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Supply Chain by the Numbers

- August 12 , 2011


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


LTL Carriers try to Right Pricing Ship; Need a Job? Burlington Northern Hiring; WalMart Sets Next Wave RFID Deadline; CSX Pouring it Back In



Announced increase in base freight rates this week by FedEx Freight, the company's LTL unit. This joined similar moves by other LTL carriers announcing rate increases above 6.0%. While most shippers are under contracted rates and thus not imminently affected by the move, and certainly would negotiate smaller increases at contract time, the beleaguered LTL was able to push rates northward in Q2, and perhaps will exert some discipline to move rates still higher and return to some level of profitability.




Number of new workers added so far in 2011 by railroad carrier Burlington Northern, with similar headcount increases seen by most of the other major lines as well, as business and profits continue to be good for US rail service providers. All four major US public carriers (Burlington Northern is now part of Warren Buffet's Berkshire Hathaway company) saw revenue growth in the mid to high teen percentages in Q2, with strong profit growth as well.


In other rail news, the amount of its revenues rail carrier CSX said in its recent Q2 earnings call that it was going to invest in its network from now through 2015. Capital investments in 2011, for example, will total some $2.2 billion. These are incredible investment levels for an industry that a decade ago had among the worst returns on invested capital of any industry in the US.



As we reported this week, the date when a new group of suppliers will be required to deliver RFID-tagged product at the item level to WalMart's US stores, notably moving beyond the apparel area where the program started to now also include tires and certain categories of electronics, in addition to women's intimates. The first categories required to be tagged were jeans and men's underwear. See Is Item-Level Apparel Tagging Going Strong, Fading, or Just Catching Its Breath? WalMart Expanding Categories to Non-Apparel.


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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