We’re Going to Need a Bigger Printer

There are times when I worry about some of the crazy ideas people get about technology. Of course, I worry about people in general, and given some of the things I have seen in my travels – people who actually believe that you could use a fax machine to send someone three-dimensional objects, for example – I’m not sure you can blame me. Technically, I suppose, it might be possible to fax 3-D objects, if you had a sufficiently powerful scanner on one end and a 3-D printer capable of working in some medium that could duplicate the original object on the other. However you still couldn’t transport an actual object, and you certainly couldn’t send someone a hot meal or a cold drink using such a method using the current printer technology. Moreover, given how expensive most of the 3-D printers are to use, there’s very little point in trying to make larger constructs using such a method. After all, as one of the designers behind the Star Trek franchise put it, if you can create starships at the push of a button, you probably don’t need to…

The same may not be true of buildings, however, if an article that turned up on the Wall Street Journal site last week is correct. According to the article, a Chinese firm called Winsun had developed what appears to be a very large version of a 3-D printer; one with nozzles that spray concrete instead of ink or sugars (or whatever), and which uses glass fibers for reinforcement. Using this giant printer, the company was able to pre-assemble enough parts to build 10 houses of 200 square meters each (about 1,460 square feet, if I’ve done my math correctly) in only 24 hours. The company is working on other applications for the system, including commercial properties, office buildings and so on. So far there is no word on how long it will take them to generate larger prefab elements, or how large a structure can get before this method will lack the structural strength to stand on its own…

Now, we should probably note that Winsun isn’t exactly putting a template for a house into a three-D printer and just pressing the “go” button. What they are assembling are effectively prefabricated sections for a building made entirely out of reinforced concrete, and there are definite limitations to how useful an all-concrete structure is going to be for residential/non-industrial applications. It’s also worth noting that anything you could actually call a “house” will also require glass for the windows, wiring for the outlets, doors that you could actually open (as opposed to ones made exclusively out of reinforced concrete), plumbing and fixtures made out of porcelain (or the equivalent), lighting, kitchen appliances, and a host of furnishings. Having the structure spring up in matter of hours – or however long it takes the concrete in the prefab sections to cure, anyway – would speed up the process, but it is debatable how much it would lower the cost. Despite what the article would have us believe, this is more “advanced prefab building technique” than it is “super high-technology magic…”

On the other hand, it is hard to deny that there are lots of useful things you can build out of reinforced concrete – and that if Winsun is actually successful in adapting the printer to use whatever salvaged materials come to hand in building its prefab sections, they might be able to overcome the cost issue. You’d still need the rest of a construction company to finish off the buildings, but there is some real potential here. And if someone applies the same technology to other building materials (there are already smaller printers that work with composite laminates, for example) there doesn’t appear to be any reason why you couldn’t fabricate all of your building components this way. Maybe we should keep an eye on this story going forward…

Business From On High

In the classic historical account The Right Stuff author Tom Wolfe details the phenomenal rate at which the luster came off the U.S. space program after the Apollo 11Mission landed on the Moon. Although manned space flight remained (and remains) a hot topic in other parts of the world, by the time the ill-fated Apollo 13 Mission launched the only thing that retained the interest of the American public was the malfunction that almost killed the entire flight crew – and the brilliant improvisations that brought them home safely. This continues to lead to some unflattering (and probably deserved) comments on the attention span of the American people, but the unfortunate truth is that by 1971 most people in this country were only paying attention to our space program when something extraordinary happened (e.g. Skylab, the first Space Shuttle launch, and two Shuttle disasters). This seems particularly unfortunate at the moment, considering that one of the most significant developments in the history of manned spaceflight and business is taking place somewhere over our heads this week…

If you missed it on your local news, you can pick up the most recent Forbes article about the Space-X Dragon spacecraft docking at the International Space Station with 5,000 pounds of supplies last week direct from the link. It may not seem that important at first – it is the fourth time the Dragon capsule has docked with the station, after all – but once you consider that price and convenience are the two major factors that have limited the commercial exploitation of space, this even becomes very significant. As exciting as the sound and fury of a rocket launch is, the critical aspect to any transportation system is reliability. A vehicle that can go someone once (or even six times) is at best a curiosity, at least from a business standpoint. A vehicle that can go somewhere whenever you want it to is a business asset. The Dragon has made the flight to the ISS four times already, as opposed to the single-use launch vehicles of the last century, and there is reason to believe it could do so indefinitely – or, at least, dozens of additional times. Assuming that you could find a cost-effective way of launching it…

This is what makes the other part of the linked article so interesting. The successful use of a privately-funded, privately designed launcher means that it is now possible for private companies to launch profit-seeking enterprises into Earth orbit without needing support from NASA or our national government. But even more potentially important is the successful test of the reusable Falcon 9 rocket. In theory, a reusable orbital launch vehicle would enable Space-X to lift payloads into space at a lower cost than any other entity in history – effectively opening up the commercial use of space to a huge range of companies that could never have afforded to place payload on a Space Shuttle or a Russian conventional rocket. A mass-produced reusable launcher would lower the costs still further. And if the company can produce a version of the Dragon – or one of their other designs – that is safe enough to be certified for human use, they could lift people to orbit for a fraction of what the so-called “Space Tourists” have been paying…

Now, even I have to admit that there are still a lot of “ifs” in that description, and a corresponding number of developments that we still have to await. It is possible that another company, or even another launch technology (such as the winged rockets being developed for Virgin Galactic) will become this century’s answer to Pan Am, leading the way into space and on across the cosmos. It is also possible that none of these things will pan out, commercial space travel will remain on hold for another century or two, or that humans will succeed in destroying our planet’s biosphere before we can get off of it and effectively exterminate ourselves. If I had all of the answers I’d be a multi-billionaire financial advisor and philanthropist, not a scruffy blogger nobody ever reads. But all of that said, I can’t help but think that what may be the most important technological development since the wheel may be taking place in the sky over our heads this week…

And, apart from a few space-mad history wonks like yours truly, no one is paying any attention…

The Ethics of WiFi

I can still remember the first time I encountered a free WiFi signal - it was at the Dana Street Roasting Company in Mountain View, California, and when our consulting company would stop there between meetings (and occasionally to have one) it was great to be able to just connect our computers and work. At the time most coffee houses charged for this service; some actually required you to purchase a monthly or quarterly plan through whoever their Internet provider happened to be. I always felt that unless you were paying extra for the bandwidth free WiFi was a way you could add value for the customer for effectively no cost to the company.  But over the years since even this simple customer convenience has become more complicated, and I suppose it is time we took a closer look at the issue...

First of all, let's consider the issue of freeloaders. Most coffee houses - and similar businesses - already have issues with limited space for seating, and people who will spend days at a time taking up a table (sometimes more than one) without purchasing anything. The WiFi situation just makes this worse -  since this is effectively free Internet service, some people elect to save money by never getting their own ISP and just using public wireless service. Such people are not really customers, of course, and any reasonable business should be able to eject them on this basis, but that will not stop people from making a $1 purchase and then spending 14 hours straight taking up space and hogging bandwidth. The business can impose a time limit, but even if you have the time to enforce such rules it is doubtful that they will add anything to the atmosphere of the place...

Then there's the issue of people using the company's WiFi signal to download material that is illegal, or to commit various other online offenses. Here again, these aren't really customers and should be booted off-line and ejected from the premises, or just turned over to the police. But doing so may still be problematic for the business; there is also a non-zero possibility (in some jurisdictions) of being charged as an accessory to the crimes being committed, even if you had no part in those activities and were in fact the one who reported them. And none of that even considers the possibility of civil litigation (nuisance or legitimate) from parties damaged by the criminal actions of someone using your WiFi to commit said crimes. It's enough to make you consider requiring full user registration and background checks before letting anyone onto your network...

On the other side of the issue, charging customers for anything that has no effective cost (e.g. the WiFi bandwidth costs you the same amount regardless of whether or not anyone is using it) is never good for customer relations. Even if you aren't charging for it, people may consider such restrictions and monitoring to be a violation of their rights to free speech, or just enough of a buzzkill to keep them from frequenting your establishment. And if you are charging for it there will always be accusations of price gouging and deliberate obstruction of full access. Requiring a password may prevent your neighbors or people in passing vehicles from hijacking your signal, but it may also frustrate legitimate customers, especially if they are given the wrong password or are simply too inept to enter it correctly...

Which leads me to the question: does a business offering wireless connectivity as a value-added service to its customers have any ethical obligation to provide that service to non-customers who find a way to gain access to the signal? Does such a business have an obligation to provide free access in the first place? Does our answer change if the bandwidth isn't costing the company anything in the first place? Alternately, does a company that provides wireless connectivity have an obligation to prevent random users from committing crimes using its signal? If so, does that obligation limited to actual paying customers, or does it extend to anyone who can connect the the signal? Or should any company offering WiFi service just accept these risks as part of the price of doing business and just let the chips fall where they may?

It's worth thinking about...

Car of Tomorrow?

I do wonder sometimes if people from other professions get as fed up with conspiracy theories, popular beliefs, and idiotic fiction and screenplays as I do. Certainly, I’ve seen lawyers and paralegals of my acquaintance get annoyed when movies and television programs misrepresent the law and portray behavior so grossly incompetent and completely unprofessional that if any real attorney did them being disbarred would be the least of their worries. I’ve also known healthcare professionals who get infuriated by the idea that all diseases could be cured in an afternoon if a sufficiently brilliant doctor had to save his love interest in time to end the movie on an up note, and public health researchers who get outraged by claims that such cures are being suppressed by various power blocks. For my money, the defeatism is even worse than the paranoia – saying that we will never have vehicles capable of driving 300-plus miles on a gallon of gas because the Oil lobby and politicians who take money from them will never allow it to happen, rather than working to bring the Volkswagen XL1 to North America…

I’m not going to link to the original far-left ranting site; you can go to the Volkswagen site and download the brochure and press package for yourself if you want to. One quick glance over the specifications will help to dispel all of the ranting, although it may also disappoint the reader (assuming I have readers). It turns out that the XL1 isn’t a magical supercar that gets its power from the mad genius of Volkswagen engineers; it’s a one-cylinder diesel-electric hybrid with an 8.4 horsepower engine and room for two people and a bag of groceries. Two relatively small people, and a very light bag of groceries, at least. The fuel economy is very impressive, although it’s closer to 250 miles on a gallon of diesel than 300, but none of this changes the fact that this vehicle is closer in size and concept to the old EV-1 electric car or the Honda Insight hybrid, and I can’t use either one of them…

The payload data isn’t included in the download from the VW site, but in the case of the Insight, its payload is so small that while it would be able to transport me (assuming I could fit in the driver’s seat, which I can’t) any theoretical companion travelling with me would have to weigh 80 pounds or less, or the car would not be able to move. And that assumes that neither of us had a small bag of groceries – or a briefcase or purse – with us. Clearly, there will be a limited market for such a vehicle in the U.S., where we like our cars to be powerful and roomy – or at least able to leave the curb when loaded. Even worse, at least from a consumer standpoint, the price given for the production model is in the $150,000 range, or about twice what a Tesla roadster (which is street legal in the U.S.) costs. In fact, it’s almost three times what the much-maligned Chevrolet Volt or the beloved Toyota Prius cost…

As to why they aren’t available for import, Volkswagen is only building 250 of these things, exclusively for sale in Europe, and has not made them available for safety testing anywhere else. Given the limited supply and high price point, it seems likely that the company is using this small fleet as a proof of concept. That many units will provide enough data to determine if the machinery is reliable, if the car is safe on the road, what happens to the vehicle (and the passengers) in the event of a crash, and so on. If the company can prove that the product is safe and reliable, they will probably be able to bring it to North America – where it won’t sell, until and unless they can bring the price down by a factor of at least four or five, and double or triple the payload. For the moment the XL1 is basically a concept car right out of an auto show, and conspiracy theories about this vehicle are completely asinine…

If Volkswagen can overcome those technical problems, however, it isn’t hard to imagine this “Super-Efficient Vehicle” (or SEV) doing to all of the current American car companies exactly what its beetle-shaped ancestor did to the industry in the last Century. If that happens I expect we will be hearing about a lot of new conspiracy theories – and a lot of unemployed auto workers. I’m not sure our domestic companies can survive another fiasco on that scale…

Nose Puppies

[Disclaimer: Parts of this post are NSFW and may be disturbing to readers of a sensitive disposition. Viewer discretion is advised.]

It’s funny how time gets away from you. Twenty-three years ago, Scott Adams drew a Dilbert strip featuring a street vendor selling “Nose Puppies” from a cart; when the title character inquires, the vendor tells him that they are small ceramic puppies that fit inside one’s nose. It is later revealed that the product was never terribly popular until the vendor hit upon the idea of putting them up a customer’s nose, whereupon they became a very fast-selling item. Adams is riffing on the old entrepreneur’s adage of “find a need and fill it” – literally, in this case, since that’s both what one does with a Nose Puppy and the punch line of the first strip – but as silly as this example seems, a great many new companies and the occasional commercial dynasty have been started exactly this way. It wasn’t until this week that I became aware of a company that sells something even more bizarre and inexplicable as a consumer product…

You can pick up the original story about them from the Kernel website if you want to, or visit them on their home page, but unless this is a Penguin Warehouse-style prank, it appears that there really is a company called Ship a Dick, and that for a relatively small fee they will ship a large cardboard representation of male genitalia to the recipient of your choice. It isn’t clear from context in either story why you would want to do such a thing, or to whom you would send it, but the company claims to be moving anywhere from 5 to 15 of these things a day (more around the holidays) in models ranging from $10 to $20 plus shipping and handling, which would translate out to somewhere between $25,000 and $50,000 a year – not an insignificant revenue stream for a side business with effectively no advertising. If marketed properly there is no telling how many of these products they might be able to sell…

Now, according to the linked news story, this isn’t really what the company does. The two entrepreneurs behind it actually run a laser engraving business, putting custom inscriptions onto all manner of things that do not normally carry inscriptions, which is probably where they got the idea for putting customer messages onto cardboard constructs that you (probably) couldn’t show on television. Making and selling these oddball greeting cards (that’s all this really is, if you think about it) is a sideline, and it will probably stay that way – but there aren’t a lot of hobbies that can bring in that kind of revenue, and I’m entirely serious when I suggest that if this idea goes viral the company could produce enough sales to add one or two more zeroes to those revenue figures. At least, until someone else copies their idea and comical, oversized obscene greeting cards become a standard consumer product category…

I call this story to your attention because despite the comical tone and risqué product, this really is an example of an entrepreneurial project that worked. Using skills, equipment, facilities and personnel already available to them, the owners of the company developed a new product, created a new company identity, and are successfully selling to thousands of customers around the world. Continued success will probably require that they develop follow-on products, and most likely that they invest in some marketing activities, but there is reason to believe that despite its absurdity this venture will continue to generate revenue for some time to come. Regardless of how one feels about obscene greeting cards – or Nose Puppies in general – it’s hard to argue that this is an excellent example of a project that created an incremental increase in profits while requiring almost no commitment of resources. Or, in other words, that this is in fact a brilliant entrepreneurial venture…

Even if it is something that the owners of the company probably won’t tell their families about…

They’re Everywhere!

So I’m getting into the line at the Hertz counter to pick up my rental car, when one of the employees working the floor tells me I can do all of that using one of the kiosks. Looking around, I notice a line of small machines, a little smaller than a bank’s ATM, each of which appears to include a touch-screen computer interface, a second monitor mounted at about eye level, and a telephone handset like the one on an old-style payphone. After a moment, I realized that there was a video camera mounted just below the upper monitor, like you sometimes see in a teleconferencing or video phone setup. The line in front of me was about 20 people, and there were only four live agents working the counter, which struck me as a rather silly way to spend an hour or more, so I decided to give the kiosk a try. I walked over and touched the “Start” icon on the lower screen…

It took a few minutes, but eventually the upper screen lit up, showing me the face of a woman and a nametag that gave her name and said she was working in the Oklahoma City call center. The conversation went about the way renting a car usually does, including the agent on the monitor trying to sell me on various upgrades and add-on services that I didn’t need (this wasn’t a driving vacation, it was a business trip, and I don’t need GPS navigation to find my way around the city in which I grew up). The kiosk had a card-reader which proved capable of reading the magnetic strip on my Driver’s license as well as the one on my credit card, and after a few more attempts to enhance my bill the printer built into the kiosk came to life and spat out my rental car documents. All I had to do was go find the numbered parking space the agent on the screen had mentioned and drive off…

I didn’t really have time just then to start interviewing my rental agent – and it can be really difficult to get someone to answer your questions when they can just press a button and disconnect your video call. But from what the agent told me the company maintains a very large call center at their Oklahoma City complex, and the agents working there may find their workstation linked to a Hertz kiosk anywhere in the world as needed – presumably assigned according to the language choice selected by the customer when they log into the kiosk screen. This means that instead of having a large crew of rental agents standing around in each airport and rental location waiting for customers to assist, the company only has one large group of rental agents standing around in the middle of North America, who can help our wherever they happen to be needed at the moment. With a couple of extra shifts this one call center could take care of customers in rental locations all over the world, all without leaving their cubicles…

Now, I’m not sure this idea would work in all industries. Most companies with equivalent business models have either build completely automated systems – telephone and website – that allow the customer to take care of his or her own business as desired, or have retained live personnel at their customer service locations, or occasionally both. The airline I was flying that day, for example, handles all of the check-in and seat-assignment tasks using automated kiosks, but has live agents standing by (one for every five to twenty-five automated terminals, depending on the location) to handle anything too complicated for the automated system. Since those duties do occasionally involve handling or moving baggage, an agent calling in from a remote location couldn’t handle them. But there are any number of other businesses that could use such a system…

I suspect that as telecommunications systems (and bandwidth) become cheaper it will become economical for more companies to use this sort of remote live agent system. Whether this is ultimately good for the customer, or for the employees, remains to be seen. But there is something appealing about the idea of a team of customer service representatives being stationed at every company location in the world simultaneously…

The Ethics of Leg Room

Some years ago in this space I noted that if the airlines ever started to offer an intermediate class of seating - between normal coach and the now-rare business class - that would offer better legroom but no other particular advantages, I would probably buy it. Assuming, of course, that there was enough of a price differential that it was cheaper to get than an actual First Class/Business Class ticket in the first place, of course. This has now happened on a number of carriers, including the one I flew on this week, and I must admit that being able to fly without having my knees pressed up under my chin was a major improvement on my typical coach experience. But I could hear some of the other passengers complaining about it, and it got me to thinking about the ethics of the situation...

First of all, there's the fact that some people can barely afford the price of an airline ticket in the first place, which makes it seem somewhat heartless to start charging them extra for a comfortable seat, or even more to the point, for the privilege of getting off the plane sooner and having a better chance to meet their connecting flight. If we were talking about free champagne or expensive food this would be different, but for anyone over 5'6" or so basic coach seats are uncomfortable, and for anyone over 6' they're miserable - and the ten minutes or so getting off from the front of the plane instead of the back can make the difference between making a connecting flight and spending a night in the airport. Since these seats do not cost the airline anything to create, it seems as though charging a premium (often a high one) for them would be unfair to anyone who actually needs this service but can't afford the upgrade...

On the other hand, while the extra 4" or so of legroom isn't a lot, it does add up after a while. On most  U.S. airlines the pitch, or distance between seats, runs at about 32" - which means that eight rows of "enhanced" economy seats take up enough space to insert an extra row of regular seats. Given those figures it doesn't seem unreasonable of the company to ask the people using those seats to make up for the missing row, which would mean paying an extra 1/8 of a fare each. And since there are only so many rows near the front of the aircraft, there is already a hard limit on how many passengers can sit up front, regardless of how the pricing structure works. If we accept that the airline is a for-profit business which needs to generate a positive return on investment for its shareholders, and that they have already set their prices to the level they believe the market will accept, it would appear that they have no choice but to charge for the premium seats...

Of course, one could quite reasonably ask whether the airlines have an ethical responsibility to their customers to avoid physical discomfort, and if so, whether that responsibility is superseded by their fiduciary responsibility to their shareholders to make a profit, not to mention their (quite real) ethical responsibility to the rest of their stakeholders (e.g. suppliers, employees, customers, and even taxpayers) to run a successful company and stay in business. It's probably also worth noting that persons who can't seat comfortably in an airline seat usually do have some other way of reaching their destination, whereas the airline has nothing else to sell besides air transportation. So let's ask the question:

Does an airline have an ethical responsibility to its customers to provide a comfortable seat, above and beyond the minimum requirements imposed upon them by the Federal government? If so, does that responsibility take precedent over their fiduciary responsibility to their stockholders? Or should they just offer a variety seats at the price points determined by the demand for such tickets, and let everyone make their own decisions about flying, driving, or taking the train?

It's  worth thinking about..

And Now From the Chicken Wars…

After last week’s post on the Burger Wars I wasn’t really planning an update on anything else – but then the Internet intervened (as the Internet is wont to do) and I found a similar article about the two leading quick-serve restaurants that focus on chicken. This article is far less specific in terms of cause and effect, and I can’t help wondering if the practical aspects of the case are getting lost in all of the political controversy surrounding at least one of the companies involved…

According to a second article off of the Bloomberg/BusinessWeek site, Chick-fil-A is now outperforming KFC to become the most successful company in their segment of the quick-serve industry. Despite having only about 40% of the stores (1,775 compared to 4,491), Chick-fil-A sales for 2013 exceeded KFC ($5 billion versus $4.22 billion). Given the relative sizes of the chains, that means that the average Chick-fil-A location is making over three times what the average KFC location brings in (about $3.2 million per year versus $938,000 per year). And while I do not have current figures for marketing expenditures, the last set of numbers I saw indicated that KFC was spending considerably more on advertising, both per store and aggregate, than the competition…

Why exactly this should be is not explained in the Bloomberg article, and industry sources are not clear either. Most of the ink about Chick-fil-A in the last few years has been political, not business-related, and has focused on the CEO’s support for right-wing and fundamentalist organizations, notably those opposed to same-sex marriage. I had noted in a previous post that this did not make sense as a business strategy – a given customer’s money has exactly the same value regardless of his or her position on any political issue, and intentionally alienating what appears to be about half of the people in this country seems unwise at best. However, I also speculated about the value of such moves in terms of free advertising, increased support from customers of similar (e.g. highly conservative or reactionary) political leanings and increased brand awareness – all of which seems much less comical given this information…

Now, it is certainly possible that the relative sales data indicates a decline in the fortunes of KFC as much as it does the rise of their competition. Certainly, the public perception of KFC’s product and service quality has dropped in recent years, and at the same time perception of the brand has become less prestigious and more associated with lower-income demographics. There have also been issues with some of the recent product offerings from KFC, including the bowl-based meals (which are considered some of the least healthy options available in the industry), “Value Menu” combinations that do not offer any particular value or utility, and repeated reports of chicken heads, feet and other generally inedible items being served to customers…

Part of the problem would appear to be that while KFC have become more and more committed to a low-cost leadership strategy, Chick-fil-A has been pursuing a differentiation strategy based on the quality of both their food and service and positioning itself as a slightly more prestigious product. Chick-fil-A has also been more successful in introducing an expanded product line, notably including a surprisingly successful breakfast menu. If you consider it from a strategic standpoint, it seems as though Chick-fil-A has intentionally attacked KFC in all of the areas where the competing firm was the weakest – and unless I am badly mistaken, that’s probably what they set out to do…

As noted in last week’s Burger Wars post, none of these effects is anything short of predictable. Once KFC began to favor low cost over product quality or brand development they became vulnerable to an opponent who would be perceived as offering a better product, and their virtual abandonment of the breakfast market effective gave that share away to anyone else in their market who could take it. What I find even more remarkable is that if these statistics are accurate, the comparatively tiny number of Chick-fil-A locations are also outperforming the McDonald’s locations on a revenue-per-store basis. And since Chick-fil-A has little or no presence in almost half of the United States, things will almost certainly get worse as they progress with their current expansion plans…

It's enough to make you wonder how well the company would be doing if it hadn't decided to intentionally alienate half of the country...

I Believe I Said That…

I picked up a link today that led me to a story about Wal-Mart executives calling the Company’s current stocking problem a “$3 billion opportunity.” I call it to your attention because this may be the most amazing piece of spin I have ever seen, and certainly the best I have seen in years. Anyone reading this quote (or the associated headlines) would most likely get the impression that senior management has identified new methods or policies regarding inventory control, inbound logistics, and internal distribution that will increase sales by as much as $3 billion each year (if not more)! Unfortunately, the truth is the executives running the Company have finally realized that if customers can’t find the product they want to purchase because there isn’t any on the shelves, not only will they not purchase it, but they will (eventually) get mad enough to take their business elsewhere. This might still be cheerful news, except the reason for Wal-Mart’s chronic out-of-stock conditions is the lack of personnel available to load more products onto the shelves – and that is the direct result of senior management attempting to squeeze more money out of each store by refusing to hire enough workers or employ them full-time…

You can pick up the original story on Bloomberg News if you want to; it has a lot of backup financial data and some really interesting quotes from some of the managers involved, but the basic story is clear enough. Over the last five years Wal-Mart has opened about 650 new stores, while at the same time their overall number of employees has dropped by about 20,000. Or, to look at it another way, during this period the total number of stores has increased by about 17% but the total number of people working in the stores has dropped by about 2% - a net loss of staffing that approaches one-sixth of the total hours available to keep a store running. As a result, there aren’t enough people to keep the shelves filled, resulting in an estimated $3 billion in lost sales – unless those numbers are net, rather than gross, in which case the company is actually losing $3 billion a year in revenue…

Now, as bad as that is, it’s still only part of the problem. Almost as serious as a lack of personnel is the issue of your available workers performing badly, and one of the key factors that can lower performance is stress – such as that of being yelled at by irate customers who can’t find the products they want, or of having to cover the responsibilities of multiple workers because management won’t hire enough people to get the job done, or not having the proper training to complete tasks because there’s no time to train people because of the artificially inflated work load, and so on. In fact, anything you do that makes working conditions worse will lower morale, making your existing employees less effective, and making your problems even worse. All of your best people will leave to find better jobs (or at least less awful ones) as soon as possible, resulting in positions that automatically select for the worst possible candidate, and the cycle will continue until you have no one available who can actually do the job, which will in turn result in unions forming, billions of dollars of sales being lost, or frequently both…

Readers of this blog (assuming I have readers) will recall that for years now I have been writing that any human resources policy that degrades working conditions will have a direct negative impact on revenue and profitability through lower employee performance, greater turnover, and a corresponding decline in the quality of the work force. I have never written about what would happen if a company’s hiring policies were so absurd that they did not hire enough people to keep their shelves filled because I could not imagine anyone stupid enough to do such a thing. But apparently somebody was, and it would seem that their idiotic staffing policies have gotten bad enough to where they are costing the company more money each year than 3,000 average people would earn in a lifetime…

I can’t speak for any of Wal-Mart’s stockholders, of course, but if the senior management of a company I owned shares in were trying to pass off a $3 billion blunder as an “opportunity” I might just be tempted to go to that year’s General Meeting and start demanding some answers – or hire a lawyer and start demanding that someone be held accountable for this total incompetence. I’ll keep you posted on this story while we wait to see what management does about the situation – and whether or not it helps…