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Supply Chain by the Numbers

- April 20, 2017 -

  Supply Chain by the Numbers for Week of April 20, 2017

Amazon Looking for Scads of Urban Euro DCs; IMF Offers Bullish View of Global Economy; Prologis Breaks Ground on Multi-Level Port DC; New CSX CEO Bent on Closing Hump Yards in Efficiency Move



That's how many smaller European distribution centers is looking to secure, in support of its one-hour Prime Now delivery service there. The on-line behemoth is understood to be seeking small DC spaces in urban locations near major cities, as consumers increasingly demand shorter delivery times for goods from laptops to lawnmowers. Popular SKUs can be held in these local DCs before being sent to customers, in what is commonly referred to as "last mile" operations. Amazon currently offers Prime Now service in the UK, France, Germany and Italy. Amazon's rapidly growing business has resulted in it signing leases for warehouse space across the world at an astonishing rate. For example, research by property agency Savills found that in 2016 Amazon accounted for more than a quarter of all warehouse space rented in the UK, pushing supply levels to new lows, with similar trends in much of the rest of Europe.




That's the prediction for global real GDP growth in 2017, up from an estimated 3.1% last year, in a very bullish forecast from the International Monetary fund. However, the IMF warned that this solid growth rate would be imperiled if protectionist measures are adopted. "One salient threat is trade protectionism, leading to trade warfare," Maurice Obstfeld, the IMF's chief economist, said at a news conference. After growing 2.2% last year, below global GDP growth, global trade volumes will expand 3.8% this year and 3.9% in 2018, the IMF predicted. "The pickup in manufacturing, industrial production and trade is fueling our confidence that this year and next year will be substantially better than 2016," Obstfeld added. The growth rate for the United States economy was projected to increase to 2.3% in 2017 and 2.5% next year, from a weak 1.6% in 2016. The US has amazingly not seen real GDP growth of above 3% since 2005. The IMF predicted developing nations will expand at 4.5% clip this year and 4.8% in 2018, a marked improvement from 4.1% growth in 2016.



That's how many levels a new distribution center being built by real estate and management firm Prologis near the port of Seattle will have, in a throwback of sorts to the multi-level urban warehouses of decades past. Why three levels? Because land around major US port complexes is increasingly hard to acquire and/or hugely expensive. So the answer? Go vertical, just as was done in years ago, even though such facilities are much more expensive to operate. Ground was broken on the 590,000 total square-foot facility last week, Prologis is said to be planning lots of different services for the three-story structure. Those include import distribution, regional distribution and ecommerce fulfillment all from the one building, which was built "on spec" hoping the clients will come. The first two stories will focus on crossdocking and transloading and have truck ramp access, using a sort of mezzanine approach on the second level. The third story will focus on storage and replenishment services, and will be served by freight elevators. Back to the future, it seems. Apparently, such vertical DCs near ports are common in parts of Asia and Europe, especially in Japan and Singapore. Logistics fees will be much higher that traditional DCs further away – will importers pay that for speed?



That's how many so-called "hump yards" that new CSX railroad CEO Hunter Harrison has already closed in the freight carrier's network, with several more potentially on the chopping block, as the former CEO of both major Canadian railroads is bringing his legendary focus on efficiency to his newest gig. What is a hump yard? It is an approach to reshuffling inbound cars to a terminal to match them up with outbound trains scheduled to take them away. Using this process, long trains are broken down into individual cars by pushing them over a hill, then letting gravity send them down different tracks. From there, they are reassembled and connected to a train headed to their next destination. Harrison has said such facilities are inefficient because of the time-consuming way they work and the high costs of manning and maintaining them. Instead, he favors an approach called "flat switching," in which locomotives are used to break down and assemble trains. In this approach, considered part of "precision railroading," train cars are sorted into blocks as they are picked up from shippers. The blocks are more organized than the jumble of cars that typically arrive at hump yards, which makes for faster swapping and assembly, cutting days off transit times, railroad experts say. Some of the 9 other CSX hump yards may stay, according to reports, based on their traffic profiles.

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