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  First Thoughts

    Dan Gilmore

    Editor

    Supply Chain Digest



 
July 12, 2019

First Half 2019 Supply Chain Review

Amid Growing Trade Tensions, eCommerce and Amazon Dominate the New Again

 

As always, the first half of 2019 flew by. It was a period dominated by trade tensions with China, and in the last few months with concerns about an economic slow down. Supply chain news again dominated by ecommerce and Amazon.

 

This time, I am getting right to it, with my curated list of the top supply chain stories by month in 1H 2019 offered below.


January

China announces it is planning to build 30 logistics hubs by 2020 and 150 by 2025, according to a new plan jointly released by the country's top economic planning agency and the Ministry of Transport. According to the plan, China is to build six types of logistics hubs - inland harbor, cargo port, airport, service-oriented port, commerce and trade-oriented port, and inland border port. China says the move in part is to reduce logistics costs as percent of GDP.

Gilmore Says....

So that's my list. Had to edit at least twice as many off the list. What did I miss?

What do you say?

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Walmart says it is opening a new highly automated consolation center near Los Angeles, the first of its kind for the retail giant. The technology will allow three to four times more volume in the flow of merchandise, resulting in more nimble and flexible product fulfillment, the company says. But the workers aren't going away - the center will open with 150 full-time workers, but that's expected to exceed 600 by 2021, company officials said. The consolidation centers speed movement of goods to Walmart's 42 regional distribution centers

The Wall Street Journal reports Amazon is reaching out to parcel shippers to solicit business by offering much lower accessorial fees for things like home delivery and shipments during the peak season. The action of course is counter to Amazon's on-going denials that it intends to build a full parcel delivery network.

Members of the longshoremen and warehouse workers union first picket outside a meeting of the L.A. Board of Harbor Commissioners protesting the approval of a permit that will allow an APM terminal to increase automation at the Port of Los Angeles. The saga continues for several months, with the permission for the automation ultimately failing for now, despite competitive pressure on the port.

February

Foxconn CEO Terry Gou shocks Wisconsin and the Trump administration by announcing that company would not build a giant flatscreen panel factory near Racine – a project that when first announced was said by the company to eventually bring with it an amazing 13,000 job. "In terms of TV, we have no place in the US," Foxconn CEO Terry Gou said. "We can't compete" producing in the US, he added.

A fire destroys the main distribution center of UK on-line grocer Ocado The story is an odd one, because Ocado is transitioning from being a grocer to an automated system provider to other grocery chains. And it was one of its mobile robots, which travel around in a grid-like structure to deliver goods to packers waiting below, caught fire and caused the major blaze, which totally destroyed the DC.

Long criticized for its lack of focus on sustainability Amazon announces it intends to make 100% of its parcel shipments carbon neutral by 2030. That as part of an ambitious new "Shipment Zero" initiative announced on the company's blog. "With improvements in electric vehicles, aviation bio fuels, reusable packaging, and renewable energy, for the first time we can now see a path to net zero carbon delivery of shipments to customers," the company said in the blog post.

March

Energy research firm Rystad Energy says the United States will surpass Saudi Arabia later this year in exports of oil, natural gas liquids and petroleum products. That milestone, driven by the transformative shale boom, would make the United States the world's leading exporter of oil and liquids. That has never happened since Saudi Arabia began selling oil overseas in the 1950s.

Walmart once again ups its compliance ante, saying it would now issue a 3% "chargeback" relative to invoice for each case that fails to meet Walmart's new "on time, in full" requirements. For example, a milk delivery containing 19 of the 20 cases ordered would get a 95% in full rating, below Walmart's 97.5% threshold for food consumables. That supplier would incur a 3% fine on the missing case. Two cases short would trigger a 6% chargeback versus invoice. There are other new standards for late shipments.

The legendary GM plant in Lordstown, OH, near Youngstown, closes. Some 1500 workers lose their jobs, but that was down from the more than 5000 the factory employed at its peak. The plant been the scene of several widely publicized labor related issues since it first opened in 1966. More recently, it kept itself open by agreeing to some wage concessions – largely involving a so-called "two-tier" system, where new workers start at a much low wage than current autoworkers make. But in the end it wasn't enough, as President Trump rails at GM for the closing.

In an interesting story, a US Labor Department Report challenges the generally accepted view of a severe US truck driver shortage, saying the market for drivers is not systemically broken, that movement away from driver jobs not that different than turnover in other in other sectors, and that the issue would be resolved by – surprise – increasing pay. The ATA says the analysis was done without enough context.

April

Huge delays hit truckers trying to cross the border into Mexico, said in part to be the result of the Trump administration just reassigned at least 750 Customs and Border Protection officers, moving them away from the ports of entry to help with processing migrant families. Hundreds of trucks are being forced to stay overnight on the bridges, with truckers are now only able make only one single round-trip journey per shift, down from two or three crossings per day under normal conditions. But the situation eventually settles down.

In its quarterly earnings call, Amazon's CFO says the company will soon offer free one-day shipping to its Prime customers instead of the current two-day shipping. The company also says that it will spend $800 million in the second quarter of 2019 to make changes in its network and processes needed for the new service.

May

Amazon breaks ground for its massive new air cargo hub at the Cincinnati airport. The new 3 million-square-foot cargo hub and 250,000-square-foot loading dock are scheduled to open in 2021. Amazon expects to invest some $1.5 billion in the facility, which will have room for 100 planes.

The International MaritIme Organization scraps for now plans to mandate slow steaming for container and bulk ocean carriers, in a move that was considered to reduce CO2 emissions from the sector. There were proposals inside the IMO that would have capped speeds at just 12 knots, which would have a huge impact on global logistics.

Garter releases top its annual top 25 supply chain list, with Colgate-Palmolive taking the top spot for the first time, but only after 2018 champ Unilever was placed in the "supply chain masters" category – a sort of hall of fame – joining Procter & Gamble, Amazon, McDonald's and Apple, companies not listed in the top 25. The rest of the top 5 were (2) Inditex (Zara), (3) Nestle, (4) Pepsico, (5) Cisco.

Nestle says it is ending it US direct story delivery model, joining Kellogg and others moving instead to shipping to retailer DCs. The moves involves the elimination of an operation that now includes 230 facilities, 1,400 trucks and 2,000 different delivery routes, with many wondering about the future of DSD outside a few product categories.

June

The United Auto Workers strikes out again in its efforts to unionize a foreign auto plant in the US, losing the vote for a second time in four years at Volkswagen's Chattanooga, TN factory. The vote was close, with about 52% of workers saying no to the union after the UAW had spent big bucks on media ads in the weeks leading up to the election. Not one single foreign plant has voted to organize now over several decades.

China and Russia sign an agreement to ship liquid gas from Russia's vast Yamal complex field to both China and parts of Europe across the Arctic Sea using ice-breaker tanker ships. The move is said to further the stated aim of China to develop a "Polar Silk Road" as an element of its overall plan to connect China to much of the rest of the world through massive investment of logistics infrastructure – some say with the aim of dominating world trade.

CSCMP and partner AT Kearny release the 2019 State of Logistics Report. Headline news is that US logistics costs soared in absolute terms 11.4% in 2018, to $1.64 trillion. That brought logistics costs as a percent of GDP to 8.0%, up a sharp 6.5% from 2017's 7.5%, putting the measure at its highest mark since 2014 , as transport costs soared in the year.

After a meeting with Chinese premier Xi at the end the end of the G20 summit in Japan, the Trump administration decides to postpone for now the next round of tariffs on Chinese imports.

So that's my list. Had to edit at least twice as many off the list. What did I miss? Let me know at the Feedback button or section below.

 

Any reaction to our list of top stories? What did we missed? Let us know your thoughts at the Feedback section below.

Your Comments/Feedback

 
 
 
 
 
 

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