Supply Chain by the Numbers

- Nov. 5, 2015 -

  Supply Chain by the Numbers for Week of Nov. 5, 2015

Kraft Heinz Giving the Cheese to Seven Plants; Ubers for the Trucking Industry Popping Up All Over; Maersk Says it has Enough Ships in Face of Slow Container Growth; US PMI Barely Shows Expansion



That’s how many North American factories that the new Kraft Heinz announced this week it will be closing, after Kraft and Heinz merged earlier this year under the ownership of 3G Capital Partners LP, a Brazilian private-equity firm. Those seven plants represent about one-fifth of the company's 41 facilities in the U.S. and Canada, and will result in layoffs of about 2600 blue and white collar manufacturing employees. In August, the company announced plans to cut 2,500 office positions in North America. A company spokesperson said that It was a "difficult but necessary decision" that will allow Kraft Heinz to invest hundreds of millions of dollars in modernizing its plants with state-of-the-art production lines. The entire packaged-food industry is under pressure to streamline operations in the face of very slow organic sales growth. Other major U.S. food makers including Campbell Soup, Kellogg, , and General Mills have also closed factories in recent years as a result of that trend.




That's about how much the average freight broker in the US takes from the carrier for connecting them with a shipper's load - a number that may be under assault from a new generation of start-ups that hope to become the Ubers of the truckload freight industry. These companies, which include such names as Convoy, Cargomatic, KeyChain Logistics, Transfix and Trucker Path, provide shippers with freight to move an instant price, based on parameters such as weight, distance, commodity type, etc., then communicate that opportunity to their carrier communities via web or mobile. The shipper often receives confirmation of the carrier within just a few minutes, versus the hours it can often take traditional freight brokers working the phones. Most of these new age brokers say their cut will be lower than the 20% traditional brokers typically take.  Will shippers really want to take this path versus receiving a certain level of carrier vetting and shipper insurance from the brokers? That remains to be seen.


That was the level of the October Purchasing Managers Index from the Institute of Supply Management, above the 50 mark that separates expansion from contraction in the US manufacturing sector for the 34th straight month - but by the thinnest of margins. While the manufacturing winning streak stayed alive in October, the PMI numbers are clearly indicating a slowdown in the economy - the September score was just 50.2, and the number has been dropping every month since June, meaning there is still growth, but at a declining rate. In November and December in 2014, the scores were a much more robust 57.6 and 55.1, respectively, and the number has been headed downward ever since. Of course, the initial estimate for Q3 real US GDP growth just came in at a very weak 1.5% rate, so there are certainly signs the economy is slowing.



That's the number of giant Triple E container ships with capacity of some 19,000 TEU that shipping leader Maersk Lines has told South Korea's Daewoo Shipping it no longer needs, cancelling the contractual options for the ships as part of a major cost cutting effort. With the container shipping industry battling significant overcapacity, the resulting low rates, and much slower trade growth than in the past, Maersk also announced this week that it would cut 4,000 jobs from its land-based staff of 23,000 and also cancel previous orders for eight slightly smaller container vessels. The Danish company also announced it would cancel 35 scheduled voyages in the fourth quarter, on top of four regularly scheduled sailings it canceled earlier in the year. It should be noted Maersk did order 11 of the Triple E's this year, contributing to the industry's overcapacity. New ship deliveries will boost capacity by 1.7 million TEU, or 8.2%, in 2015, while demand growth should top out at 2%, the lowest rate since 2009.