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March 6, 2015 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Walmart and Amazon by the Numbers bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic & By the Numbers for the Week bullet Holste's Blog/Distribution Digest
bullet Cartoon Caption Contest Continues this Week bullet Trivia      bullet Feedback
bullet New Stifel Transportation and Supply Chain by Design bullet New Videocasts/On Demand Videocasts

Register for OPTIMUS 2015 Atlanta and join the world's leading authorities in supply chain optimization, predictive analytics and operations research. Use the discount code SCD100 to save $100 off your registration!

first thought


Supply Chain Graphic of the Week

Quantifying Supply Chain Disruptions in 2014

bullet Tracks Its Fulfillment Center Design Iterations
Walmart Releases Sustainability Leaders Program for Consumers
Can Phone App Solve Port Congestion Issues?
Dollar Rises to 11-Year High


February 17, 2015 Contest

See The Full-Sized Cartoon and Send In Your Entry Today!

Holste's Blog: Automation Projects Sponsored By Top Management Have The Best Chance For Adoption


Register for OPTIMUS 2015 Atlanta and join the world's leading authorities in supply chain optimization, predictive analytics and operations research. Use the discount code SCD100 to save $100 off your registration!


Weekly On-Target Newsletter:
March 4, 2015 Edition

Cartoon, WMT Green Badge, Amazon FCs, Driver Pay not Main Issue? Big Ships and more

Stifel Transportation Weekly for
March 2, 2015

by John Larkin
Managing Director and Head of Transportation Capital Markets Research
Stifel Financial Corp.

Top Five Rules for Cleaning Data for a Strategic Analysis

by Dr. Michael Watson

SCDigest's 2015 Supply Chain Cartoon and Event Calendar!




The logistics industry has a relatively new acronym – ULCV. What does it stand for?

Answer Found at the
Bottom of the Page

Walmart and Amazon by the Numbers

I think it is rather safe to say that the two most prominent US retailers today are Walmart and


"Walmart doesn't disclose ecommerce sales, but did say for 2015 they were up 22% globally. That would put it a bit behind Amazon's growth, which saw merchandise sales up 24.7% worldwide."


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Walmart earns that place due to its stature as the world's largest retailer (and company) and one that represents often a substantial share of many consumer goods companies' total sales. Amazon earns a spot because it is the dominant eCommerce company, which is where all the action seems to be right now, its phenomenal growth (slowing down somewhat now due to the law of big numbers), and its incredibly aggressive innovation in eFulfillment and more.

So we've been looking at both of these retail giants "by the numbers" in recent years - which as I will explain in a second, is harder than you might think. What Walmart and Amazon are doing is obviously of interest to most other retail and consumer goods manufacturers, and I hope others as well, as in the end almost every company is connected to the retail supply chain.

So let's start with Walmart, which just reported its full year earnings, ending its 2015 fiscal year on Jan. 30.

I will simply say that while Walmart is an incredible giant, its growth has slowed dramatically of late. As can be seen in the chart below, Walmart's US (Walmart stores + Sam's Club) sales grew very rapidly in the beginning years of the 2000s, primarily by adding new superstores carrying groceries at a rapid pace into new markets.

But that growth was soon decelerating, and the recession year of 2009 started a pattern of very low growth that is not much above inflation on average, meaning real growth is almost flat. US sales reached $288 billion last year, more than double the $139 billion the company had in 2001, but the pace of that growth has slowed dramatically, certainly putting some tensions inside the offices in Bentonville.

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And surprising to me, international growth has also plateaued, despite an awful lot of attention and investment there (naturally enough, as US growth opportunities shrank). International sales last year were $136.1 billion, down a bit from the $136.5 the year before that, and little above the $135.2 billion on calendar year 2012. Interesting.

Walmart doesn't disclose ecommerce sales, but did say for 2015 they were up 22% globally. That would put it a bit behind Amazon's growth, which saw merchandise sales up 24.7% worldwide.

Not all that many years ago, there were (I think legitimately at the time) concerns about Walmart gobbling a giant share of the US retail market, but with the recent very modest growth Walmart's share of retail has also flattened. We developed a methodology several years ago, where we compare Walmart's US sales versus relevant US retail - total retail minus autos and parts, gas station sales, restaurants and fuel distributors. It's not quite perfect because Yes Walmart does sell some gasoline, but they don't break it out. I think what we have is pretty good.

By that measure, Walmart had an 11.3% of US retail sales in 2014, same as the year before, and down from a peak of 12.2% in 2009.


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Now let's turn to Amazon, a company that provides a lot of numbers but getting real insight from them takes some work. That is because of its several business units and how it computes certain ratios, as I will explain in a moment.

Overall Amazon revenues were up 20%, but that includes digital media sales and its rapidly growing web services unit. I think it is more interesting to look at Amazon's merchandise sales, as shown in the chart below.

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That shows Amazon was able to grow merchandise sales 28.5% in North America last year, about the same as the year before. Impressive, though still down from the 50% type growth we were seeing through 2011. International merchandise sales growth (19%) was solid but is slowing faster than North America.

One thing that vexes me is that I do not understand how and where Amazon books revenue for its "marketplace" service, where a customer is buying not from Amazon but direct from the supplier. Do Amazon's fees for that go into merchandise sales, or its web services unit? I think the latter, but I am trying to confirm. All this is complicated by the fact that sometimes Amazon does the fulfillment for these marketplace sellers.

In the end, I am trying to adjust the numbers Amazon reports for things like shipping and fulfillment costs against the right denominator.

For example, Amazon provides its net shipping costs - what it spends versus how much it receives from Amazon customers. Net shipping costs in Q4, for example, were $1.4 billion, and about $4.2 billion for all of 2014. And we remember when companies used to make money on shipping.

The Amazon figures report shipping costs as a percent of worldwide sales - and over the last five quarters that was in the 4-5% range. That's high enough, but SCDigest then compared those shipping costs just against merchandise sales - and the picture is worse, as shown in the graphic below.

View Full Size Image

Using that denominator, shipping costs are more in the hefty 6-7% range of relevant sales - quite a meaningful difference.

I am out of room, even though I have more - such doing the same sort of adjustment to Amazon reported fulfillment costs. Do you like this stuff? Let me know - we'll get more out somehow.

Any reaction to these numbers from Amazon and Walmart? Any other data you would like to see? Let us know your thoughts at the Feedback button or section below.



View Web/Printable Version of this Column

New Videocast:

Dr. David Simchi-Levi's Risk Exposure Index 3.0

How Ford has Leverages the REI from Strategy through Execution

Details on how Ford has Adopted this Expanded Approach and now uses REI not Only for Strategic Risk Management but also for Tactical and Operational Risk Management

Dr. David Simchi-Levi of OPS Rules and MIT and SCDigest's Dan Gilmore

Wednesday, April 8, 2015

On Demand Townhall:

Townhall Meeting! Is Flowcasting Really a Game Changer in the Consumer Goods to Retail Supply Chain?

Claim is that Store-Level DRP and New Approach to Forecasting Deliver Big Gains - Does It Stack Up?

Andre Martin , Flowcasting Inventor, JDA Software, Kevin Smith of DePaul University, Parag Jategaonkar of Accenture and Fred Baumann of JDA Software.

Now Available On Demand

On Demand Videocast:

Why Now Is the Time to Close the 3PL "IT Gap"

How Leading Logistics Service Providers Can Move to the Next Level of Technology Enablement to Win New Business and Get More Strategic with Clients

Featuring Gene Tyndall, former VP of Supply Chain Solutions at Ryder, SCDigest's Dan Gilmore, and Todd Johnson of JDA Software.

Now Available On Demand


We publish here a couple of more emails from our rent column on "Supply Chain Predictions 2015 from the Analyst Community, some of which we publish below.

Feedback on Supply Chain Predictions 2015 from the Analyst Community:


The column reminded me of an article published in The Economist late last year titled "Devining Reality from Hype".  The article shows a "hype" cycle and the source is Gartner.  

See image below:


As for 50% of current supply chain execs being gone by 2018, I highly doubt it.  They may not be with the same organizations, but there is too much demand AND good talent out there that I'm sure they will be with us.

David Armstrong

Inventory Curve, LLC

Editors Note:

I think moving to new organizations would count as being "gone" in Gartner's calculus. I agree demand is such that most will land somewhere if they leave their current organizations, but the Gartner thesis is there will be a disconnect for many (50%) between CEO expectations and what the supply chain exec can deliver.

We'll see.

Dan Gilmore

  More on Supply Chain Predictions 2015 from the Analyst Community:  

I appreciate your summarizing some of the predictions of the analysts like that. It is very interesting to see them.

I am not sure that I agree with Simon Ellis that we will see a move towards what he calls "micro logistics," or many smaller, more local distribution centers versus fewer, larger ones.

This trend has actually be predicted for many years, and never seems to happen.

The operational efficiencies of the larger DCs combined with the inventory advantages of fewer facilities (fewer DCs that require safety stock) instead favor fewer larger DCs, a trend I think will be accelerated by the growing opportunities to use advanced DC automation.

The ROI behind that automation works in a large DC, but not in smaller ones.


Scott Beloitt
Cincinnati, OH



Q: The logistics industry has a relatively new acronym – ULCV. What does it stand for?

A: Ultra Large Container Vessels – megaships capable of carrying 18,000 or more TEU.

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