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Supply Chain by the Numbers
   
 

- Feb. 2, 2017 -

   
  Supply Chain by the Numbers for Week of Feb. 2, 2017
   
 

It Begins - Amazon Starts Global Freight Forwarding Service; It's Awfully Expensice to Rent Warehouse Space in SanFran; Mall Owners Handling the Keys Back to Lenders; Bloom Off the Multi-National Company Rose

   
 
 
 

150

That's how many ocean containers Amazon has moved from China to the US acting as a freight forwarder since October, according to an article last week in the Wall Street Journal. The figure is based on analysis of shipping documents collected at ports of entry that were compiled by the firm Ocean Audit. It has been almost a year since Bloomberg and others reported that Amazon was taking steps to build out an end-to-end global logistics service capability that would compete with major 3PLs, forwarders and carriers, perhaps not only to move its own freight but those of others. Amazon's moves in this area included getting licenses in both US and China to act as a wholesaler for ocean container shipping - and now it is happening. With maritime forwarding's reputation as a notoriously complex and time consuming process, which is why forwarders exist, Amazon's entry could signal a cheaper, more straightforward option for Chinese shippers. Wow. Most of the activity so far is for Chinese made goods being sold on Amazon.com and fulfilled by Amazon. See It Begins – Amazon begins Freight Forwarding Operations with Shipments from China to US.

 
 


 
 
 

$30.36

That is the amazing average cost to lease warehouse and distribution center space in the San Francisco area, according to the lastest quarterly market analysis from real estate firm CBRE. That puts it far at the top of the US market, CBRE says. Number 2 is San Jose, at $19.34 per square foot, followed by San Diego ($13.60), and then Austin, Orange County California, Northern Virginia, and Dallas-Ft. Worth, all just over $10 per square foot. Conversely, space can be had for just $3.37 in Greenville South Carolina, and $3.40 in Louisville Kentucky. While space in Northern Virginia goes for over $10 per square foot, as noted above, it is only $4.65 in nearby Richmond. Go figure. The average rate in Q4 across the US was $6.58 per square foot, a record high and up 1.5% quarter over quarter and 6.3% year over year. That annual growth rate was the highest for a quarter since 2007. Rents have been up for 12 consecutive quarters. But as we reported last week, there are some signs the warehouse market is reaching a top, though more likely lease rates will see slow growth, not decline, in 2017.

 
 
 
 
 
$247.5 Million


That is the mortgage value of four shopping malls owned by real estate firm Washington Prime Group that the company either has already or is considering simply handling back to its lenders. The firm has already defaulted on two of the four mails, and has said it is likely to do the same on two more. And Washington Prime Group is hardly alone. Three years ago, CBL & Associates Properties announced plans to prune its portfolio and so far it has unloaded 14 malls, eight of which it sold and six it handed back to lenders. It turns out that just as in the housing sector, mall owners with dismal prospects for a property can simply default on the loan, giving the property back to the lender - and the trend is growing. Of course, all this is the result of the relentless growth in ecommerce sales generally and Amazon specifically, leading to a rash of store closings in the past two years, perhaps best exemplified by the demise of The Limited, which has closed all 250 of its stores to become an on-line only retailer. Closings by big anchor store chains such as Macy's, Sears and JCPenney are really having an impact. The retail sector, and thus the supply chain networks of retailers and consumer goods companies, is transforming before our eyes.

 
 
 
 

25%

That is the drop in profits of multi-national companies over the past five years, according to report this week on Bloomberg,com. That compares with a 2% increase in profits for more domestic oriented firms. Returns on capital at multi-nationals have slipped to their lowest in two decades. What's going on? The age of the multi-national may be waning, says Bloomberg, adding that "In a majority of industries they [multi-nationals] are growing more slowly and are less profitable than local firms that stayed in their backyard. Firms' tax bills have been massaged down as low as they can go; in China factory workers' wages are rising. Local firms have become more sophisticated. They can steal, copy or displace global firms' innovations without building costly offices and factories abroad." Of course, multi-nationals are behind the increasingly complex world of global supply chains, and represent about 50% of global trade volumes. All this before President Trump took office. China, Bloomberg says, wants global firms to place not just their factories there, but also their brainiest activities such as research and development – no doubt in part so it can acquire much of the intellectual property for the country. Where are we headed? Who knows, but Bloomberg noted that "a rapid unwinding of the dominant form of business of the past 20 years could be chaotic."

 
 
 
 
 
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