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Supply Chain by the Numbers

- Feb. 5, 2016 -

  Supply Chain by the Numbers for Week of Feb. 5, 2016

New Age Warehouse Robot Said to Turbocharge Productivity; Amazon Fulfillment Costs On Rise Again; Investment in Clean Energy Need to be Massive, Bloomberg Says;  US Manufacturing Slumps Again



That is the claimed level of productvity growth possible from a new line of distribution center robots released by a company called Locus Robotics, just launched in its first DC, a 3PL operation run by Quiet Logistics in Devens, Massachusetts. What is somewhat ironic is that the name Quiet Logistics came from the company's use of the Kiva Robot system for picking and shipping on-line orders. Unlike the now Amazon-owned Kiva robots, which bring goods to an order picker, these Locus robots travel to order picking areas and take picked products at a speed of 4.5 MPH to the front of the DC for packing and shipping. The net result, Quiet says, is a substantial reduction and travel time for DC associates. The robots are connected to the order management system, so as orders are released to the floor, they meet human workers at the right picking locations. Sounds cool, but we have questions, starting with it seems you would need a very large number of these robots to keep up with picking activity.




That's that was the rise in fulfillment costs at in Q4, according to its recently released earnings report. Given that its revenue rose 22%, that means fulfillment costs continue to rise much faster than sales. The result is actually worse than those numbers would indicate, in that the growth in sales of 22% includes revenue from areas like Amazon's web services business, which has nothing to do with fulfillment. And many people don't realize that Amazon fulfillment include the cost for inbound logistics and fulfillment center operations (including depreciation of those investments), but not outbound shipping costs, which as usual far exceeded shipping revenue n the quarter. While Amazon did make a small profit in the quarter, most of that came from the web service, with the retail side of the business again around break-even.


That was the reading in January for the Purchasing Managers Index from the Institute for Supply Management, the fourth consecutive month below the 50 mark that separates manufacturing expansion from contraction. This slump comes after 35 straight months of US manufacturing growth that ended last October. The January reading was up just a bit from the 48.0 level in December. In better news, the New Orders Index registered 51.5, an increase of 2.7 percentage points from the seasonally adjusted reading of 48.8% in December. New orders is seen as a good barometer of future manufacturing activity. But in less positive numbers, the ISM Prices index registered a very low 33.5, the same reading as in December, indicating lower raw materials prices for the 15th consecutive month. While lower input costs are generally a good thing for business, they can also indicate a weak economy.


$12.1 Trillion

That's the level of investment of investment in so-called "clean energy" technologies (wind parks, solar farms and other alternatives to fossil fuels) needed to meet the UN goal of holding global warming to 2 degrees Celsius (3.6 degrees Fahrenheit) over coming decades. That estimate coming this week from Bloomberg New Energy Finance and Ceres, a coalition of investors and environmentalists. Bloomberg says that about $6.9 trillion in such investments in renewables is already in the cards, spurred on by government support mechanisms. Another $5.2 trillion - or 75% more - is needed, Bloomberg says, to sufficiently reduce CO2 emissions from fossil fuels. The required expenditure averages about $484 billion a year over the period, compared with business-as-usual levels of $276 billion, according to Bloomberg calculations. What would be the impact in terms of taxes or energy costs from such a near doubling of such investment? That is the trillion dollar question.

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