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July 7, 2016 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet 1H 2016 Supply Chain Review 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 Winners Announced bullet Trivia      bullet Feedback
bullet New Expert Insight and Supply Chain by Design bullet On Demand Videocasts

Download the Complimentary Case Study:
How “Smart Bins” are Improving Industrial Supply Chains


first thought


Supply Chain Graphic of the Week
Moving Network Design from Project to Process at Whirlpool


Record Toll for Passage Through New Panama Canal

Rolling Delivery Bots to Start Working in Four Euro Cities
Yet Another Major Materials Handling Sector Acquition
US Deficit in Goods with China Soars


Download the
Complimentary Case Study:
How “Smart Bins” are Improving Industrial Supply Chains


Week of May 31, 2016 Contest

See Who Took Home the Prize!

Holste's Blog: Will DC Automation Drive Some Shippers to 3PL Service Providers?

Weekly On-Target Newsletter:
July 6, 2016 Edition

Last Chance Cartoon, Materials Handling Mergers, Crewless Cargo Ships and more

Manage What Matters

Discusses the Law of the Vital Few, the Pareto Principle, ABC Analysis and How to Manage by Exception

The Tactical View: What's Missing in Today's Supplier Integration Market

by John DiPalo
Chief Strategy Officer
Acsis Inc.

Profit Maximization Feature and Amazon’s Focus on Lead Time to Grow Revenue

by Dr. Michael Watson


What percent of UPS' 2015 US parcel volumes were ecommerce related (B2C)?

Answer Found at the
Bottom of the Page

1H 2016 Supply Chain Review

Well, suddenly as always we reached mid-year.

I am here with a mid-year review of the first half of 2016 in supply chain. As usual I had forgotten much of the news items summarized below by month, and I do this for a living.


Timeline summary this week, broader perspective and charts and graphs next week.


I could have added twice as much if we had more room. What top stories did we miss?


Send us your
Feedback here


The Baltic Dry Index, a measure of the cost to ship bulk goods via ocean carrier and often seen as a sign of global economic strength or weakness, fell to its lowest level of all time, down to a level of just 369. The index was as high as 1,222 in August 2015, and is down 84% from a recent peak of 2,330 in late 2013.

US oil prices fall to about $32 per barrel, gas and diesel prices plummet before move back close to $50 starting in April.

Sports apparel retailer Finish Line makes news when it says troubles with new Distributed Order Management and Warehouse Management Systems causes it to lose $32 million in sales over Holiday period. CEO resigns, chief supply chain officer let go shortly thereafter.


Google jumps into grocery delivery wars with new same-day delivery service for fresh, perishable groceries in an expansion of its Google Express offering. Google has been operating the service for non-fresh food items in many parts of the country, but the food delivery will initially operate just in areas of San Francisco and Los Angeles. Service will pick up orders at retail partners and deliver to homes.

Controversy as HVAC giant Carrier, a division of United Technologies, announces it is moving factory operations from Indianapolis to Monterrey, Mexico, eliminating 1400 jobs when transition is completed in 2020.

Mercedes says it is scaling back the number of robots it uses on its manufacturing lines because they are not flexible enough to handle the customization in terms of features its consumers can order now.

Report from Bloomberg that Amazon seems to be taking steps to build out an end-to-end global logistics service capability that would compete with major 3PLs and carriers, perhaps not only to move its own freight but those of others. Moves include getting licenses in both US and China to act as a wholesaler for ocean container shipping.


Amazon confirms the lease of 20 Boeing 767 freighter aircraft from Air Transport Services, in a long rumored deal. Air Transport Services operates out of the Wilmington, OH Air Park that was previously DHL's US parcel hub before it shut down its US domestic service, and before that the hub for Airborne Express before it was acquired by DHL. Unclear exactly how they will be used.

Chris Welsh, secretary-general of the European-based Global Shippers Forum, an industry lobby, says at a conference that while the ever larger megaships may be reducing costs for container carriers, they are increasing costs for almost everyone else – ports, terminals, shippers, etc.

Legendary FedEx founder and CEO Fred Smith says in interview that B2C ecommerce shipping rates have to rise. "We can't build these networks and spend this kind of capital and not get a return on it,” FedEx CFO Alan Graf adds.

Reports that Target is doing a deep dive on its SKU counts, in-store logistics processes and more in an attempt to reduce out-of-stocks and inventory levels. Retailer is testing putting more product on the sales floor rather than the stockroom by redesigning shelves, looking at case pack quantities from vendors, and reducing total SKU counts in many categories.

Meanwhile, Target also says it is largely dumping packaged software for forecasting and replenishment to write its own, more suited to needs of omnichannel commerce. Is the traditional DRP-based model dead, SCDigest asks?


The Federal Reserve makes major revision to its US manufacturing data. Among the changes, growth in US manufacturing output since 2013 now estimated at only about 3%, half the 6% reported previously.

Retail giant Walmart causes quite a stir in its vendor community, after recently releasing new standards for carton marking that have the potential to add huge costs to its suppliers. Requirements ban use of inkjet printing for case code bar coding, meaning suppliers would have to maintain inventories of cartons specific to each SKU, among other changes.

Canadian Pacific Railway says it has scrapped efforts to buy Norfolk Southern, almost six months after it launched its unsolicited $28 billion bid for the fourth-largest US railroad operator. US regulatory barriers were key factor. Turns out CP was also again trying to acquire CSX at the same time.

Final report from the Federal Motor Carrier Association as expected concludes there simply isn't enough data to make a call for support of either heavier or longer vehicles on US highways, the same thing it said in a preliminary report last June. Meanwhile, during its convention in Las Vegas, the Truckload Carrier Association (TCA) officially changed its policy stance, and now says it is against both heavier and longer trucks.

News that Target is telling vendors that it will issue a chargeback of as much as 5% of the invoice for shipments that arrive as little as one day late, plus chargebacks of $5,000-$10,000 for suppliers who fail to provide complete and accurate master data for their products.


Amazon releases Q1 numbers, with overall revenues up 28%, to $29.1 billion. In North America, Amazon’s merchandise sales were up an incredible 31.8%, to $13.5 billion, as it simply continues to defy the supposed law of large numbers. Amazon did manage some profits in the quarter for the second period in a row, but at $513 million that represented just 1.7% of total sales. Cash flow generation is stronger.

US Labor Dept. finalizes change that basically double the salary below which workers must be paid overtime for working more than 40 hours per week to $47,476 a year. Impact on supply chain costs not yet clear, with new rule in effect starting Dec. 1.

Game of musical alliance chairs in the container shipping sector continues, as “THE Alliance" is formed, led by Hapag-Lloyd and five other carriers. Follows announcement a few weeks before of the “OCEAN Alliance,” with members CMA CGM, newly merged China Cosco Shipping, Evergreen and OOCL. That leaves three major alliances, these two plus 2M with Maersk and MSC.

Gartner releases annual top 25 supply chains, with Unilever coming out on top, followed by McDonald’s, Amazon, Intel and H&M. Apple and Procter & Gamble remain in sort of “hall of fame” status outside top 25. New this year is a corporate social responsibility factor, with a 10% weighting.


BP releases 65th Statistical Review of World Energy report for 2016. Finds oil, at 32.9%, increased its share of energy consumption in 2015 for the first time since 1999, while coal’s share fell again but remained in second place. Renewables accounted for 2.8% of global electricity generation, up from 0.8% 10 years ago. Almost all energy consumption growth is in developing nations.

CSCMP releases 27th State of Logistics Report under new lead authors from AT Kearney. Headline news is that US logistics costs as percent of GDP fell just a bit to 7.85% in 2015. Bigger news may be that the last 10 years of data was adjusted down by approximately half a percentage point or more each year, meaning the logistics cost burden is lower than previously thought.

US FAA eases some commercial drone rules, but maintains regulations requiring line of site of each drone by a “pilot” and ban on flying over persons not involved in the test, effectively continuing to bar tests of drones for deliveries, though waivers may be available.

Walmart brings reporters into Bentonville DC for demonstration of a drone taking physical inventories on continuous basis, flying the aisles and using an imaging system.

Big news in materials handling sector, as giants Dematic (by Germany’s Kion) and Intelligrated (by Honeywell) are each acquired within a week or each other, as consolidation hits this industry too and ecommerce providing strong growth opportunities.

Expanded Panama Canal finally opens - two years behind schedule - with an 11-hour trip through the locks by a Chinese container ship. Increase in ship size capable of moving through the Canal connecting Atlantic and Pacific oceans from 5000 to 14,000 TEU may have huge impact on global logistics.


I could have added twice as much if we had more room. What top stories did we miss? Let me know.

Anything we missed in our month by month summary? Let us know your thoughts at the Feedback section below.

View Web/Printable Version of this Column

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Feedback will return next week.


Q: What percent of UPS' 2015 US parcel volumes were ecommerce related (B2C)?

A: 46%, the company said in May, up from 36% in 2009 and headed to 51% in 2019. This has a big impact on the required network - and on costs and margins, which are higher and lower, respectively, for B2C.

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