Supply Chain by the Numbers

- March 17, 2016 -

  Supply Chain by the Numbers for Week of March 17, 2016

Alibaba Says it has No Ceiling for Expense to Stop Fakes; UPS Investing Millions More in Nat Gas Trucks, Stations; Instacart Looks for Savings by Cutting Delivery Driver Pay; Scrap Steel Prices Collapse Hurting Huge US Industry



That's how many new staff members Chinese on-line giant Alibaba has recently added just to fight the sale of counterfeit merchandise over its platform. "There's no ceiling for investing in fighting fake goods," Alibaba CEO Jack Ma told employees in a speech last week at the company's Hangzhou headquarters, according to a Chinese news site. Those new hires amazingly bring the total to more than 2,000 full-time employees fighting counterfeits. Last year, the company said it had invested more than 1 billion yuan ($154 million) over two years to combat the problem. Luxury brands such as Gucci, Balenciaga, and Yves Saint Laurent have sued Alibaba, alleging that company "knowingly encourages, assists and profits from the sale of counterfeits." Alibaba denies the claim. In the remarks last week, Ma promoted the use of sophisticated data analysis to tackle the problem "For so many years, we have been using traditional methods and measures to fight fakes, but the harder we fight, the more pop up," he said.



$100 Million

That's how much UPS announced this week it was investing in natural gas-based trucks and supporting infrastructure, saying it did not want to lose momentum on alternative fuels even though diesel prices have tanked, making the move less financially attractive. The new program will fund 12 compressed natural gas (CNG) fueling stations and add 380 CNG heavy duty trucks to the parcel delivery company's fleet. The announcement comes as a sharp slide in the price of crude oil has reduced demand for alternative transportation fuels such as CNG. "We'd like to see the momentum continue," Mike Casteel, UPS' director of fleet procurement, told Reuters. "As long as we are able to do this and still have it be economically feasible, we're going to do it. If you have to stop and start again, it will be that much more difficult." Diesel fuel averaged $2.23 a gallon in January, compared with $2.09 per gallon of gas equivalent of CNG, according to data from the U.S. Department of Energy. The gap used to be much wider just a few years ago. Because UPS owns its own stations, its CNG costs are substantially lower than public pump prices, the company said.


That's at least how many US scrap steel dealers have closed up shop in North America over the past year, according to data from the Institute for Scrap Recycling Industries. Why? Because like almost every other commodity, scrap steel prices have tanked, down now to about $203 a ton, falling 29% from a year ago and 52% from the $420 or so per ton seen in early 2014. This is really a big deal, as it turns out the US is by far the global leader in scrap steel production and exports. The total US scrap steel industry generated some $105 billion in annual sales in recent years, and exports in 2014 were $6.2 billion, placing the US in the top spot globally. But exports fell 34% to $4.1 billion last year, and are likely to go even lower in 2016, as falling prices and demand buffet the industry. Many auto scrap yards are said to be holding on to vehicles hoping prices will move back up rather than selling the steel at these depressed levels. Turns out more than 60% of steel in the U.S. is made from scrap, compared with only 7% in China.



That's the current cost per delivery from grocery fulfillment provider Instacart, up from $3.99 last year. The problem: even at the new price that is less than it cost the company to make those deliveries. In response, Instacart announced last week it was reducing what it will pay drivers, or what it calls "shoppers" - freelance employees who go into partner stores and either pick up already selected orders or go shop for the items themselves. The bottom line, Bloomberg reports, is that Instacart knows that "it costs much more to deliver an order than the $5.99 it charges shoppers, but customers are unwilling to pay more." So, the company will try to get the cost down by reducing driver compensation. Starting next week, the pay will be $1.50 per drop-off, a cut of 63% from the previous guarantee of $4. Instacart is also slashing by 50% to 25 cents the commission it pays for each item in an order when drivers actually select individual items for an on-line or mobile order. Will drivers keep on the job? Time will tell on that. They have to pay their own expenses like gas, insurance and other fees from the $15-20/hour Instacart says they will still earn after the change.