A DIFFERENT WORLD – RICH PASCHALL

Reinventing Ourselves, by Rich Paschall

When I was much younger, perhaps late teens, and throughout my twenties, I used to like to go down to State Street, “That Great Street,” in Chicago. It was alive in much the same way as Time Square and Broadway in New York were. And yes, just like NYC, our downtown had a somewhat seedy period, but that came later.

“On State Street, that great street
I just want to say
They do things that they don’t do on Broadway, say…”

I particularly liked to go downtown in December to see all the Christmas decorations. Marshall Field’s, the giant department store, had Christmas windows filled with mechanical people, trains, cars, and all sorts of moving parts to marvel at. I was just like the children gathered around the windows to get a good look at the displays. Our fantasy world was mechanical back then. Today it is video, but I digress.

Marshall Field’s at Christmas.  Photo credit: Richie Diesterheft

There was a time when I would plan to do my Christmas shopping, sometimes all of it, on Christmas Eve. I could arrive at the Red Line subway stop right in front of the historic Chicago Theater and go first to Field’s. I might not buy anything there because it was the most expensive stop, but if you went downtown, you had to go there.

After the visit to Field’s and perhaps a purchase of Frango Mints, off I would go to Carson Pirie Scott, Montgomery Ward’s, Sears, Wieboldt’s, Goldblatt’s, JC Penny. By the time I got to the last of the giant department stores, I would buy everything else I may have needed. Then I could go right out to a subway stop at the other end of State Street and head home. It was a marvelous adventure and has always brought happy memories of downtown at Christmas.

The stores are gone now. Every single one of them is gone. Marshall Field’s is now Macy’s. They have kept the Marshall Field’s plaque outside the building below the famous clock, so as not to upset the locals. They also have Frango Mints. These are the only throwbacks to those days. Except for that one grand store, the department stores of State Street have all been replaced by other businesses or torn down.

Times changed. They did not. Instead of transforming themselves for the future, they waited for the past to come back. It didn’t. I saw these great stores disappear one by one. Ward’s, Sears, Wieboldt’s, and Goldblatt’s all had large stores in our neighborhood. When Sears had the motto “Sears Has Everything,” they really did. From washing machines to stoves to clothes, that was our favorite store. Gone.

It is the same with many businesses. As motivational speaker Simon Sinek likes to point out, these are not unprecedented times. Major shifts in business have come before. This one is just “more sudden, absolutely. More shocking, absolutely.”

He gives several good examples we all know are true. The internet changed business. Some companies are surviving now because they have changed the way they work. In Chicago during a period of lockdown, one small clothing shop gave virtual tours of the store and video displays of the clothes. When delivery and pickup was available, people could tour the store online, pick out and pay for what they wanted, and drive to the business, where an employee would come to the curb to hand them their purchases.

Restaurants are gone for good after being out of business for months. Others survived by reinventing themselves as an online product. They found their way to Yelp and partnered with Grubhub, Door Dash, Uber Eats.  Reinvention saved them.

Sinek likes to note that Starbucks did not put the local coffee shops out of business. They offered a newer version, and the old-time shops refused to change. Why would I go to a shop with an old worn-out sofa and year-old magazines, when I could go to one with the latest newspapers, a variety of beverages, pastries, and sandwiches, and importantly for millennials, wifi?

I work for a major airline that is operating at 5 to 10 percent capacity on any given day. Most of its fleet is grounded. It has lost 20,000 people from its workforce. Facilities around the globe go unused. Business disruptions and government regulations eliminated many flight destinations.

The airline industry believed back in March that they could regain 90 percent of their pre-COVID business by December. Now the hope is 50 percent. As the novel coronavirus continues to surge in certain countries, the USA for example, so the hope to recover your business any time soon is fading.

In 2012 Air Canada had launched Rouge, a subsidiary to more effectively compete in the low-cost tourist/vacation travel industry. It was looking at other growth opportunities to serve the ever-growing luxury tourist trade. Their business model was built around these expanding travel markets. That dream has taken off as the last flight from the battleground.

So what is a passenger airline with no passengers to do? The Canadian government is not going to hand the airline billions of Canadian dollars to help it through to the time when business returns to “normal.” The new normal is right around the corner and it does not look like it did in January.

No passengers? Move cargo.

They have to reinvent themselves of course. The 767 Boeing aircraft are being retired early. Accelerating this process for an older part of the fleet only makes sense. They were not being used anyway. Some of the planes had the seats removed to put freight on top, but this is a stop-gap measure. The main deck has no cargo door so this is labor-intensive. Other planes fill the belly entirely for cargo runs, but the seats are not removed. Mail, e-commerce partnership, and cargo and business charter runs are added to the new business model.

What about underserved areas of Canada? The airline has entered into a drone partnership. The initial run was to indigenous people who live on an island. There are many far-flung communities that can be served through a combination airline, drone service.

Without adapting and changing, airlines will die. Some already have gone under while others stay afloat through government bailouts. There are those, including a prominent orange so-called politician, waiting for things to go back to the way they were. We have news for them. It is not going to happen.

SENDING AND RECEIVING STUFF – RICH PASCHALL

The Supply Chain and You – Rich Paschall

Toilet paper isles in most stores in New York and CT

This is about more than the amount of toilet paper you can get the next time you go shopping if you can get any at all. This is about all the other stuff. We all have a lot of stuff. Some of the stuff is made up of lots of stuff from various places. No manufacturer actually makes all the items they use when they assemble stuff for you. Cars, radios, televisions, stoves, washing machines…well you name it. They were probably made with items that came from various sources. This means the shipping and receiving of goods play an important role in all the things you buy.

Even the simplest of goods rely on an efficient means of transportation. People have gotten so used to getting things quickly, that people are actually lodging complaints with Amazon for not delivering their groceries, widgets, or whatever on the same day, or even a two-hour window where they offer it. Transportation companies are down-sizing. Airlines are grounded. People are sick. Stuff is not moving like it used to move. It’s not going to recover overnight, even if some politician says it should.

For example, POTUS has ordered meatpacking plants to remain open and ship to stores. Despite his “executive order,” plants are closing around the country.  In fact, seven more have closed since he ordered them to stay open on April 28. One hundred sixty-seven plants have had coronavirus outbreaks and over 9400 people were stricken. At least 45 have died. Sorry, but the bacon order is going to be delayed.

While a lot of these companies use their own trucks to get food from point A to your grocery store, others rely on other truckers and the airlines to move their product around, but what if the trucks are not trucking?

Truck Transportation.

You see trucks of all sizes all over the road. If you live near an airport you likely see quite a few due to the practice of locating truck terminals near airports, seaports, and rail yards. Like every industry, trucking has been hit by illness. So have warehouse workers, ground handlers at the ports, trucker loaders, document checkers, security guards, and a variety of people who are part of the transportation chain. One COVID-19 outbreak at a truck terminal can shut it down for a day or more while the area is sanitized. After that, you can understand a reluctance by others to return to the scene.

If goods are traveling across the country by rail or plane, then you have to rely on a trucker to pick up the goods and deliver to the destination. But that might actually be several truckers. One picks it up and takes to his terminal. Someone unloads the goods and then loads to another truck with other items going across the country or to the airport or wherever.  There are many people handling goods in the supply chain and for some industries, the chain is just broken.

With many factories and warehouses shut, some truckers have stopped working on the weekends. Some have far fewer truck runs and it is not economical for an over the road trucker to go with a half-empty truck. His company may have him wait until the truck will be full, at least in one direction. Hence, YOUR goods are delayed.

Air Transportation.

Sometimes your goods are moving around by more than the freighter airplanes. Widebody aircraft usually fill up to two-thirds of the belly space with cargo. Even those small planes might be moving small packages along with the people. Air Canada for example, was moving one to one and a half million metric tons of cargo a day systemwide prior to an almost complete halt of shipping due to COVID-19. Every airline is in the same situation.

Pinal Air Park, Arizona

If many millions of tons of cargo a day can not move, how do things get from place to place? From mid-March to until now, the demand has been down, but there is still some demand. As a point of full disclosure, as they say, I work for Air Canada. I have worked in transportation for over 35 years. In the last six weeks, I have probably said no to more requests for bookings than I have taken.

The skies are starting to open up as more places are allowing flights, but there is one big problem for passenger airlines like Air Canda, United, American, Delta, and so on. How can you fly those big passenger planes without passengers? An orange politician may tell us that everything is OK and we can all go back to normal but are you going to go to a crowded airport and take a flight anywhere in the next few months?  No, I didn’t think so.

By the end of March, the airline industry had felt that they could get back to 90 percent of the business they were doing at the beginning of the year by this December. The prediction now is 50 percent.  Air Canada said this week that they are currently operating at 5 percent of capacity. For your stuff to move, there are fewer flights on all airlines, and the cost can be as much as six times higher than it used to be to move your stuff from here to there. How long can that go on?

Reinvention.

Seats removed from Boeing 777

So what do you do with an airline that has most of its fleet parked and a slow recovery ahead? You know you have to bring the cost of transportation down, even if you can not bring it to pre-COVID-19 levels. So, you have to reinvent yourself. Survival depends on it.  Air Canada will retire 79 aircraft this year, roughly 1/3 of its fleet. It will become much smaller in the hopes of building back up. And what about all those large airplanes? Increase cargo capacity.

Air Canada has removed 442 seats from 4 of their 777 passenger flights and will do the same with another one as well as three Airbus 333. The seat tracks on the floor work well to secure cargo netting and the main deck can be loaded with cargo. There is no cargo door, and loading equipment can not be used. But the short term solution, although labor-intensive, is to replace passengers with cargo so your stuff can get here.

No passengers? Move cargo.

Sources include: “Trump executive order didn’t stop meat plant closures. Seven more shut in the past week,” By Kyle Bagenstose and Sky Chadde, USA TODAY, May 5, 2020.
See also: The Global Supply Chain Disruption, The Pandemic Problem, SERENDIPITY, April 15, 2020.