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Supply Chain by the Numbers
   
 

- Oct. 29, 2015 -

   
  Supply Chain by the Numbers for Week of Oct. 29, 2015
   
 

Walmart Inventory Cold has Vendors Worried about Pneumonia; Truck Driver Pay Heading Up and Up; Ocean Carriers Pushing Migration to East Coast Ports; China's New Approach to Growing Economy

   
 
 
 

2500

That’s how many SKUs Walmart has pruned from its supercenter store shelves in recent months, down now to about 120,000, with plans to cut even more in the months ahead. It has also reduced the number of in-store displays by about 15%, again with more to come. The move to reduce inventory costs comes in the face of tepid sales growth, predictions for falling earnings next year, and inventory levels that reacedt slowly to a slowdown in sales growth. "It's the objective of every retailer to grow their inventory slower than sales," Walmart US stores CEO Greg Foran said last week. "We just carry too much inventory. And we carry too much inventory across most parts of the box." The moves have many Walmart vendors nervous, worried their products will lose a place on Walmart shelves or they will sales drop from the decline in promotional displays. Walmart has been down this road before in 2009, and then reversed course in 2011.

 
 


 
 
 

18.4%

That is the increase in the 12-month rolling average of growth in container volumes moving from Asia to US East Coast ports. That measure was up 22.5% in Q2, and has been slowing a bit lately, to a rate of 12.7% in August, but still much faster than growth in West Coast volumes. What’s happening? The move to the East Coast was initially led by importers concerned in mid and late 2014 over the impact of a potential Longshoremen's strike on the West Coast, and then the delays and chaos that occurred during the ILWU negotiations and even well into 2015 after a deal was reached. But Drewry Shipping now says ocean carriers seem to be pushing down rates to drive shippers towards the East Coast leading up to the opening of the expanded Panama Canal in 2016. Why? So the shipping lines can capture the revenue going now to rail carriers and trucking companies to move containers from the West Coast to the Midwest or East Coast.

 
 
 
 
 
4%

That's how much LTL carrier Saia increased its driver pay in July, after other increases in the past two years. Combined with improvements in benefits, that led to an increase in total driver expenses of 6.8% in Q3 year over year. Those rising costs contributed to a sharp decline in profits at the carrier of 27.7% in the quarter. Average driver pay in the US has jumped 17% since the end of 2013 to a record $57,000 this year, but is heading still higher in the face of continued driver shortages. Knight Transportation CEO David Jackson said in the carrier’s Q3 earnings call that driver wages at his company will go up next year "and probably in 2017, 2018 and beyond. That’s not going away.” But of course, the pay increases must inevitably lead to higher rates for shippers in the end. Saia CEO Rick O’Dell, for example, said the company is targeting a 4% to 5% rate increases in 2016 to cover the rising labor costs.

 
 
 
 

2

That's the number of children Chinese couples will now be able to have under new policies that will end the country's notorious "one child" policy that has ruled the country for decades. Are China's leaders suddenly becoming more progressive? Hardly. More pragmatic is a better answer. The policy is being changed as China's leaders are grappling with much slower economic growth and an aging population, with some observers warning the China could be the first country to " grow old before it grows rich." The one child policy was of course adopted over concerns about over population in the country, now with some 1.4 billion. The change could lead to faster growth and even larger product markets in China, though liberalization of this rule in some urban areas over the past few years led to few couples taking advantage of the change.

 
 
 
 
 
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