Supply Chain by the Numbers

- Nov. 17, 2016 -

  Supply Chain by the Numbers for Week of Nov. 17, 2016

Chinese Manufacturers Thrive on Government Subsides; IKEA DC Going Solar Big Time in Illinois; LTL Carriers Retain Pricing Power Even in Face of Weak Volumes; Singles Day Sales Continue Rapid Growth



That is the percent of profits from China's publicly listed, non-financial companies that comes from governement subsidies. That according to new analysis from research firm Wind Info. That is way up from 5% of profits six years ago. In his attack on Chinese imports and the resulting loss of US imports, president-elect Donal Trump has been focusing on what he and others say is a purposely undervalued Yuan currency, but a Wall Street Journal article this week suggests focusing on the subsidies might be the wiser course. Such subsidies could even be increased to offset the impact of any rise in US tariffs. The analysis includes both state-own and private Chinese firms, with many of the private companies still with some ownership by the Chinese government (often provincial). The subsidies come in many forms, including straight out cash grants, tax rebates, local government financial assistance, export credits and more. In China's nascent auto industry, subsidies have grown 50% annually since 2010, Wind Info says. A level playing field in manufacturing? We think not.




That's how many square feet of solar panels will cover the roof of a new distribution center home furnishing IKEA is building in Joliet, IL. That means the nearly 9000 solar panels being used will cover a bit less than half of the roof on the coming 1.25 million square foot DC, shown under construction in the image nearby. The system will produce approximately 3,411,600 kWh of electricity annually for the facility, the equivalent of reducing 2,398 tons of CO2 – equal to the emissions of 506 cars or providing electricity for 354 homes each year. When complete in fall 2017, it will be the largest solar array to date in the state of Illinois. Combined with arrays atop Ikea’s Chicago-area stores in Bolingbrook and Schaumburg, the new project will make the retailer the owner of three of the state’s largest solar rooftop installations. Ikea’s renewable energy portfolio in Illinois also includes a 49-turbine wind farm in Hoopeston. Ikea elected SoCore Energy, a wholly owned subsidiary of Edison International, to develop, design and install the facility’s solar power system.

That was the healthy rise in so-called "revenue per hundredweight," a decent proxy for changes in overall rates, at LTL carrier Saia in Q3, according to its earnings report. That's impressive considering that volumes were down 2.9% at the carrier. Old Dominion saw a 2.5% rise in the same metric in the quarter, while ABF Freight Systems said it saw a rise in the mid-single digit percentage range, even though these LTL carriers also saw volumes sag in Q3. What's up? YRC noted, for example, that "pricing discipline in the LTL sector remains steady," while Old Dominion commented that "Although the economic environment continued to be weak during the quarter, the pricing environment remained stable." While the LTL sector remains far less profitable than the US truckload sector, the days of ruinous price competition in LTL seem behind us for now.


$18 Billion

That's was the value of on-line retail sales last Friday during China's so-called "Singles Day," an event created in the 1990s by unattached university students who wanted an antidote to Valentine’s Day. But the idea turned into a big deal a few years ago when Alibaba founder Jack Ma got behind the concept in a major way. The $18 billion in sales is up 32% from 2015, and the event is strictly an on-line and especially mobile phenomenon - brick and mortar retailers don't participate. By comparison, this year's total is about seven times the on-line sales of last year's Cyber Monday in the US. Alibaba's Alipay unit accounted for 82% of the sales total, compared to 69% in 2015, so it looks like Ma was very smart indeed to boost the event. Meanwhile, Singles Day could be now characterized as a global event too, considering that shoppers from 235 countries and regions completed cross-border transactions this year, and 37% of total buyers purchased items from international brands or merchants, according to Alibaba data.