Lessons From Seoul

November 26, 2018 BY Charles Fallon

20181121 - Seoul Distribution v2-363135-edited

I'm now safely returned from a business trip to wonderful Seoul, Korea. The city is vibrant and beautifully provocative - a journey I would recommend to anyone who can stand a long flight over a big ocean.

Visiting food production and distribution facilities, along with exploring the streets of Gangnam and Insa-Dong, a lesson learned long ago struck me like a lightning bolt.

When I was a young consultant, I would hear my bosses brag to clients about the work they did in Europe. "Doing work in Europe" was a proxy for saying "doing sophisticated work". The fashion had (has) it that Europe was more advanced in deploying automation across the supply chain. North Americans, by comparison, were still barbarians with our too-big pallets and silly, labor-intensive materials handling systems.

However, whenever forced into a situation where my bosses wanted me to design and justify automating a distribution function, the results always depressed me. We cheered 10 year paybacks even though I thought, "I wouldn't spend my capital that way. It’s too precious and could serve a million better purposes." We would present our leading-edge solutions and when we got to the sloth-like ROI, my bosses would mitigate the point by reminding the client they would be first-movers into the future! But the reality was - and is - the fundamental economics of land and labor in Europe created one set of solutions. The fundamental economics of land and labor in North America create another. Sophisticated supply chains are not ones where we copy and paste solutions from abroad, rather where we recognize our peculiar economic fundamentals and adapt our solutions to them.

Seoul is a city where human settlements have sat for millenia. It is ancient. It is also a city that has grown in wealth over recent decades like almost no other city. It is brand new. That collision of ancient patterns and staggering economic activity creates supply chains that must adapt to local circumstance.

Particularly, off each broad boulevard are warrens of small roads teaming with markets, restaurants and shops. In these tiny streets, Koreans buy their food and clothes and make their lives. Consequently, the last mile in the Korean supply chain cannot accommodate the big-rigs or 26' straight-bodies that a similarly-dense New York City could. Those final deliveries come in small trucks with gull-winged sides so that drivers don't hog too much street space. It is hard to see such a truck holding more than 400 - 500 cubic feet of product.

At the distribution center, dock doors accommodate these delivery trucks. Dock depths need only be deep enough to stage one or two of these loads. Picking waves for truck routes are short with quick turnovers. Vendors deliver in equally small trucks as they must cater to a variety of delivery points as well. Entire distribution networks pivot around this central fact of Korean life: it is at its most sublime in those tiny streets where delectable dumplings and garlic-painted fried chicken lay. Korea's supply chains adapt to Korean fundamentals.

Any business, yours included, should recognize its economic fundamentals and tailor solutions to it. Thoughtless fad-chasing or coveting a competitor's leap into robotics is a road to folly and wasted capital. It’s an age-old lesson made plain in gorgeous Seoul.