Supply Chain by the Numbers for Week of Oct. 27, 2011
Ocean Shipping Rates Plummeting; Amazon Keeps Building DCs; Yuan Value is Right, China Says; FedEx Says E-Commerce Driving Rising Volumes for Christmas Season
The drop in ocean shipping rates per TEU on lanes from Asia to Northern Europe, according to the analysts at Alphaliner this week, to the point where nominally carriers are moving freight at lower than variable costs. At an average rate of about $680, and a bunker fuel adjustment of about $750, carriers would appear to be losing $70 on each TEU, taking net rates down to below the worst of the2009 recession. However, Alphaliner said actual bunker fuel used per container is really only about half the adjustment rate, so carriers are picking some margin up there.
The amount the Chinese Yuan has risen against the dollar since 2005, pushing its value "close to an equilibrium level," according to a government spokesperson this week. Of course, many in the US and other developed countries argue that the Yuan is still artificially low, by as much as 25%, versus other world currencies , which unlike the Yuan trade freely in global markets. The US Senate recently passed a bill would make it easier for UN industries to get tariffs on Chinese imports if the Yuan deemed to be at unreasonably low levels, but its fate in the House or for ultimate presidential signature is unclear.
The amazing number of distribution centers Amazon.com will have by year's end, according to the company's Q3 earnings call this week. That includes 17 DCs that will have been opened just this year, up from the 15 facilities Amazon had forecast earlier this year. That level of investment was in part blamed for the 73% year over year drop in profit in the quarter - but understandable given that revenues rose 44%. This is simply quite an amazing story.
Number of shipments FedEx said this week it expects to handle during the upcoming Christmas season, a rise of 12% over 2010. However, the company says that growth is not coming from a sharp rise in overall consumer spending, but rather from the continued move to more on-line purchases. FedEx also said a growing percent of those shipments will move through its SmartPost service, in which the last leg of residential delivery is performed by the USPS.