Supply Chain by the Numbers

- May 26, 2017 -

  Supply Chain by the Numbers for Week of May 26, 2017

US Logistics Infrastructure May Better than Thought; Oil Prices Inevitably Headed Down; New Kentucky Aluminum Plant Coming because of Right to Work; HP's Instant Ink Program Leverages IoT, More



Perhaps surprisingly, that is the share of US bridges that were listed as being in poor condition, or "structurally deficient," under federal standards in 2016 - down from 15% in 2000. What's more, the share of bridges built according to outdated design standards, known as "functionally obsolete," has declined from 15.5% in 2000 to 13.8% in 2015. And given most of the news these days, we all assumed America's logistics infrastructure is getting worse. Maybe in some areas, but not in bridges. What is happening? State and local transportation officials nationwide have been targeting aging bridges for upgrades and safety enhancements. Federal spending on bridges has indeed stayed relatively flat at around $6.8 billion a year since 2013, according to a 2016 report from the Government Accountability Office. But state and local funding has more than doubled from about $5.4 billion in 2006 to $11.5 billion in 2012. "The story of American infrastructure is in fact more complex than often portrayed," the Wall Street Journal recently wrote, adding for example that "Interstate highway conditions have also steadily improved over the past few years."



That is where the price per barrel of oil is headed over the next decade or so, according to new predictions from California search firm RethinkX.  And while this may be good for shippers and consumers, the geopolitical ramifications will be huge, RethinkX says. The fundamental issue: reduced consumption in developed economies, soon to be exacerbated by widespread adoption of electronic vehicles, means we will see "peak demand' for oil on a global basis reached in just three to four years. "If you produce oil and you can't compete at $25, essentially you are holding stranded assets," a RethinkX analyst told CNBC this week. He added "At $25 a barrel, that means deep-water, sands, shell oil, fields, most are going to be stranded, and also all the refineries and pipelines associated with these expensive oils are also going to be stranded. And that is going to reshape worldwide oil, geopolitics and so on." SCDigest wonders just what will happen, for example, when the Russian economy, heavily dependent on oil exports, is delivered this whammy. CNBC, however, notes there are differing views on how fast electric cars will grab market share, though both China and India have aggressive state programs to accelerate that shift.



That is the very high retention rate on subscriptions for HP's Instant Ink program, in which customers agree to purchase different numbers of printed pages per month, and HP monitors ink usage and can ship new cartridges automatically in sort of just in time fashion. That according to Paul Carlton, an HP supply chain executive, speaking on a panel discussion at the Gartner Supply Chain executive conference this week in Scottsdale, AZ. The program, launched just 18 months or so ago, brings together many interesting supply chain themes and issues: the Internet of Things (the printers are connected to the web and send usage information); the impact of ecommerce (HP is selling the ink directly to consumers, bypassing traditional retail channels); and transforming from a product orientation to more of a service one (printing as a service?). With the program, HP had to build efulfillment capabilities, created a new make-to-order manufacturing process, was able to reduce its packaging footprint, and is learning how to maximally leverage now real-time demand signals. Could your product be delivered as a service?



That is the number of applications received in just a couple of weeks for jobs in a new aluminum factory to be built in Ashland, KY by Braidy Industries, many with "heart-wrenching personal anecdotes," according to the company. Ashland, a small Appalachian town on the Ohio River, was once an industrial powerhouse, but like many areas has seen massive job losses in the steel, oil and coal sectors. Braidy CEO Craig Bouchard has much experience in the metals industry, and that has left him with a sour view of the impact on unions on metals production. He was determined to build his new aluminum plant in a right-to-work state, where workers can’t be compelled to join a union. While a number of factors such as total logistics costs favored Ashland, Bouchard says he was prepared to build elsewhere had Kentucky’s Republican governor, Matt Bevin, not signed right-to-work legislation in January. That's when Kentucky became the 27th right-to-work state, followed by Missouri a month later. Pay at the new plant, which is expected to be up and running in 2020, will start at $50,000 a year and average $70,000 - about twice the median household income in Ashland.