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Supply Chain by the Numbers

- Jan. 30, 2014

  Supply Chain by the Numbers for Week of Jan. 30, 2014

Emerging Market Growth Slowing Dramatically; UPS Christmas Fail to Deliver Earnings Hit; Brick and Mortar Retail to Hollow Out, Some Say; P3 Would Control Major Share of Several Major Lanes if Approved



Share of global GDP coming from emerging economies excluding China, over the past few years, according to Rachir Sharma of Morgan Stanley, in a recent column in the Wall Street Journal. Why is this noteworthy? Because contrary to popular wisdom, that share hasn't changed since 2011, whereas most pundits predicted emerging economies would continue to grow much faster than the developed world. The US' share of global GDP has similarly stabilized at about 23% for the past three years. What’s happening? One major factor has been the big tumble in commodity prices over that period, as emerging economies are often highly dependent on commodity exports as major elements of overall GDP. Will it last? That is the trillion dollar question, as most multi-national companies are banking heavily on emerging market growth.




Hit to shipping giant UPS' Q4 earnings from its now famous 2013 Christmas delivery failure, the company said in an earnings warning this week. In the days right before Christmas, UPS was unable to make thousands of deliveries in time for Christmas, and was forced to increase its cost significantly even for those it did deliver, due to a huge and unexpected surge in last minute on-line orders. UPS had to employ 30,000 more temporary workers than expected close to Christmas, for example, and to bring on-line so-called "hot spare" aircraft as well, though a lack of sufficient cargo planes was at the heart of the capacity issues. It is not clear if UPS will have to subsidize the give-backs some retailers are giving customers whose deliveries were late. Amazon, for example, is sending those customers gift cards.



Likely drop in total US retail brick and mortar square footage over the next 5-10 years, according to Michael Burden, a principal with Excess Space Retail Services, during an interview on CNBC this week. That's just one man's opinion of course, but many others have made generally similar predictions, if not quite as extreme as this one. eCommerce sales of course continue to dramatically outpace physical store sales growth, by 3-4 times or more, and Christmas 2013 store shopper traffic was down some 15%, according to ShopperTrak. There will be many fewer stores in the near future, and smaller footprints for many other outlets, experts say. This will impact retail and consumer goods supply chain network requirements, among other ramifications.



Percent of container movements that the proposed P3 alliance between Maersk Line, France's CMA CGM and Switzerland's Mediterranean Shipping Co. (MCS) - the three largest container shipper lines - would control, respectively, on Asia-to-Europe, trans-Atlantic, and trans-Pacific routes. Those numbers resurfaced in recent weeks, as news is leaking that regulators in the US, Europe and China are likely to approve the alliance after demanding some minor concessions. The market share the alliance will control in those markets is generating concern among shipper groups, and even from areas such as bunker fuel distributors. But the deal is likely to go through nonetheless.

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