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  First Thoughts

    Dan Gilmore

    Editor

    Supply Chain Digest



 
July 20, 2017

1H 2017 in Supply Chain in Numbers and Charts


A Picture is Worth a Thousand Supply Chain Words

 

It is a big time cliche, but a picture really is worth a 1000 words.

I can say that definitively, because when I put together these reviews of the past year or half year in supply chain, the graphics I use really do tell the story - wish I had room for more.

Gilmore Says....

Hope you enjoyed this review in numbers and charts. Anything else you would like to see?

What do you say?

Click here to send us your comments
 

Last week, I provided a month by month chronology of the top stories for the first six months if 2017, which you will find here: What Happened in Supply Chain in 1H 2017?

 

This week, I am back with a look at the 1H in what I call numbers and charts. So let's go.

 

In a bit of repeat from last week, the economic environment that has such a big impact on our supply chain was lukewarm in the 1H, as it has continually been since 2010 - the new normal.


Q1 US GDP growth was finally pegged at a weak 1.4%, with a slow start to the year yet again, repeating a recent pattern
. The Q2 numbers when released are expected to be better, but not by much, maybe 2% real growth.

 

The IMF now forecasts annual US GDP to rise 2.1% in both 2017 and 2018, though the obvious trend in recent years is for the forecasts to be downgraded over time. The US amazingly has not seen 3% full year GDP growth since 2005, a longer stretch than has been seen for decades (I checked back to 1950) and maybe ever.

 

The IMF also predicts global trade growth of 3.5% for 2017, exactly equal to its forecast for global economic growth. Something has changed - until just a few years ago, global trade was gowing much faster than GDP for about two decades.This change is of course playing havoc on container shipping lines, leading to substantial consolidation.

 

eCommerce rolled on, up 14.7% in Q1, the last data point from the US Commerce Dept., and 14.2% in Q4 2016, as the growth rate stays 14-16% quarter after quarter, much, much faster than brick and mortar retail growth. Amazon changed its reporting again, and I can't find the usual data on its growth in "merchandine" sales, but "retail product" sales were up just 15% globally (not reported just in the US) in Q1, about equal to overall US ecommerce growth. However, revenue (commissions) from Amazon's Marketplace, where others sell  goods on the Amazon platform, was up a very strong 34% in Q1.

 

US manufacturing, once a bright spot early on in the pseudo-recovery after the Great Recession, gave mixed signals. The US Purchasing Managers Index from ISM was above the 50 mark that separates expansion from contraction in each month of the 1H, with June's 57.8 the highest level since August 2014.

 

 

But, puzzingly, US manufacturing output numbers have been flat for a year, according to the Federal Reserve estimates, with the index numbers as shown in the chart below relative to the baseline year (index = 100) of 2012. As can be seen, there has been almost no increase thus far in 2017, and the scores around 103 mean just 3% growth in US output since 2012 - well less than 1% per year. Not good.

 

 

 

After rising sharply in the few months before the start of the year, US oil prices fell slowly but steadily for the rest of the 1H, dropping from $55.98 on Jan. 1 to a low of $41.56 in late June, ending the month at $46.33, for a drop of 17% thus far this year.

But despite that drop, diesel prices were largely flat, averaging $2.58 in January and just a bit lower, at $2.51, in June. By way of comparison, diel prices averaged around  $4.00 per gallon from 2011-2014.


Those lower fuel costs and a generally weak freight environment made it generally good times for shippers. Data on volumes were mixed, as always seems the case. Through June, the American Trucking Associations' Freight Tonnage Index finds freight is up just 1% versus 2016. But the Cass Freight Index, measuring shipment activity, has been up each month through May, the last data point, saying "that a recovery in freight had begun." Maybe.

The Cass Linehaul Index, which measures per mile US truckload rates before accessorials, fuel and other charges, did in fact show modest year-over-year growth in the last three months, after an incredible 13 straight months of y-o-y declimes before April.

 

From a long term perspective, at a June level of 123 versus the baseline level of 100 in January 2005, the Cass Linehaul Index is up an average of 1.74% over that period. Meawhile, the ATA Tonnage Index is up about 2% per year since 2000.  So, it appears average rate increases have been modestly less than freight volume gains over the last 12-17 years.

Meanwhile, through May the Cass Intermodal pricing Index was up year-over-year each month thus far in 2017, making the streak nine months in total, after having fallen an incredible 21 consecutive months before that. Interrmodal volumes broke the 1H record set in 2015, and were up 2.7% versus 2016.

 

It was still largely good times for ocean shippers and importers. The China Containerized Freight Index was up about 12% from the beginning of the year through the end of June, but at a level of about 850 that is still well below the 1100 or so the index was at through most of 2014, before a big plunge in the second half of 2015 that has left rates lower ever since.

 

I have more but am out of space. Hope you enjoyed this review in numbers and charts. Anything else you would like to see? Combined with the timeline last week, it's a pretty thorough review of what we seen thus far in 2017.

 

Anything we missed? What do these trends tell you? Let us know your thoughts at the Feedback section below.


Your Comments/Feedback

Srihari

Senior Consultant, Infosys
Posted on: May, 22 2016
Great article. I am a little suprised not to see BNSF in the mix while I understand their financial mode/operation is a little different. 

That would only give a complete perspective with all the players in the pool.

Mike O'Brien

Senior editor, Access Intelligence
Posted on: May, 26 2016
Surprised to see Home Depot fall off the list; thought they were winning with Sync?

Julie Leonard

Marketing Director, Inovity
Posted on: Jun, 27 2016
Using the right tool for the right job has always been a best practice and one of the reasons, we feel, that RFID has never taken off in the DC as exponentially as pundits have been forecasting since 2006. While these results may seem surprising to those solely focused on barcode scanning, the adoption of multi-modal technologies in the DC makes perfect sense for greater worker efficiency and productivity.

Carsten Baumann

Strategic Alliance Manager, Schneider Electric
Posted on: Aug, 19 2016

The IoT Platform in this year's (2016) Hype Cycle is on the ascending side, entering the "Peak of Inflated Expectation" area. How does this compare to the IoT positions of the previous years, which have already peaked in 2015? Isn't this contradicting in itself?

Editor's Note: 

You are right, Internet of Things (IoT) was at the top of the Garter new technology hype curve not long ago. As you noted, however, this time the placement was for “IoT Platforms,” a category of software tools from a good number of vendors to manage connectivity, data communications and more with IoT-enabled devices in the field.

So, this is different fro IoT generally, though a company deploying connected things obviously needs some kind of platform – hoe grown or acquired – to manage those functions.

Why IoT generically is not on the curve this year I wondered myself.

 

 

Jo Ann Tudtud-Navalta

Materials Management Manager, Chong Hua Hospital, Cebu City, Philippines
Posted on: Aug, 21 2016

I agree totally with Mr. Schneider.

I have always lived by "put it in writing" all my work life.  I am a firm believer of the many benefits of putting everything in writing and I try to teach it to as many people as I can.

This "putting in writing" can also be used for almost anything else.  Here are some general benefits (only some) of "putting in writing":

1. Everything is better understood between parties involved.  There are lots of people types who need something visual to improve their understanding.
2. Everyone can read to review and correct anything misunderstood.  This will ensure that all parties concerned confirm the details of the agreements as correct.  This is further enhanced by having all parties involved sign off on a hard copy or confirm via reply email.
3. Everything has a proof.  Not to belittle the element of trust among parties involved, it is always safest to have tangible proof of what was agreed on.
4. There will be a document to refer to at any time by any one who needs clarification.
5. The documentation can be useful historical data for any future endeavor.  It provides inputs for better decisions on related situations in the future.
6. This can also be compiled and used to teach future new team members.  "Learn from the past" it is said.

There are many more benefits.  Mr. Schneider is very correct about his call to "put it in writing".





Sandy Montalbano

Consultant, Reshoring Initiative
Posted on: Aug, 24 2016
U.S. companies are reshoring and foreign companies are investing in U.S. locations to be in close proximity to the U.S. market for customer responsiveness, flexibility, quality control, and for the positive branding of "Made in USA".

Reshoring including FDI balanced offshoring in 2015 as it did in 2014. In comparison, in 2000-2007 the U.S. lost net about 200,000 manufacturing jobs per year to offshoring. That is huge progress to celebrate!

The Reshoring Initiative Can Help. In order to help companies decide objectively to reshore manufacturing back to the U.S. or offshore, the nonprofit Reshoring Initiative's free Total Cost of Ownership Estimator can help corporations calculate the real P&L impact of reshoring or offshoring. http://www.reshorenow.org/TCO_Estimator.cfm

Robert

Transportation Manager, N/A
Posted on: Aug, 30 2016
 Good article!  I am sending this to my colleagues who work with me.  We have to keep this in mind.  Thanks!

Ian Jansen

Mr, NHLS
Posted on: Sep, 14 2016
SCM is all about getting the order delivered to the Customer on date/ time requested because happy Customers = Revenue. Using the right tools to do the right job is important and SCM is heavily dependent on sophisticated ERP systems to get right real data info ASP.

I've worked in a DC with more than 400,000 line items and measured the Productivity of Pickers by how many "picks" per day.

I've learned that one doesn't have to remind Germany about your EDI orders.

Don Benson

Partner, Warehouse Coach
Posted on: Sep, 15 2016
Challenge - to build and sustain effective relationships at the level of the organizations that are responsible for effectively coordinating and colaborating in an otherwise highly competitive environment 

Jade

Admin, Fulfillment Logistics UK Ltd
Posted on: Oct, 02 2016
Of course we all need to up our game. We need to move with the times, and always be one step ahead of what the future will bring.

Mike Dargis

President of asset-based carrier based in the Midwest, Zip Xpress Inc. (at ZipXpress.net)
Posted on: Oct, 03 2016
Thanks for the article, but I know there's a lot more to this issue than just the pay rates. Please check out my blogs on the subject at www.zipxpress.net.

Blaine

Inventory Specialist, Syncron
Posted on: Nov, 16 2016
Lora, great article! I agree that companies choose the 'safe' solution more often than not. My solution is a bolt-on for legacy ERP's and we even face challeneges of customer adoption. Most like to play it safe and choose an ERP upgrade, which is more costly, time consuming, and has lower ROI across the board. Would love to learn more about your company, we are always looking for partnerships.

Blaine
blaine.schultz@syncron.com

Bob McIntyre

National Account Executive, DBK Concepts LLC
Posted on: Nov, 21 2016
This is a game changer in GE's production and prototyping.  It also has huge implications across the GE global supply chain with regard to the management of their support and spare parts network. 

Kai Furmans

Professor, KIT
Posted on: May, 22 2017
I am referencing to the comment that leasing of warehousing equipment (beyond forklift trucks) is a vision for 2030.
Just recently in Europe, such a business model has started, see here: https://next-intralogistics.de/

I am following with a lot of interest, how the business develops.

Stuart Rosenberg

Supply Chain Consultant, First Choice Supply Chain
Posted on: Jun, 05 2017
If we limit the standard on judging or determining the best supply chain to just three calculations it does not tell the entire picture.  Financial performance metrics are valuable as they capture the economic consequences of business decisions.  But supply chain managers make decsions and use organizational resources that impact a company's financial well being.  Where is a firm's earnings over a period of time determined by sales less product costs and general/adminsitrative costs?  Where is the metric for determining the sources and uses of cash from three perspectives - operational, investment and financial?  Where are these supply chain metrics: on-time delivery, lead time, response time to customers, product returns, procurement costs, network distance, inventory carrying costs, forecasting accuracy, sourcing time, etc,.  Without knowing the results of all these supply chain calculations the there must be a question as to the accuracy of the 25 top supply chains.

Dustin Calitz

Project Commercialization Manager, Mondelez
Posted on: Jun, 06 2017
I feel this ranking misses the mark in SC. It does not seem to consider a key indicator in days inventory on hand, which is key to determining a SC company's ability to forecast, manage inventory costs and reduce aged stock. In additiion I realize it's difficult to understand what goes into the customer survey, but would I assume specific metrics are being asked. For examples customer's opinion on service level differentiation and the ability to deliver the right product on time, which should then be allocated a bigger weighting than 10%. It would also be interesting to take a view of the above list's SKU portfolio complexity, seasonality and launches/promotions. I would again assume some companies on the list above have a far more complex SC to manage and lead, ultimately requiring a lot more innovation within a SC to stay ahead of competitors, and ultimately satisfy their customers demands.  I understand above metrics are difficult to measure, as mentioned in the article, but they somehow need to be considered to give a true reflection. 

Michael Hurd

Lean Consultant, Unemployed
Posted on: Jun, 10 2017

A Very Good Article...

While some feel that lean is a scam that pushes for more out of the personnel and out of the companies through reduction of waste and adding value for the customer, there are several things to remember:

1) Lean methodologies are designed and implemented to reduce time wasting, so this may seem that you are working harder as an employee.

2) Lean methdoligies only work when everyone from the janitor to the owner of the company get involved and back the program.

3) Lean methods are there to make you work smarter not harder, although it may feel you are working harder.

4) YES... Sometimes lean methodologies fail! This is due to project overun or taking on too large a problem and trying to fix it all in one go and not taking the smaller problems that are associated with the large problem and fixing them first. Sometimes fixing the small problems leads to resolution of the larger problem.

h
 
 
 
 

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