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Supply Chain by the Numbers

- Aug. 4, 2016 -

  Supply Chain by the Numbers for Week of Aug. 4, 2016

Walmart to Make Huge eCommerce Acquisition? Uber Packs it Up in China; US Truckload Carriers have Tough Q2; California Plans to Remake Freight Transportation


$3 Billion

That's the what etailer could fetch in an acquisition, as rumors swirled this week that Walmart was in talks about buying the Amazon on-line rival. Jet, barely a year old, has sought to underprice Amazon with a vast marketplace that would require billions of dollars in funding and a plan to rely more on suppliers for fulfillment than warehouse inventory, similar to China's Alibaba and Amazon's own marketplace service. Jet has already raised some $500 million in investment. Buying would push Walmart's ecommerce efforts in a new direction as it seeks to grow beyond its brick-and-mortar storefronts with speedy home delivery from a network of big, new suburban warehouses. The company would gain Jet's sophisticated pricing software and warehouses tailored for on-line delivery from such a move. Will a deal happen? "Walmart could certainly use some energy" around its on-line efforts, said Bryan Gildenberg, an analyst at Kantar Retail. "I'm struggling with the math of why you would pay this much money for this [business] model at this particular time."




That was the decline in profits in Q2 at leading public US truckload carriers, according the usual quarterly analysis performed by SCDigest. Those declines were due to a freight market almost all the carriers characterized as "soft" in the quarter. For example, Werner noted that "Second quarter 2016 freight demand was significantly softer than freight demand in the second quarters of the prior two years." Similarly, Heartland Express commented that "Throughout the first half of 2016 we continued to experience downward pressure on freight rates due to the softness in freight volumes resulting from the available capacity in the industry." That led to a rise in average operating ratios across the six carriers we follow, rising to 88.7% from 85.1% in Q2 2015. Swift said it has responded to the slump by reducing its average operational truck count by 244 trucks in Q2 versus 2015.


That is the share that Uber will now have in rival Chinese ride sharing service Didi Chuxing, after it sold out to Didi after apparently concluding that the Chinese government was never going to allow it to succeed in the giant China market. "Foreign tech companies trying to make China a big market have always found it a fraught endeavor," the Wall Street Journal wrote this week, adding that US companies "face a massive disadvantage in that if they do find success, state media and regulators find a way to cut them down to size." With the move, that giant Chinese market will now basically become a monopoly for Didi, which earlier had an influential investment from China's sovereign-wealth fund. Another one bites the dust in China, as the saying goes.



That's by how much California plans to improve "freight efficiency" in the state by 2030, as part of a massive plan to makeover the freight transport sector and reduce CO2 emissions. The Sustainable Freight Action Plan, released this week by governor Jerry Brown, has some 82 goals, including employing 100,000 trucks, trains and cargo-moving machines powered by cleaner fuels or electricity by 2030, and maximizing near-zero vehicles by 2020. The ramifications of all this could be far reaching. For example, one regulation calls for requiring so-called "last mile delivery" companies such as FedEx and UPS to purchase zero-emission fleets by 2020. Next steps for state agencies will include continued work with federal, state, industry, labor, regional, local and environmental and community-based partners to refine and prioritize the strategies and actions outlined in the Action Plan. Will this spread to other states? What will be the costs? Those are the huge questions

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