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Supply
Chain by the Numbers |
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- June 21, 2018 -
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US Truckoad Rates See Record Increase; IMF Forecasts Strong Global Economic Growth Despite Trade Wars; Home Depot Transforming Distribution Network for eCommerce; Google Invests Big Time in eCommerce Partner |
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9% |
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That was the incredible increase in May in the Cass Linehaul Index, which measures per mile US truckload rates before fuel surcharges and other accessorials. That is an amazing year-over-year increase, and represents the largest single monthly jump in the history of the index, which dates to January 2005. The index has not only been positive now for 14 months in a row, but the strength is continuing to accelerate. "Our realized contract pricing forecast for 2018 is 6% to 8%, and current data is clearly signaling that the risk to our estimate may be to the upside," stated Donald Broughton, analyst and commentator for the Cass indexes. "We believe that this is the strongest normalized percentage level of truckload pricing achieved since deregulation (normalized meaning except for extreme periods of recovery from recession)." We are seeing historic increases in the cost of moving freight.
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That is amazingly how many distribution facilities Home Depot expects to create across the US over the next five years to meet the changing customer demands of ecommerce. The goal, says Mark Holifield, the company's EVP of supply chain and product development, is to be able to reach 90% of the U.S. population in one day or less. The new sites will include dozens of direct fulfillment centers for next-day or same-day delivery of commonly ordered products, as well as 100 local hubs where bulky items like patio furniture and appliances will be consolidated for direct shipment to customers. The initiative is expected to cost some $1.2 billion by the time it is through. Customers "expect delivery to be free, they expect it to be timely," Holified recently told a conference. "Sometimes they want it fast, and are willing to pay for that. Sometimes they want it free, and they're willing to wait for it. We need to have the right options there." On-line orders accounted for 6.7% of Home Depot's $100.9 billion in sales last year, but the digital revenues were up 21% year-over-year. About 45% of on-line orders are picked up inside stores, and the company is rolling out self-service lockers at the front of some stores to speed the pick-up process.
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$550 Million |
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That's is how much internet giant Google is going to invest in JD.com – the second largest ecommerce platform in China, behind Alibaba, and not by much. The two companies described the investment as one piece of a broader partnership that will include the promotion of JD.com products on Google's shopping service. This could help JD.com expand beyond its base in China and Southeast Asia and establish a meaningful presence in US. and European markets. Company officials said the agreement initially would not involve any major new Google initiatives in China, where the company's main services are blocked over its refusal to censor search results in line with local laws. The partnership not only lets Google bolster its retail ambitions in China but also allows it to further tighten its relationship with Walmart. Together, the two companies could challenge the dominance of Amazon and Alibaba in key markets around the world, analysts said. Expect Google to make a major push to get into a leadership position in ecommerce, building on its search dominance. |
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That is the revised forecast for 2018 global economic growth from the International Monetary Fund, in a report released this week. If that forecast proves accurate, it will be the best global economic performance since 2011. The even better news: The IMF sees the global economy continuing to gather strength despite a decline in global stock markets this year and trade tensions between the US, China and others. Despite those tensions, global trade volumes are expected to grow strongly this year, projected to rise 5.1%, above the solid 4.9% growth seen in 2017, in good news for ocean freight carriers. World trade volumes rose just 2.3% in 2016. The strong growth is expected to be felt be felt broadly, with every major economy poised to grow for the second year in a row, the IMF says.
