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Supply Chain by the Numbers

- May 20, 2020 -

  Supply Chain by the Numbers for May 20, 2020

Walmart's Blow Out Revenue Quarter; New Fund to Subsidize Reshoring? Pulling Out of China Takes a Long Time; Uber Freight's Future Now Unclear



That was the incredible rise in Walmart's ecommerce sales for the quarter ended April 30, according to the company's earnings report this week, as locked down consumers spent heavily to get staple goods and more at Walmart. At a time when a huge percent of stores that sell non-essential merchandise were temporarily shut down, the nation's largest retailer had the natural advantage of carrying other items that consumers needed during the pandemic in addition to food and other basics. Same store sales in the US were also very strong, up 10%. Walmart also said it's seeing gains in new customers from across all income brackets. What's more, the company hired 200,000 additional employees to clean stores, stock shelves and fulfill on-line orders in the quarter. Interestingly, in addition to continued shortages of some cleaning products and more recently meat, products such as laptops, office chairs, and fabric have been cleared out in some of our stores and online. Walmart, however, still does not report specific on-line sales revenue.


$25 Billion

That is a number being tossed around as a potential level of a new government fund that would be used to subsidize US companies to move production from China back to the US. Details are sketchy, but the idea is said to be in the planning stage, with potential support from both sides of the aisle. That according to a report from news service Reuters this week. It also indicated the subsidy would be specifically targeted at certain "essential goods" categories, noticeably pharmaceuticals and medical ingredients as well as food. White House economic adviser Larry Kudlow has previous to this latest report talked publicly about using tax incentives instead to prod US companies to move some manufacturing home. Japan has already done something similar, launching a 243.5 billion yen stimulus package to help Japanese companies move production out of China.



That's how long it takes for a company to move its production to some the country, according to Kerry Logistics group managing director William Ma Wing-kai, in an interview this week with the South China Morning Post. "China's role is unlikely to be reduced rapidly," Ma added. That as some reports says high percentages of companies are said to be pursuing moving away from China over tariffs, political risk, and now the coronavirus. A key factor: the growing unreliability of Chinese supply, as China is said to have locked down another area of the country with 100 million people, as new COV-19 cases are rising rapidly there months after the Wuhan crisis. "It takes 2,500 components to make a car, but just one component to not make a car," said Madhur Jha, head of thematic research at Standard Chartered in India. The consequences of the disruptions in global manufacturing "is leading to a renewed focus on the concentration risks inherent in supply chains," he said. Many companies are "shortening and simplifying supply chains," Jha added.


$64 Million

That's how much Uber Freight – the electronic freight broker unit of ride sharing pioneer Uber – lost in Q1, despite a 57% rise in revenues, to $199 million. And now, Uber's CEO says it is looking whether it makes sense to continue with the Freight business – and its work on autonomous vehicles as well – as its core ride sharing business is seeing volumes and revenues collapse in the face of the virus, lock downs, and incredible declines in personal and business travel. So much so that Uber has laid off some 6700 workers, a quarter of its total staff, in the last two weeks – and that doesn't include drivers, who are generally contract workers. Some pundits, however, say Uber Freight is buying its growth in matching truck drivers with loads by offering rock-bottom rates with little margins. A Morgan Stanley analysis last year suggested the business wouldn't generate profits for years. After the CEO's comments, a company spokesperson said Uber is committed to the Freight business. We'll see.

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