cause this is the kind of stuff I think about. Yeah, yeah, yeah...it sucks. But I've been thinking about it from a different angle than either the constant stream of lament or the endless river of denial and spin...these seem to be the two most popular approaches to dealing with it.

There are some interesting opportunities to think about.

Manufacturing and distribution have both moved to "just-in-time" (JIT) supply chain management. JIT means that you minimize the carrying of inventory in advance of an order. The poster child for this is Dell which doesn't order the parts until the consumer orders the computer. The evolution toward JIT was a brilliant tactic. You don't have to have so much in the way of land, plant, employees to hold and manage your inventory and you shed spectacular amounts of inventory risk (the risk associated with ordering a ton of stuff for manufacturing you'll do down the road and then find that down the road sales have plummeted and you're holding all kinds of stuff that you now aren't going to use). Two factors in JIT being a sensible approach are:

1. Gas is cheap
2. Land is expensive

I'm not saying that JIT is dead. I'm suggesting that a large company with good credit, which can avail itself as a result of cheap credit, should be frantically calculating the point at which the rise in gas prices and the drop in real estate makes it more fiscally advantageous to take on inventory risk by building warehouses and locking in shipments of materials at a lower shipping rate (hugely influenced by oil prices). Somewhere, there's a point at which it's cheaper to house and manage inventory than it is to JIT it and be hammered by this steady and dramatic upward move in oil and, as a result, transportation costs.

In addition to reconsidering JIT I think some bright kids somewhere are going to question off-shoring of manufacturing. Labor rates somewhere like China are cheeeeeaaaaaap. But, the cost of shipping one big freight container across the Pacific from China has gone from $3000 to about $8000 in the last two years. Certainly, we're seeing nothing in oil consumption trends to make us think that our run-up in prices is a shock like we saw back in the 70's...something that will pass. With exploding demand for oil in the BRIC (Brazil, Russia, India, China) countries we should see a steady upward trend. Sure, there are things that can slow the trend (increased production in OPEC, more domestic drilling) but these things will only slow it. They won't reverse it. As a result, the manufacturing that has moved across oceans becomes less financially appealing to consumers...it gets more expensive. Again, not calling for the end of it but at some point manufacturers should be frantically calculating whether it would be better for them to move manufacturing back across the ocean to Mexico or even (blasphemy!) the US.

Finally, in the arena of food manufacturing, there are going to be opportunities for CPG companies that move to a much more local/regional seed to shelf process. Take a slice of processed cheese. Right now that slice (most likely...there are exceptions) starts with dairy from a whole bunch of far flung sources in the US which is shipped to a mega-plant which processes the cheese which is then shipped to far flung stores across the US. That's alot of transportation cost...and transportation cost is spiking. Those manufacturers that are already being more regional in their approach...sourcing closer to the plant, distributing within a tighter geographic region...are going to offer much better prices to the consumer while maintaining or even expanding profit margins vs. their competition.

I'm just sayin'...there's some cool stuff to think about...things that run counter to the way we do things now...that are gonna give somebody an edge.

A Father's Prayer

Mid-April. Driving from Green Bay home to Minneapolis. My flight had been canceled due to weather. I thought the weather they were referring to was a mildly thick fog that had settled over Green Bay but, according to weather reports, lifted about ten miles west of town. I was wrong. The weather they were referring to was snow in Minneapolis. In the middle of April. Gross.

Driving, though, turned out to be a great idea. Beat the hell out of spending another night in Green Bay. Or so I thought until I was 70 miles away from Minneapolis and drove into a blizzard. That last 70 miles took nearly 3 hours. Then, it seemed, driving was a lousy idea. Until the next morning when I went out to NWA’s website and discovered that the snow storm I drove through hit Green Bay about the time a morning flight would have taken off and due to some weirdness with the lake the front sat down over Green Bay for the day meaning had I not driven I’d have been stuck there for two day. So…you know… I guess driving wasn’t such a horrible choice.

On the drive home, well before I hit the blizzard, or even knew there was one waiting for me up yonder, I stopped in some non-descript small town for a bite to eat. It wasn’t a destination but as I was approaching the exit for the town I saw a big neon sign along the top edge of a low slung building “Bowling  Pizza  Burgers  Beer”.