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Supply Chain by the Numbers

- Dec. 15, 2016 -

  Supply Chain by the Numbers for Week of December 15, 2016

Carrier Driver Turnover Continues to Head Lower; First Amazon Real Drone Delivery Happens Fast; ISM Study Says 2017 to be Strong Year for Manufacturers; Major Tax Overhaul Could Whack US Imports



That was the Q3 rate of truck driver turnover at large fleets (over $30 million in revenues), according to the latest report from the American Trucking Associations. That was down 19 percentage points from the level in Q3 2105, and the lowest number in five years, though down just a little from Q2 2016 levels. Turnover at smaller fleets rose 1 percentage point to 80% sequentially, but increased 12 points compared with the third quarter of 2015, as the turnover at large and smaller carriers was about the same for the first time in recent memory. A soft freight environment is being cited as behind the low number, as drivers are leery of making a move in a questionable market, though we think there must other factors going on, especially steady increases in pay in the past two years. Less-than-truckload turnover remained low at 9%, 3 percentage points lower than the second quarter and down 1 point year-over-year. Has the driver shortage crisis been over sold?




That's how many minutes it took for Amazon to complete its first true drone delivery from the time of the order. The company recently launched a trial of drone deliveries in Cambridge, England - and on December 7th, Amazon completed its first true flight with a customer parcel via drone. The drone departed from a fulfillment center custom-built just for this drone test purpose. The UK location was selected because the rules about drone delivery testing are much less restrictive for now than they are in the US, where for all practical purposes FAA rules prohibit drone deliveries, such as requiring line of site by the operator for the entire flight. Amazon's video about the project says that it's only servicing a few customers in the area right now, but will soon be open to dozens more who live within a few miles of the Cambridge fulfillment center. The drone flew at a height of about 400 feet. The drones are only allowed to fly during daylight hours when its sunny -- rain, snow or icy conditions will ground them.


That is the optimistic view of the increase in sales by US manufacturers in the December 2016 Semiannual Economic Forecast issued this week by the Institute for Supply Management (ISM). That compares with the 2.8% 2017 revenue growth estimate made in the May edition of the report, and just a 0.9% gain now forecast for 2016 versus 2015. A healthy 16 of the 18 reporting manufacturing sectors expect positive revenue growth for first half of 2017. However, capital expenditures are expected to rise just 0.2% in 2017, coming off of a 7.3% increase in 2016. With expectations for raw materials costs at just a 0.9% rise, and labor and benefits costs up 2.5%,a 4.6% rise in revenues could set up manufacturing for a solid improvements in margins and overall profitability next year.



That would be the new tax on all important goods coming into US, under a new and major US tax reform being developed by House Republicans. This plan - which is sometimes known under the term "border adjustment" - would be paired with a reduction in a reduction in the US business income tax rate from 35% to 20%. But even that 20% tax would be waved on goods exported out of the US. The obvious goal: reduce imports and encourage exports and US manufacturing. The move would be an alternative to President-elect Trump's idea of slapping a 35% tariff on goods imported from China. The new tax plan - which has received relatively public attention yet - would create winners and losers, and the short term losers would be major importers, which is why major retailers and the NRF are mustering forces against the change. This is a potentially major development – you can read more here: New US Tax Plan Could have Major Impact on Imports and Exports.

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