I second the nomination of David Leonhardt's "Have Recessions Absolutely, Positively Become Less Painful?" for a Voxy. I am not sure that I sign on to the term "micro-recession," but this is a wonderful piece of journalism that helps illuminate why the macro economy have been giving mixed signals over the past 4 years. The focus of the article is on how FedEx, riding in the HOV lanes of the global shipping highways, has made its operational model more flexible, thereby allowing the U.S. economy to weather more difficulties without sharp, economy-wide declines in output. The title of my post is drawn from:
On a recent Wednesday, the empty plane that departs each night from Las Vegas had to travel to San Diego - rather than making its usual flight to Memphis - to fill in for a broken plane. But ground workers in Las Vegas had become so used to its completing its typical route that they had loaded some packages marked for the Memphis hub onto the plane. The packages ended up in Oakland instead.
"That's the risk with that flying spare," Mr. Dunavant, using company lingo for the empty planes, said during the call. "That's one of the things they get lulled to sleep on."
Besides Las Vegas, the flying spares leave from Duluth, Minn.; Laredo, Tex.; Fort Myers, Fla.; and Portland, Me. All take circuitous paths to Memphis, passing near major cities like Dallas, Denver and St. Louis.
On a typical night, one of the five makes an unexpected stop to collect an overflow of packages, one lands to bail out a plane needing a repair, and three arrive in Memphis as empty as they were when they took off.
Until a year ago, FedEx used just one flying spare, leaving from Las Vegas, but executives decided they needed an even larger reserve army to fight uncertainty. Every night, the company also keeps about 10 percent of planes half empty, allowing them to make unplanned stops and pick up more cargo.
There is an interesting lesson here that is often forgotten--less volatility of the outcome is often the result of more volatility of the inputs, to smooth out the impact of unexpected shocks to the production process or market demand.
Imagine if passenger airline companies were paying this much attention to their business models, or if other industries in which distribution is essential planned so well for daily contingencies, ...