Supply Chain by the Numbers

- May 6, 2016 -

  Supply Chain by the Numbers for Week of May 6, 2016

Alibaba Sales Continues to Soar; Target Stores Getting Really Tough on Vendors; The Trump Effect on Chinese Imports? Sagging New Class 8 Trucks Sales May be Economic Warning Sign


$115 Billion

That was the amount of merchandise sales going through Alibaba's ecommerce platform in Q1, the company announced this week. That was up a strong 24% year over year, defying some critics who have been predicting growth would slow down at the Chinese ecommerce giant. Alibaba's own revenue rose 39% to $3.75 billion, implying that Alibaba's commission on sales through its platform is about 3.2% (3.75/115). Incredibly, the company said a73% of the total gross merchandise value (GMV) was bought on mobile devices and at the end of March, the company said it had 410 million monthly active users, a number of course that far exceeds the population of the US. Alibaba managed a small profit of $824 million on those sales. Alibaba is in the process of expanding beyond China into areas of Southeast Asia.



$20.9 Billion

That was the US trade deficit in goods with China in March, according to figures released by the Census Bureau this week. That is a big number, but is down sharply from a $28.1 billion deficit in February and $31.2 billion in March of 2015. Should we be calling this the "Trump Effect?" The overall US trade gap decreased 13.9% from February to a seasonally adjusted $40.44 billion. Exports of goods and services fell 0.9% while imports dropped a sharp 3.6%. But this data may simply be a sign of a weak global economy. For the first quarter as a whole, US exports were down 5.4%, while imports fell 4.5%. Some of the decline in imports continues to come from falling purchases of offshore oil, which were the lowest in dollar terms since September 2002.


That is the percent of the invoice that Target stores now plans to deduct for shipments from vendors late by as little as one day, according to a report this week from Reuters. That's up from 1-3% currently, and obviously represents a very significant "chargeback." What's more, the fine is said to kick in if the delivery is just one day late, whereas in the past US vendors were given a grace period of two to 12 days depending on product category. Target is trying to reduce both out-of-stocks and inventories with these and other moves on vendor policies, such as new chargebacks of $5,000-$10,000 for suppliers who fail to provide complete and accurate master data for their products. Ouch. With Walmart similarly tightening up its vendor rules earlier this year, it is clear major retailers are trying to tighten up the relatively loose ship that has existed until now in terms of retail vendor performance.



That was the decline in new heavy duty trucks orders in the US in April, according to research group FTR this week. That was also down 16% from already low March numbers, and shows that trucking companies are getting more serious about pulling capacity from a weak shipping market. At the annual NASSTRAC conference in Orlando last week, American Trucking Associations' chief economist Bob Costello described the current market situation as a "freight recession," showing a dark underside to the current state of the economy overall. Trucking fleets ordered just 13,500 Class 8 trucks last month, the fewest net orders in any April since 2009. Truck production had been running at about 21,000 to 22,000 vehicles per month before these recent declines. The ATA's freight tonnage index fell 4.5% in March, but that was after a strong 7.2% increase in February. The ATA hasn't yet released its number for April, but we are guessing it will show more contraction.