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Supply Chain by the Numbers

- Aug. 20, 2015 -

  Supply Chain by the Numbers for Week of Aug. 20, 2015

Good News, Bad News Quarter at Walmart; USPS Looking for Salvation from eCommerce - and Finding It; Empire State Production Plummets; Maersk Cuts Global Container Volume Forecasts



That was the global growth in Walmart's Q2 ecommerce sales, according to the company's earnings release this week. It would have been higher - 18% - if not for the rising value of the dollar, which reduces the impact of overseas sales when converted back to dollars. While that 16% is a decent number, it is down from earlier company projections in the mid-20% range -and perhaps most importantly, well  below Amazon's numbers. Walmart's on-line rival saw North American merchandise sales rise 31% in its Q2. While Amazon's international number was much lower, at 10%, it too would have been 31% if not for the effect of currency fluctuations. This was a good news/bad news quarter for Walmart. The good: same store sales were up 1.5% in Q2,  healthy number. The bad: profits fell 15%, and it lowered its full 2015 outlook, citing higher labor costs from its increase in associate pay earlier this year, higher ecommerce costs (including four new fulfillment DCs), and - interestingly - greater losses from "shrink."




That was the growth in package shipping revenue year over year at the US Postal Service in its just concluded third quarter, to $3.65 billion, as the struggling USPS looks to ecommerce to save it from rapidly declining traditional mail volumes. First class mail is down 2.2% through the first three quarters of the year, and have fallen about 20% over the past decade. Now under new chief Megan Brennan, the USPS in New York City loads boxes of fresh and frozen seafood from Fulton Fish Market in the early morning onto mail trucks and delivers them to local restaurants by 11 a.m. It also collect packages from Internet electronics retailer Newegg for fast, local afternoon delivery, and is doing daily water delivery to businesses for Nestlé in Manhattan and Brooklyn. The Post Office cut certain Priority Mail package prices last year by as much as 58% for its largest customers to attract more business, and is obviously open to new services to create additional demand.


That was the level of the New York Federal Reserve's Empire State Manufacturing Index for July - in which a value of zero means manufacturing activity in the region is flat. That is the lowest reading since the height of the Great Recession in 2009. The reading was at 3.9 in June. The index was as high as 25 in Q3, 2014, but has been headed sharply down from there, in what is worrisome news for the economy. The new orders index plunged to -15.7, and the shipments index fell to -13.8. It was better news on the national front, however, with the Fed saying US manufacturing output in July was up 0.8% versus June, and a modest 1.5% year over year. We'll note the national index recently changed its baseline year from 2007 to 2012, which is odd  because 2007 output was higher, but regardless at an index level of 105.7 it means US manufacturing production is up 5.7% versus average 2012 levels.



That's the revised forecast for growth in ocean container volumes for 2015 from Maersk Line, the industry's largest carrier, down from 3.5% it had projected at the beginning of the year. That during its Q2 earnings release, where Maersk Line was able to achieve a profit of $507 million in the quarter, down 7% from 2014 but above expectation. The results at Maersk were aided by lower bunker fuel costs from falling oil prices, as overall container shipping sector dynamics remain poor for carriers if good for shippers. Overall container shipping rates were 14% lower than a year earlier while capacity was up 11%, and with volume gains in 2-3% range, that is surely a recipe for overcapacity and thus falling rates, as the megaships keep coming. "It’s a matter of us and everybody else misreading the market and being too optimistic," said Nils Andersen, CEO of Maersk Line's parent company. The continued drop in global trade remains a worrisome signal and a factor behind overall slow global economic growth.

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