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Supply Chain by the Numbers

- May 12 , 2011


Supply Chain by the Numbers for Week of May 12, 2011

  China Wages to Skyocket; Supply Chain Conference Week in Orlando; Margin Increases Tank Oil Prices; YRC Worldwide Not Exactly Looking Like a Stock Bargain


The increase in wages for Chinese workers over the next years, according to someone who should know - William Fung, head of trading giant Li & Fung. This will be a key driver is rising costs of imports from Chinese manufacturers, he says, and that Western companies better start preparing now.




Number of simultaneous supply chain-related conferences all being held early next week in Orlando, FL. The Warehouse Education and Research Council (WERC) annual conference, ISM's International Supply Management Conference, and SAP's Sapphire user conference are all running in the Orlando area Sunday through Wednesday. SCDigest Editor Dan Gilmore will be reporting from the WERC and ISM events.


The new share price target for LTL giant YRC Worldwide (Yellow Roadway) issued by the transportation analysts at Wolfe Trahan this week, after the financially struggling carrier posted disappointing results for the most recent quarter last week (greater than expected losses, though tonnage and market share were up). The stock is currently at about $1.31 per share, but an upcoming recapitalization will dilute current shareholders by some 97%, taking the value to just 5 cents/share. Wolfe Trahan believes the carrier could run out of cash by the end of 2012 at current trajectories.



The increase in so-called margin requirements for oil futures trading announced by the CME (the former Chicago Mercantile Exchange) late last week. That simply means oil traders must come up with more money upfront rather than borrowing the cash used to buy oil futures. The third oil margin hike of 2011, the change was thought to have led to the 15% drop in oil prices late last week, with oil now under $100 per barrel. The margin hike either led to a real drop in demand for oil futures or the perception that demand would drop, causing prices to tumble.


Oct. 3, 2008

There are valid reasons for both the DC and DSD distribution models, but neither should determine the store assortment, which depends on the consumer.

The Distribution Center model makes sense when you have many prepackaged products which are continuously replenished and require little in-store servicing. With the facility justified, you can also add seasonal and holiday 'in and out' products which can share the distribution network.

The key is to manage the time supply of inventory in the warehouse and distribute it efficiently.

The Direct Store Delivery model can be implemented purely as a distribution method or also allow the manufacturer to manage some of the in-store merchandizing.

I do not see any advantage of using DSD simply to deliver merchandise. Although it may help the 'mom and pops' that are on the same route as a large retailer, the DSD model must be more expensive. Once the big drops are removed, it will become more costly to reach the independent retailers but the larger retailer must benefit.

If DSD is used to support in-store merchandising, then you have a different story. The manufacturer's representative can give their products the individual attention that increases their sales. The bad thing is that they can also load up the store with inventory if no one is watching.

Bill Bittner
BWH Consulting


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