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Supply Chain by the Numbers

- June 9 , 2011


Supply Chain by the Numbers for Week of June 9, 2011

  Truckload Capacity Getting Real Tight; China's Shrinking Labor Cost Advantage; Railcar Idling Turns Other Direction; Nestle Sees Unprecedented Commodity Price Volatility


Percentage of respondents to the quarterly State of the Freight report released this week from the transportation analysts at Wolfe Trahan who sees tight capacity in the US truckload freight market. That is the highest level of perceived tight capacity in the 10+ year history of the report, dating back to Ed Wolfe's work at Bear Sterns before he started his own firm. That means higher rates are coming.




Number of additional idled rail cars in May, bringing the total for all types of cars in storage for at least 60 days to 279,083 units as of June 1, up from 276,228 one month earlier, according to the Association of American Railroads this week. That was after a 7000+ decrease in parked cars in April had moved the total to the lowest level since the start of the recession. The new data leaves 18.4% of the North American railcar fleet stored instead of in active freight service.


Rate of monthly prices swings in key agricultural commodities during the 2006-2010 period, up from 12.4% in 2000-2005, according to Kevin Petrie, Nestlé's head of procurement, in comments this week. "We have a few years of being in this [commodity] boom cycle," Petrie added. Nestlé has set up commodity research teams to identify trends, while the company uses futures contracts and hedging to lessen its exposure to price swings.



The percent of effective US manufacturing costs in the most labor competitive regions of the America (considering productivity differences) that Chinese labor costs will rise to by 2015, according to new research from Boston Consulting Group (before other supply chain costs). Those costs will also arise to 44% (in the Yangtze River Valley region of China) against average US labor costs across the entire US market, versus just 31% in 2010. In both cases this wuld dramatically shrink China's manufacturing cost advantage over the next four years.


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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