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Supply Chain by the Numbers

- Sept. 22 , 2011


Supply Chain by the Numbers for Week of Sept. 22, 2011


Peak Oil - Not so Much; Chinese Economy Stalling;Amazon in Hot Water over Hot DCs; Yuan to Float Sooner than Expected



Approximate year noted energy expert Daniel Yergin says in a new book that world oil output is likely to plateau, not begin a steep drop, differing from the time line and severity of the decrease in oil output promoted by "Peak Oil" adherents. Yergin believes continued innovations in extraction and other technologies will counter much of the Peak Oil theory effect. See Are Peak Oil Theories Overblown?




Preliminary September reading for the Chinese Purchasing Managers Index, down from 49.9 in August, and which would make it the third straight month the index would be under the 50 level that separate expansion from contraction. The news contributed strongly to the drop in stock prices around the world this week, and even more so to the large drop in a variety of commodity prices, from oil to copper, which have supported by strong Chinese demand. However, a Chinese official still predicted an economic growth rate of about 8.5%-9.0% in coming quarters.

$2.4 million

Amount on-line retail giant says it has just spent "urgently" installing new air conditioning systems at four US distribution centers, after it was hit this week with charges on the Morning Call web site that it was abusing workers at an Allentown, PA DC in which temperatures regularly soared to 100 degrees or more. It turns out an emergency room doctor in the area called federal regulators in June to report an "unsafe environment" after he treated several Amazon warehouse workers for heat-related problems.



The year China is likely to let its currency openly float on world markets, according to a senior Chinese official last week. That would mean calls from the US and Europe for China to let the value of the yuan rise, which they believe is held artificially low by the government to spur exports, would no longer be an issue, as the market would truly set its value, as with other currencies. Western companies need to assess what this might mean in terms of costs coming out of China.


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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