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Supply Chain by the Numbers

- Oct. 23, 2014 -

  Supply Chain by the Numbers for Week of Oct. 23, 2014

Volkswagen Ready to Crank Up More Robots; Free Holiday Shipping for All from Target; Could Low Bunker Fuel Costs End Slow Steaming? More US Companies Say They are Bringing Production Back Home



The average savings over time per hour for using a robot on the factory floor at auto giant Volkswagen versus a human being, according to a recent magazine article from the VW board member that focuses on human resources. That versus a fully loaded cost of about 40 euros per hour for a German factory worker. The article said that VW plans to replace many of the thousands of baby boomer workers who will retire over the next 10-15 years with robots, a sensitive issue everywhere but especially in union-centric Germany. VW claims the change will not increase Germany's unemployment rate, but that is a bit of a dodge, as VW says demographic changes mean it would have a hard time filing all the factory positions and will keep hiring as many younger workers as it does today.




The amount that retailer Target will charge - nothing - for shipping for online orders placed between now and Dec. 20, according to an announcement from the company this week. The incentive comes four months after Target unveiled a permanent free shipping offer for those spending at least $50. But of course, shipping via parcel carriers such as UPS and FedEx is not free, so Target's profit margins will be under pressure, especially for small dollar value orders. A bit late to the efulfillment wars, Target is also now shipping products directly from a network of 135 stores in 38 markets so online customers can get items within one day as standard delivery.


The approximate recent price per ton for bunker fuel in Europe, as measured by the rate for Rotterdam IFO 180, down substantially from a level of about $630 in June. With that kind of cost reduction, would shippers or carriers be tempted to end the technique of "slow steaming," in which the container carriers run their ships about 25% slower than design speed, to reduce bunker fuel usage? Basically, at these fuel costs, shippers could go back to normal speeds and take several days out of shipment times for about the same cost as they have been paying recently for slower delivery. Not going to happen, say the analysts at Drewry Shipping - the carriers have little to gain financially from a switch, and slow steaming in effect reduces container shipping capacity, in a sector plagued with too many TEU available.



The number of companies which said they are bringing some manufacturing back from China to the US, according to a just released study from Boston Consulting Group. That's up from about 16% in last year’s study of US manufacturers with over $1 billion in sales. In addition, the number of companies which said that they would consider returning production in the near future climbed from about 17% in 2013 to 20%. What's more, respondents also predicted that the U.S. would account for an average of 47% of their total production in five years, reflecting a 7% increase in U.S. capacity compared with last year's results Is reshoring real? The jury is still out.

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