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Supply Chain by the Numbers

- Feb. 5, 2015 -

  Supply Chain by the Numbers for Week of Feb. 5, 2015

Countdown to West Coast Port Lockout; Rapid Growth in Factory Robot Adoption in China; Union Pacific Profits Continue to Roll Along; Logistics Costs in China Remain Very High



The number of days until we could potentially see a lockout of Longshoremen at West Coast ports if a new contract is not hammered out by then, according to a statement Wednesday by the Pacific Maritime Asssociation, which represents the ports in the negotiations. The PMA also said it was offering the ILWU a 3% increase in base wages. The new would also bring up union pensions to a whopping $88,800 per year as a part of a five-year contract  For its part, the ILWU is optimistic, saying that "Everything is moving in the right direction, and if folks knuckle down they can get this done right away. There is really no reason it couldn't be done tomorrow."  Of course, it was a lockout, not a strike, that closed West Coast ports for 10 days in 2002.




That's how many industrial robots China will have working on shop floors in 2017, according to a new estimate from the International Federation of Robotics (IFR) said on today. That would make China the largest adopter of robots by that point on an annual basis, though China's "density" of robots still lags well behind many other countries. Right now, China has just 30 robots per 10,000 workers employed in manufacturing industries, compared with 437 in South Korea, 323 in Japan, 282 in Germany and 152 in the United States. While the expected growth in the China robot market will up that number somewhat, it will still be many years before China sees high levels of density. Rising wages in China are a big factor in the move towards robots. "In the current phase it's the auto industry, but in the next two or three years it will be driven by the electronics industry," an IRF spokesperson said.


The incredible operating ratio, or operating expense divided by operating revenue, a key metric in the transport sector, that Union Pacific was able to achieve in Q4, a record for itself and the industry. That led UP to see net income as a percent of sales of a robust 23.3%, a number that would stand up very well against almost every sector. Procter & Gamble's net income as a percent of revenue in Q4 was 11.8%, for example.  Other rail carriers had reasonably strong ORs as well, with CSX at 71.8%, Norfolk Southern at 69%, and Kansas City Southern at 66.7%. Having now reached its goal of a full year OR of 64%, UP has set a new target to achieve an OR of just 60% by 2019.



That's the percent that logistic costs typically represent versus sales for shipping and moving goods in China, according to the latest edition of the MIT Center for Transportation and Logistics' Supply Chain Frontiers newsletter. That of course is much, much higher than in developed economies, and it is a bit ironic that China - known for such efficiency and low costs in manufacturing goods - has such an inefficient internal logistics system that supports that manufacturing. Intercity toll charges amount to a high percentage of those overall overall transportation costs, MIT reports. But it also notes foreign 3PLs are starting to enter the Chinese market in a big way, which may change this picture through more efficient operations, especially in greater use of technology, which Chinese 3PLs to date have been reluctant to adopt. MIT says deregulation of the 3PL sector in China is also occuring, which may help end the very siloed nature of most 3PL service offerings today there.

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