My 2 ½ year old woke up this morning and started singing a Lady Gaga song in her crib. Should I be troubled? I have the rest of the day to ponder this question.

Now the news:

The first item caught my attention because it points to a trend many supply chains need to prepare for: the growth (resurgence) in urban living. According to the WSJ article, “Wal-Mart Stores Inc. is experimenting with allowing customers to buy merchandise online and have it delivered free to urban FedEx Corp. locations, a bid to boost sales in big cities where the retailer has little to no store presence.” Pilot tests have been run in Los Angeles and Boston, and according to a Walmart spokesman quoted in the article, “customer response thus far has been quite positive, and our business team recognizes we have a winning formula.” Walmart already allows customers to order products online and have them delivered to a nearby Walmart store location for pickup (see “Multichannel Logistics: Walmart.com’s Site-to-Store Strategy”). This will give customers who don’t live near a Walmart and don’t want items delivered directly to their homes, apartments, or college dormitories another delivery option.

Back to the urbanization trend: Here is an excerpt from a June 2010 article in The Atlantic, “Here Comes the Neighborhood,” by Christopher B. Leinberger:

The increasing costs of driving, meanwhile, have put great pressure on suburban family finances. On average, traditional suburban households spend 24 percent of their income paying for and maintaining their cars; urban households in walkable neighborhoods spend only 12 percent of their income on transportation. The difference amounts to half of what a typical household spends on health care—nationally, $700 billion a year in total.

Two-thirds of all households today consist of singles, childless couples, or empty-nesters, and that proportion will rise over the next 20 years. All of these groups tend to prefer walkable urban housing. Millennials—the rising generation of 20- and 30-somethings—are particularly drawn to urban living, seeing it not only as exciting but as healthy and environmentally friendly.

Obviously, supply chains built for the suburbs don’t work (as well) in the cities. Less development space, greater traffic congestion, limited parking, zoning regulations, and the list of challenges goes on. Companies are already dealing with these challenges today, of course, but if a greater percentage of consumers will live in cities down the road, then smarter solutions need to be developed. And this will require enhanced collaboration between all stakeholders: manufacturers, retailers, transportation service providers, transportation equipment manufacturers, and government bodies at all levels (city, state, and federal).

At the CSCMP Europe 2010 Conference earlier this year, Deborah Lenz from Kraft Foods Europe highlighted urbanization as a trend that will impact Kraft’s supply chains moving forward. And Bernard Favre, Director of Research at Renault Trucks, discussed “urban mobility of freight” in his presentation on “Truck Technologies for Sustainable Transport Solutions.” The two slides below are from his presentation. The first shows new truck architectures that Renault is exploring (in addition to electric and hybrid vehicles already in use) and the second highlights changes in urban infrastructure, including the ability to leverage passenger rail infrastructures to move freight.

Source: Bernard Favre, Renault Trucks (click to enlarge)

Source: Bernard Favre, Renault Trucks (click to enlarge)

Bottom line: supply chain executives need to think about where people will live tomorrow as they plan their supply chains today. Also, it’s important to recognize that urbanization does not exist in a vacuum. It is linked to how people will buy goods in the future (e.g., the rise of mobile commerce) and age demographics.

Oracle OpenWorld 2010 was held this week. My colleague Steve Banker attended the conference and he’ll post his key takeaways next week.

Finally, if you’re attending the CSCMP Annual Global Conference next week in San Diego, stop by and say hello. I’ll be presenting in the following sessions:

  • Today’s Supply Chain Technology Ecosystem (17-2), Monday, 9/27, 1:30-3:00
  • Trends in CPG Transportation, Tuesday, Tuesday 9/28, 10:00-11:30
  • Technology That Powers Global Trade (17-5), Tuesday, 9/28, 1:30-3:00
  • The Expert’s View of 3PL Prospects Worldwide (19-6), Tuesday, 9/28, 3:30-5:00

Have a great weekend!

(Note: Oracle and SAP are ARC clients)

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