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Supply Chain by the Numbers

- May 24 , 2012


Supply Chain by the Numbers for Week of May 24, 2012


US Factory Utilization Almost All the Way Back; SAP Reaches Deep in Wallet for Ariba; TVs being Made Again in America; Amazing Level of New Truckload Fleets



The level of US manufacturing factory utilization in April, according to the Federal Reserve late last week. That was up another three-tenths of a point over March, and now leaves the utilization level at just nine-tenths of a point below the long run average of 78.8%. It has been a long but slow climb from the bottom in June of 2009. (Note: this is for manufacturing only, not the overall number for industrial capacity utilization, which includes mining and utilities, though the trends are quite similar for both metrics).




Roughly the multiple of procurement vendor Ariba’s revenues, not profits, that SAP will pay to acquire the company, in a deal that will value the Ariba at about $4.3 billion dollars (versus Ariba’s 2011 revenues of $443 million). The move was a bit surprising to us, but is consistent with SAP’s recent focus on cloud-based solutions, as virtually every software company has jumped on the cloud bandwagon.


The projected price for a new television that – believe it or not – is being made in the US. That is the first time TV assembly has been done since the last major TV major factory in the US was shuttered about five years ago. The new 46-inch flat screen will be sold initially at Target stores, and is the result of an unusual alliance between a US brand-focused company (Element Electronics of Eden Prairie, MN) and a Chinese supplier of many of required components (Tongfang–Global). The “labor cost differential isn’t as great as it once was,” said the head of the Consumer Electronics Association.


The incredibly low average age in years of the fleet of truckload carrier Knight Transportation, according to its recent Q1 earnings call. Knight is among several major TL carriers that haveturned over a huge percent of its existing trucks in the last two years. Those moves have been driven by new environmental requirements and the opportunity for improved fuel mileage. Just a couple of weeks ago, for example, Schneider National said it would acquire 3000 new tractors in 2012, replacing one-third of its fleet.


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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