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Supply Chain by the Numbers

- June 12, 2014 -

  Supply Chain by the Numbers for Week of June 12, 2014

US Freight Spend Soaring Much Higher than Volumes; Will Walmart Accident Impact HOS Reform? Ocean Carriers Warn on Big Fee Hike if West Coast Port Strike; Gap Stores First to Source from Myanmar



Approximate wages per month that workers at South Korean-owned factories in Myanmar will earn making clothing for the Gap stores, after the apparel retailer confirmed this week it will become the first US company to sign an apparel deal with the Asia country after US sanctions barring such sourcing deals were lifted two years ago. That was after something of a civilian government is now in place after years of military rule. The Gap says those wages are four times average worker pay in the country, and that supervisors can earn as much as $1000 per month. The US sanctions against the country were put in place in 2003. Before the Gap move, Coca-Cola Co. started producing soda in Myanmar, pledging to spend $200 million here over five years. Gap says it sources from 40 countries, by the way.





Of course you have probably heard this by now, but that is the number of hours some reports are saying Walmart truck driver Kevin Roper hadn’t slept in before he triggered the fatal crash in New Jersey late last week that killed one and severely injured others, including well known comedian Tracy Morgan. Beyond the human tragedy, this comes just as a Senate committee had passed a bill that if ultimately approved by the full Senate and House would delay the 34-hour re-start provision included in the new Hours of Service rules that went into effect last year until a detailed study on the benefits is completed by the FMCSA. Though the accident had nothing to do with HOS compliance, will the supposed lack of sleep now connected to the incident make delay of the HOS changes politically toxic? That is the question.


Rate several ocean carriers/terminal operators have said they will charge shippers per 40-foot container above normal handling rates as a congestion surcharge, in the event of a "strike, lockout, work stoppage, work slowdown or other labor-related disruption" in West Coast ports. The notices went out in recent weeks to meet contractual requirements for notice of such price changes, as the contract between ports and terminals with the International Longshore and Warehouse Union expires June 30. Few are expecting an agreement will be reached by then, but all of course hope a deal will be reached sometime soon after that without any work disruptions – as memories of the 10-day lock-out of the Longshoremen in 2002 that caused supply chain havoc resurface. We say chance of a disruption of some kind is about 30%.



Astoundingly, the increase in US spending on freight transportation in May versus the bottom of the recession in the country in June of 2009, according to the latest Cass Freight Index report. As an indication of how low rates sank in that period, the increase in the number of shipments in May versus that same time frame was up just 26.4%, versus the 77% increase in spend. We suspect there was also some increase in weight per shipment, which might also be a factor in that delta between shipments and spend, but that probably explains only a small portion of the change. The freight spend in May was also 11.2% higher than 2013, and the number of shipments was up 3.6% year over year - that again signals strong pricing power for the carriers, with spend increasing about three times faster than volumes. Logistics costs are headed up - rapidly.

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