Supply Chain by the Numbers for Week of January 7, 2016

Supply Chain by the Numbers

- Jan. 7, 2016 -

US Manufacturing Slumps Again in December, Leading Firms Achieve Much Higher Procurement Returns, Supposed Movement to Major Urban Centers Exaggerated, Can Amazon be Stopped?



48.2
That was the disappointing score for the December Purchasing Managers Index from the Institute for Supply Management, the second consecutive month with the level being below the critical 50 mark that separates expansion from contraction - after 35 straight months of US manufacturing growth. This obviously is a poor sign for the overall economy, and continues a multi-month downward trend in the PMI, which has now fallen for six consecutive months, hovering in September and October barely above the 50 level before dropping below that in November. The PMI has historically been well correlated with overall US GDP, so expect a poor number in that key measure for Q4. The new orders index was also below the 50 mark for the second straight month, though at 49.2 was actually a few ticks above the November score. All told, the economy is certainly wobbling.

That is the average return on each dollar invested in procurement (people, technology) for the top quartile of companies, according to the Return on Supply Management Assets (ROSMA) report that was recently released by AT Kearney, which invented the approach, along with partners The Institute for Supply Management and the Chartered Institute of Purchasing and Supply. That compares with a return of just 4 times for the middle set of companies, and only 0.8 for the bottom quartile - meaning those firms receive less return than they spend. The report also finds that top quartile performing companies generate about $1.25 million in financial benefits per procurement employee per year - quite a return indeed - and that leading performers have driven their procurement function costs to well under half a percent of total company procurement spend. See Leaders Get Far More Return from their Investment in Procuremen



51%
That is the percentage of US ecommerce sales growth in 2015 that was captured by Amazon.com, according to analysis by Macquarie Research. Looking at the Macquarie numbers, SCDigest believes this may be a bit exaggerated, as Macquarie appears to count all Amazon revenue as ecommerce, when some sizable percentage comes from web commerce, its "Marketplace," and third party fulfillment operations, but accepting it is generally accurate, this is simply an astounding number. "It's Amazon and Also-Rans in Retailers' Race for Online Sales," blared the headline in the New York Times in its article on the analysis. The Macquarie research also says Amazon captured 25% of all retail sales growth in 2015, both on-line and brick and mortar. Is there any stopping Amazon?



13.4%
That is the percent of San Francisco's city population of 800,000 that is comprised of children age 0 to 18, down from 22% in 1970. What's more, nearly half of parents of young children there plan to leave in the next three years, largely due to high housing costs. All that and lots more according to new research on US demographic trends from the Chapman Center for Demographics and Policy, which importantly for the supply chain finds the narrative about the movement back to major urban areas is not accurate, at least in terms of families. The preference of families for suburbs versus major cities continues on, driven by the usual issues, the Chapman Center says, including the cost of living, safety, and the quality of education. In fact, the Chapman research says many urban policies to attract young, upwardly mobile residents are leading to housing costs run-ups that are further driving out more middle class families. In addition, since 2010, the fastest growth in the ranks of college-educated millennials has been to lower-cost regions such as the four large Texas cities (Dallas-Fort Worth, Houston, San Antonio and Austin), Nashville, and Orlando, as well as such Rust Belt cities as Pittsburgh and Cleveland.