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January 12, 2017 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Supply Chain Year 2016 in Numbers and Charts 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 bullet Trivia      bullet Feedback
bullet New Expert Column bullet New Videocast and On Demand Videocasts


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first thought


Supply Chain Graphic of the Week
What Words Would Describe Your Company's Supply Chain Organization?


Bringing Toy Production Back to US a Tough Order

Alibaba CEO Says Tons of US Jobs Coming
Procurement Improvements Driver Major Profit Gains
Right to Work States Gain New Member


As Always, Survey Respondents Receive Complimentary Gartner Research - a $300-500 Value


December 12, 2016 Contest

Fantastic Entries for Santa-Themed Contest - Have a Good Laugh!

Plus, SCDigest Editor Dan Gilmore with the Winning Caption He Thinks Everyone Missed!



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April 3-6, 2017 in Chicago, IL  

Holste's Blog: Training & Discipline Are Key to a Smooth Running Operation


White Paper Discusses how to Manage Volatility in Developing Markets to Deliver Strategic Success

Weekly On-Target Newsletter:
January 11, 2017 Edition

Last Chance Cartoon, 2016 Timeline, More Amazon Patents, 2016 ROSMA Study and more

The Battle for Supply Chain Talent
by Henry Canitz
Product Marketing Director

A Non Obvious Way Self Driving Trucks May Impact Your Network Design Strategy
by Dr Michael Watson

WMS in the Cloud will Go Mainstream in 2017
by Dinesh Dongre
Vice President of Product Strategy


By how much are US per mile truckload rates up since the start of 2005?

Answer Found at the
Bottom of the Page

Supply Chain Year 2016 in Numbers and Charts

Wrapping up our review of the year in supply chain 2016, this week we offer our popular look at the past year in numbers and charts.

Last week, I summarized what I thought were the key supply chain themes and trends of 2016 (see Supply Chain Year in Review 2016: Top Trends and Themes). Then earlier this week, we published our excellent timeline of key news stories and events by month. Take a look - I guarantee you have forgotten a number of these important developments (see Timeline of Key Supply Chain News and Events by Month in 2016).


The Cass Linehaul Index was barely higher year over year in January and February, then went negative every month after that through November.


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So, let's get right to it.

It was yet another mixed/lukewarm year for the US economy. As it has for several years running, Q1 was a bust, with real US GDP up an anemic 0.8%, then almost as bad in Q2 (1.4%). But growth then jumped to 3.5% in Q3. Q4 will come in fairly strong as well, according to most pundits, but full year growth is once again likely to be a little over 2%, as the US economy has amazingly not reached 3% growth since 2005.

I would say the US Purchasing Managers Index from the Institute of Supply Management was fairly consistent with these numbers. As shown in the chart below, the PMI started by coming in just below the 50 mark that separates US manufacturing expansion from contraction in the first two months of the year (consistent with a weak Q1 GDP), then indicated expansion in nine of the next 10 months, ending the year in December on a 2016 high, with a decent score of 54.7.

However, the Q3 numbers from the PMI were not very strong and inconsistent with a robust 3.5% GDP growth rate, in my view, but who knows what's up here.

From yet another view, US manufacturing was weak/flat for almost all of 2016, based on the monthly output numbers from the Federal Reserve. They were basically flat all year - no expansion, as seen in the chart below.

More consequentially, as reported just about exclusively by SCDigest, the Federal Reserve in April made a major revision to its US manufacturing data. Among the changes, growth in US manufacturing output since 2013 is now estimated at only about 3%, half the 6% reported previously. That means, as can be seen in the chart above, US manufacturing output is still several percentage points below peak 2007 levels, now 10 years later. This is an under-reported fact.

Oil prices had an interesting ride. As can seen in the chart below, WTI prices started the year about $44 per barrel, soon fell to 13-year-lows in February at about $36, rose until June, then stayed in a band of roughly $45-$55 for the rest of the year. Prices jumped to full year highs in late December after OPEC announced planned production cuts. The full year rise was about 21%, with some saying we will see $70 oil in 2016.

Naturally, US diesel costs roughly followed suit, starting the year at $2.21, falling to $1.98 in mid-February, then ending the year at a high for 2016 of $2.54, meaning the full year increase was about 15%.

All told, it was a good year for commodities, which as a group posted their first gain since prices started collapsing in 2011 after a multi-year run, as shown below (the index represents a basket of different commodity types).

The Scotiabank commodity price index had metals/minerals up about 22% on the year, forest products up 9%, and oil/gas up 15%, though agricultural commodities were down 3.4%, causing reported grief for grocery chains and food manufacturers. The currently strong US dollar keeps a lid on commodity prices here, sends them higher in other countries.

There were mixed reports on freight volumes. In their quarterly earnings calls, rail, truckload and LTL carriers almost all characterized freight volumes as weak in each quarter in 2016. The Cass freight shipments index was down year over year every month in 2016 through November, with the exception of October. What's more, in almost every month in 2016 the index was below the levels in each of the years 2013, 2014 and 2015.

But the ATA's freight tonnage index was up 2.8% through November. It reached an all-time high in February of 144, meaning up freight volumes were up 44% versus baseline 2000 levels. But there were major swings up and down the whole year, with the index almost back to the record in November at 142.4. This is somewhat inconsistent with carrier reports and the Cass data.

Rates would indicate volumes were indeed weak.

For example, the Cass Linehaul Index, which tracks US per mile truckload rates, was barely higher year over year in January and February, then went negative every month after that through November, down in the 1-3.5% range each month. The average rate change was -1.7% for the first 11 months of the year.

Rail volumes shrank again, with total units down a significant 8.2% for the year. according to the Association of American Railroads. Even once high flying intermodal car volumes were down 1.6% for the year. More telling, in October the Cass Intermodal price index rose modestly year over year after a surprising 22 months consecutive months of price declines.

It was an ugly year for ocean container carriers, and another good one for shippers, as the China Containerized Freight Index started the year at about 750, down from 1200 in 2014, then fell to just 600 or so for most of Q2, at record lows against the 1000 set as the baseline in 1998. The index rose to 800 or so by year's end, but the market is still ugly for carriers.

The US trade deficit continued along, coming in about $40-45 billion each month, though that's down from about $60 billion per month pre-recession. The trade deficit in goods with China also stayed strong, at about $319 billion through November, though the US will not as usual break the previous year's record level in 2016, which was the $367 billion deficit in 2015. The cumulative deficit with China since 2000 is more than $3.6 trillion.

The growth of ecommerce sales in the US also rolled on, up 15.5%, 16.0%, and 15.7% in Q1 through Q3, respectively. Ecommerce represented 8.4% of total retail sales in Q3, by the government's calculation, but the way SCDigest figures it, the share is probably now over 10%. Total retail sales were up just 3% in 2016, so ecommerce is rapidly gaining share.

Amazon's is somehow growing even faster, with increases in merchandise sales of almost 30% in the US through Q3, and it will end the year with revenue of well more than $130 billion when it reports at the end of the month. For a change, Amazon actually made some profits in the year, $1.6 billion through Q3, but that was still just 2% of sales.

I have lots more but am out of space. Hope you enjoyed all this.

What is your reaction of supply chain 2016 in numbers and charts? What would you add? Let us know your thoughts at the Feedback button below.

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New Videocast:

Innovation in Shipper-3PL Relationships Benchmark Study Results

New Research will be Unveiled from SCDigest and JDA On This Increasingly Important Topic

In this outstanding broadcast, SCDigest and JDA recently completed new research study on innovation in shipper-3PL relationships, with the goal of obtaining the perspectives of both shippers and service providers on this increasingly important topic. All registrants will be sent a copy of the report will all the data shortly after the Videocast.

Featuring SCDigest editor Dan Gilmore and Danny Halim and Lori Harner of JDA.

Tuesday, February 7, 2017

On Demand Videocast:

New Cloud WMS Solution is Game Changer for Warehouse Management Deployment and Flexibility

New Technology and Deployment Approach Offer a Simply Better Way to WMS Implementations - Learn How

In this outstanding Videocast, we will cover the latest in each-picking robotics, co-bots, artificial intelligence, autonomous vehicles, sensors, drones and droids.

Featuring  Dan Gilmore, Editor, along with Mark Hawksley and Bruno Dubreuil of TECSYS, a leading provider of WMS solutions.

Available On Demand

On Demand Videocast:

Successful Supply Chain Vendor Compliance - for Retailers and Beyond

Author Norm Katz on Vendor Compliance "By the Book"

In this outstanding Videocast, Katz will summarize key elements of book, to include: Compliance program guiding principles; What is permissible under the law relative to vendor chargebacks; Common mistakes companies make in rolling out and maintaining vendor compliance programs; The many "E's" of successful vendor compliance, from "Envision" to "Ethics."

Featuring  Dan Gilmore, Editor, Norman Katz, consultant and author of "Successful Supply Chain Vendor Compliance," and Greg Holder, CEO, Compliance Networks

Available On Demand


More the great Feedback we received on from Dan Gilmore's First Thoughts column on The Trump Supply Chain?, with his analysis of what we can likely expect in terms of supply chain impact from the Trumpster. First Feedback below from Jon Kirkegaard of DCRA Inc. is outstanding.

Feedback on The Trump Supply Chain:


Great job bringing this up. lets help the policy create real value from the talk!

Supply chain design and strategy should be used to enable business and government policy goals. As one who has volunteered significant time to use supply chain and advanced manufacturing to promote US jobs I have witnessed the dysfunction. We believed strongly in the concept of using supply chain to create jobs and donated nearly 3 years of time to Texas Governor's office to develop an Industry Cluster Initiative that justified the Texas Emerging Technology fund. Our efforts were key in raising a half billion dollars to fund Texas businesses that would use supply chain strategy and advanced manufacturing to promote jobs.

I considered it a huge win until I saw how the funds were allocated. They all got used to fund any old initiative. Last I checked they were mostly funding business largely importing goods or some politician's friend's supposed cure for cancer. You can only imagine my reaction . We developed a knowledge base as part of this effort and have kept it running since on own

So I am obviously refreshed by Mr. Trump's instincts that something has been horribly wrong with our government policy goals and as it relates to cutting the right global deals that support our treasured manufacturing talent.

However, based on my experience, I am very supportive of what we see evolving but am skeptical that the execution can adroitly align with the goals. As has been said many times, the devil is in the details and to say it politely there are many devils in government.

Here are two concepts we believe hold up in the details and are quite simple to understand vs. global supply chain design is not "easy" to understand for the average business person as not very physical, tangible and to them appears far removed from quarterly profits.

First, Promote Postponed Manufacturing in US:

1. Government policy should support and help US companies create a postponed manufacturing or what we describe as an assembly coordination product supply chain. This means the planning bill of materials (components) could be made and purchased in any part of the world but the final assembly is done in US facilities with US personnel. Bottom line benefits it greatly reduces shipping costs, it protects intellectual capital as we are not shipping full designs off shore, it dramatically lowers working capital as the components can be used to make 1000s of times more product variety then just a single SKU wrapped in Styrofoam, stuffed in a shipping container essentially half full of air.

It also helps on US infrastructure side as logically if you are more efficient in shipping it cuts down on port congestion, transportation cube and even assists in clearance as products are simpler to examine.

Most importantly it creates JOBS and jobs if not into every piece of the engineering design they are at least heavily involved in the planning bill of materials of design. For you supply chain planning experts, you know the difference between a design bill of material and planning bill of material. It is this planning bill of material that essentially needs to become inculcated into government policy thus creating jobs. Once you involve personal at all levels more deeply into the product you create millions of paths for PEOPLE to expand career growth, education, innovation, engineering, and production skills. When you buy finished goods wrapped in Styrofoam and set them on a big warehouse shelf you only create jobs for material handlers of which most are being automated.

I have done this analysis for hundreds of US products and have rarely found that the costs are not less for a finished good when you consider customer choice, total supply chain holding and transport costs and in particular when you consider IP protection and balance sheet losses from IP theft.

We even created two businesses that we own and have operated over the past 10 years that use this postponed US assembly model that does create US jobs in manufacturing.

An example of what government could do to support is create a virtual transportation hub to allow the manufacturers to get transport costs down and precisely coordinate arrival based on lead time to their assembly centers. This is the type of 21st century INFRASTRUCTURE we need. A manufacturing nationwide "air traffic control of sorts."

2. Second Key Initiative  - Incent Promote Develop Manufacturing in the Inner City

There has been much talk of lack of opportunity in the inner city during this election cycle. Why not use our human resources in the inner city to be involved in the initiative described above (assembly) or in pure manufacturing? Of course this is not without effort - as we can all imagine - but the benefit and rewards could be staggering. If you take a top down initiative such as Mr. Trump has indicated he will do it can happen. Imagine what could happen with the right incentives from government to the private sector to "make things" in the inner city - you could provide the biggest opportunity ladder ever imagined.

Having created two businesses that use this model, I can safely say personnel is a challenge but maybe with the right top down perspective, cheer leading, support it can improve. Lets give fame to value creation in manufacturing vs. pure consumerism.

For those of you who have studied the Chinese model in essence by promoting manufacturing of good for foreign export it is what they have done. They have a coordinated effort including blasting US CFOs with information on cheap labor to the point CFOs don't look at total cost.

Bonus 3rd Initiative - Green “Supply Chain Coordination”:

Lastly, as an overriding theme and as what I personally see as the most GREEN initiative the world could take on is top down support for global supply chain coordination. The amount of resources saved, energy saved, unused product eliminated by even tiny percentage increases in coordination is insanely large then all the "green" initiatives ever proposed. In essence the first initiative above Assembly coordination / postponed manufacturing is just a tiny physical example of a larger scale effort to coordinate global supply chain coordination.

Average business reader is going to get this last topic but readers of your site I think do - and many I think would logically agree that government policy that would support supply chain coordination could really cut out immense pollution, waste and improve lives globally not just in US. It has to start somewhere but the strategy used can and will make a huge difference in realization of benefit.


Jon Kirkegaard



Let's keep this simple.

Unemployment is at 4.9%.

The overall US trade deficit has been largely stable since 2008.

Coal is noncompetitive to gas which currently is plentiful.

For the first time in at least a decade, there is a small decrease in income inequality. (not so meaningful until one considers if tires made in the US that are more expensive, someone will need to be able to buy them.)

Advancement and innovation in supply chain principles made globalization a reality. So why do we want to return to high tariff and protectionism? Those Cuban cars are pretty special, I suppose.

Jerry Saltzman
Director, Global Supply Chain Processes



I remember a chart of the U.S. trade deficit with China, where the share of the deficit due to Walmart alone was clearly visible (somewhere in the single digit %). Consumers need to understand that the factories have left the U.S. because consumers want to buy T-shirts for $9 and DVD players for $39.

Vice President, Product Marketing




Q: By how much are US per mile truckload rates up since the start of 2005?

A: About 24%, according to the Cass Linehaul Index, or only about 1.8% per year.

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