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1H 2010 Supply Chain in Review

For the past several years, we have done reviews of the top news stories and developments at both the half way point of the year and at year’s end, and have received consistent feedback that readers enjoy these recaps.


It’s hard even for us to really remember all the important developments, and we do this for a living.


So below you will find what we view as the top stories, roughly in order of importance.


Just as the Great Recession ultimately had the top impact on supply chain management in 2009, so did the nascent economic recovery in 2010. Most data now show that the recession really bottomed out in June of 2009, and a variety of numbers (see more below) clearly indicated a modestly growing economy in the first half of 2010 – but now with some new headwinds.

Gilmore Says:

"There are growing reports about tight truckload capacity in the US, as carriers are still loathe to add back any assets. The tightness seems to be almost “rolling’ across different regions of the country, but seems most pronounced in the Southeast."

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As an anecdotal indicator, most software vendor user conferences reported attendance gains of 30-40% - and clearly the mood of attendees and interest in buying technology was way up. Pent up demand and an interest, frankly, in enjoying recovery while not adding back all the people led software vendors to see strong results in the first quarter, such as Manhattan Associates (which saw Q1 revenue soar 22%, blowing away estimates) and JDA Software (software revenue up 87%). Many other privately held software vendors also saw strong gains. Bottom line: companies were making supply chain investments in the first half of the year.


The Institute for Supply Management’s widely followed Purchasing Manager’s Index (PMI) was in positive territory again in June, indicating economic expansion in the manufacturing sector, making it 11 straight months of growth in the US. The rate of expansion now appears to be slowing somewhat from its peak in April, however.

Various issues, however, have many worried about a “double-dip” recession, or at least just a tepid recovery for the rest of the year. Unemployment remains very high here and in Europe. Several European countries, notably Greece, have huge debt problems, requiring contentious EU bailouts, which sent the Euro falling, hurting US exports (many believe the Euro will ultimately go away). Many states and cities in the US are broke, and the Federal government is now in enormous debt largely financed by the Chinese. We’ll see.


The annual State of Logistics Report from CSCMP was released in June and showed just how bad the economy and logistics industry really was in 2009. Logistics costs as a percent of GDP, after rising sharply in the last half of this decade, fell to just 7.7% in 2009, its lowest level since the report started 20 years ago. Plummeting shipping volumes and carrier rates, combined with lower inventory carrying costs due to drastic inventory reductions and lower interest rates, were the key factors (see State of Logistics Report 2010 Instant Video Review and Comment.)


In May, the US Senate at long last saw the introduction of a Cap and Trade bill on carbon emissions that if passed will have a dramatic impact on US supply chains (the House passed a somewhat different bill already in 2009.) Under the Senate bill, utilities would be forced into a carbon trading regime in 2013, and manufacturers in 2016. There are large debates about by how much such legislation will increase energy costs to business and consumers. The bill also contains provisions for “carbon tariffs” on products imported from countries deemed to be soft on CO2 emissions. (See Trying to Understand the New Senate Climate Bill and its Impact on US Supply Chains.)


Other news of note:

  • Toyota’s woes over sticking accelerators and other quality issues led to the recall of millions of vehicles, embarrassing testimony before the congressional committees, and one of the greatest PR black eyes of all time. Most interestingly, some tried to blame Lean manufacturing on the troubles – total nonsense – but many agree Toyota did allow a focus on growth to override some of its traditional focus on quality (See Is Lean to Blame for Toyota's Recall Issues?)
  • Trade tensions between China and the US were high, with some back and forth action on tariffs or threats of tariffs continuing. There were increasing calls for China to let the value of the yuan rise versus the dollar, a move that just recently China said it would condone – but in a 5% type range that would really have little impact on the balance of trade.
  • More interestingly, in March China sentence several Chinese employees of Australian mining giant Rio Tinto to jail over corruption charges, which many believe were connected to disputes with Rio Tinto over the price of iron ore. More recently, there has been unprecedented amount of labor unrest in China, including a government permitted and for awhile well media-covered strike against a Honda parts plant there, which led to a 24% wage increase for employees. Cost in China are clearly rising, as the apparel and other sectors look for alternative sourcing points. (See Labor Dynamics Continue to Change in China as Workers get Bold.)


  • Freight movement has recovered, albeit modestly. The ATA Freight Tonnage Index saw its sixth consecutive month of year over year gains, but the total rise through May in 2010 versus 2009 was a lukewarm 6.2%, given how low things had fallen in 2009. Nevertheless, there are growing reports about tight truckload capacity in the US, as carriers are still loathe to add back any assets. The tightness seems to be almost “rolling’ across different regions of the country, but seems most pronounced in the Southeast. That said, while there are expectations for some TL rate increases, they are still muted for now.
  • Global trade volumes are again rising after a dramatic drop in the recession. Container volumes at US ports ended their 30-month year-over-year drop in early 2010, and the forecast is for double-digit gains in container volume in Q2. Several ocean carriers are already reporting tightness in container availability in Asia, and in some cases are speeding up “slow steaming” strategies to faster reposition containers. Ports in LA/Long Beach are seeing congestion before the peak shipping season, it is reported, caught somewhat by surprise by the higher volumes.
  • Early in the year, JDA closed its acquisition of i2 Technologies, in its second attempt at the deal, bringing an end to the story of the most noteworthy name in supply chain software technology to date.


There is more of course, but we’re out of room. Hope you enjoyed the recap.


Anything you would add to our review of the first half year in supply chain 2010? What did we miss? Let us know your thoughts at the Feedback button below.


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We received a number of letters on our piece on our First Thoughts piece on the battle at the Port of LA over what is nominally a Green supply chain issue - but in which a unionization agenda seems to lurk underneath (See Port of LA, Clean Trucks, Owner-Operators, and You.)

Many thanked us for calling this issue to their attention. Our feedback of the week on this topic is from our friend Thom Williams, a former trucking industry executive, and now industry consultant at AmherstAlphaAdvisors LLC. You'll find his great letter and more below.

Feedback on LA Clean Truck Program:

Bravo, SCDigest!

Your "First Thoughts" discussion, today, of the many issues and parties now facing-off in and around the Port of LA is a cogent summary of that current battleground.

I've long been sympathetic to the LA Port Authority's "clean air" objectives, also long amazed that the Authority feels compelled to lash out at truck owner-operators while paying no attention to foreign or domestic ship operators who actually lease their "boats" from others.  If the Port of LA can deny access to a self-employed truck driver, then the City of Detroit (another jurisdiction with equally strong ties to "organized labor") can ban self-employed drivers from its streets and highways.  Clearly, Mr. Hoffa and others would lead us in that direction.

The Obama Administration did not find its way into the White House without strong support from organized labor, which has seen its less-than-truckload constituency dwindle over the past decade.  The Teamsters and other unions yearn to penetrate the still near union-free truckload freight transportation industry.  I hope your  continuing dialogs will include discussions of the Employee Free Choice Act, and what parts it might play in the battles at the Port of LA and elsewhere across the country.

Incidentally, when a company-employed or owner-operator truck driver chats with a Longshoreman working at the Port, it seldom takes long for that truck driver to become enamored with the ILWU's contractual pay and benefit schedules.  Those PMA-ILWU contract would make most any truck driver drool with envy!

Thanks for starting my morning with great reading!


Thom A. Williams

AmherstAlphaAdvisors LLC

Nice Job SCDigest!  I think you hit it right on the head.  It’s not just about being green.  Keep up the good work!

Kevin McCarthy

C. H. Robinson

I read with great interest your article on the the issue of clean trucks.

We have been very engaged on this issue since the beginning when the Ports of Los Angeles and Long Beach developed their plans. We support their goal of cleaning up the environment and applaud the accomplishments to date, without having to change federal law. We have actually been running a coalition of shipper and other interest groups opposing the efforts of the Port of LA, Teamsters and others to amend the Federal Aviation Administration Authorization Act to allow for concession plans requiring an employee mandate.

The Clean and Sustainable Transportation Coalition has been very active over the past year educating members of Congress about the issue.


Jonathan Gold
Vice President, Supply Chain and Customs Policy National Retail Federation



Thanks for bringing this issue to everybody's attention.  You are right, we have reason to fear.  

Thomas A.  Moore

Warehouse Optimization LLC

I believe that there is an additional agenda by the Teamsters - to eradicate non-union owner-operated drayage trucks from the ports, many of whom were operated by illegal aliens. These operated very old trucks and, no doubt, did contribute somewhat to the pollution of the local air quality but, far more important to the union, was the fact that the  rates charged by the independents greatly undercut those of the “unionized” fleets. As long as the status quo continued they would have little chance of encouraging membership.

The union’s strategy has taken two main avenues of attack – A) using the issue of Federal security requirements for all personnel accessing the Port areas to obtain an identity card, a process that would eliminate the “illegals” – the unions were strident in their support of these measures to “Keep America Safe” and B) to use the “environmental” argument to go after the trucks of those that could survive the id process.

As you rightly point out, this has never been about the environment.

Rob Hoffman




Which was the first US university to offer an Industrial Engineering degree?


Penn State