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March 2, 2017 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Walmart and Amazon by the Numbers 2017 bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic & by the Numbers for the Week bullet Holste's Blog/Distribution Digest
bullet New Cartoon Caption Contest Begins bullet Trivia      bullet Feedback
bullet Supply Chain by Design and Expert Column bullet On Demand Videocasts


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first thought


Supply Chain Graphic of the Week
Building a Supply Chain Sustainability Scorecard


Cost of Manufacturing Regulations is Very High, NAM CEO Says

Wendy's Replacing Employees with Kiosks
Many Years Since the US has Seen 3% Economic Growth
Jersey Warehouse Market Red Hot


February 27, 2017 Contest

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This White Paper Discusses the Downfalls of 2016 and Reports the Main Features That Need to be Addressed in the Upcoming Year

Holste's Blog: Operating a High Performance DC Depends On Smooth, Flat Floors

Weekly On-Target Newsletter:
March 1, 2017 Edition

New Cartoon, LTL Results, Q4, DC Worker Wages, NAM Tour and more

The Most Overlooked and Underestimated Data in Supply Chain Design

by Dr. Michael Watson

Regulatory Compliance in a Changing Environment

by J. Anthony Hardenburgh
VP, Global Trade Content
Amber Road

See the February Retail Vendor Performance Management Bulletin from SCDigest!


What is the current average US hourly wage for warehouse workers?

Answer Found at the
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Walmart and Amazon by the Numbers 2017

I think it is rather safe to say that the two most important retailers in the world today are Walmart and

Walmart earns that place due to its stature as the world's largest merchant (and company) and one that represents an often substantial share of many consumer goods companies' total sales. Amazon obviously earns a spot as the dominant ecommerce company, which is where all the action is right now, sucking most of the oxygen out of the retail room. It continues its phenomenal growth - hardly even slowing down in the face of the law of big numbers - and has been an innovation machine in terms of fulfillment and more (e.g., in the past few months, the fascinating new Go store concept, new supply chain-related patents it seems almost weekly, and more).


By our measure, Walmart had an 11% of US retail sales in 2016, basically flat over the past 5 years, and down from a peak of 12% in 2009.


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So we've been looking at both of these retail giants "by the numbers" in recent years, and it has become one of our most popular columns of the year, forwarded by many SCDigest readers to others in their companies.

But as I will explain in a second, getting your arms around the numbers is often 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 reported its full year earnings, ending its 2017 fiscal year, at the end of January.

While Walmart is an incredible giant, its growth has slowed dramatically in recent years. As can be seen in the chart below, Walmart's US sales (Walmart stores + Sam's Club) 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 soon decelerated, and in 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 or up a percent or so at best. US sales reached $365.2 billion last year, about double the $188 billion the company had in 2002, but the pace of that growth has obviously slowed substantially down. The Cumulative Average Growth Rate (CAGR) has averaged an impressive 5.8% since 2002, but slowed to 2.3% since 2010.

And surprising to me, international growth continues to plateau, despite an awful lot of attention and investment there. Walmart international sales last year were $116.1 billion, down from $123.4 billion in fiscal 2016, though the rising dollar is a factor in that decline. Still, international is clearly not the Walmart growth engine once imagined.

Walmart still doesn't provide much detail on its ecommerce numbers, but it says it saw 36% growth in on-line sales in the US in Q4. However, much/most of that comes as a result of the acquisition of ecommerce site last year. Globably, ecommerce sales were up 15% in Q4, well behind Amazon's growth, as we shall see.

Not all that many years ago, there were concerns (I think legitimately at the time) about Walmart gobbling a giant, monopolistic share of the US retail market. That fear has simply faded. With the recent very modest sales growth, Walmart's share of US retail has flatlined. SCDigest developed a methodology several years ago, where we compare Walmart's US sales versus relevant US retail figures - total retail minus autos and parts, gas station sales, and restaurants/bars. 

It's not quite perfect because Yes Walmart does sell some gasoline, but they don't break it out in a way we can use. Nevertheless, I think what we have is pretty good - and does reflect a higher share of US retail for Walmart than if you do not exclude those categories, which is how it is usually reported. When you hear all these numbers, make sure you understand how they are calculated.

By our measure, Walmart had an 11% of US retail sales in 2016, basically flat over the past 5 years, and down from a peak of 12% in 2009. It simply does not appear any more that Walmart will take over the retail industry. That is an interesting and important change - and that percentage seems unlikely to go much higher to me, absent an acquisition. Would the FTC now let Walmart buy say Kroger or CVS? Hard to say.

Now let's turn to Amazon, a company that provides a lot of numbers to analysts but getting the best 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 2016 revenues were up 27% to $135.9 billion, 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 (books are not included in these merchandise numbers).

That shows Amazon was able to grow merchandise sales an amazing 28.7% in North America last year, down just barely from the growth rate of the year before even as the baseline number continues to rise. International merchandise sales growth jumped back to 31.3%, way up from 2015, as the effects of currency on its international numbers was less significant. Simply amazing.

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 on he Amazon site. Do Amazon's fees for that go into merchandise sales? I think so, but I am trying to confirm. All this is complicated by the fact that sometimes Amazon does the fulfillment for many of these marketplace sellers. Neither of those numbers is broken out.

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 reports its net shipping costs - what it spends versus how much it receives from Amazon customers. Net shipping costs in Q4, for example, were an incredible $2.63 billion, and about $7.1 billion for all of 2016. Let me say that again - that was $7.1 billion loss with a B on shipping. No wonder Amazon struggles to turn a profit. And we remember when companies used to make money on shipping.

The Amazon figures do report shipping costs as a percent of worldwide sales - last year that was about 5%. That's high enough, but SCDigest then compares those net shipping costs just against merchandise sales - eliminating revenues from web services and digital media that have no shipping. Logically, this makes the picture worse, as shown in the graphic below, with net costs hitting a whopping 7.5% of merchandise sales in Q3, before declining to a still hefty 6.2% in Q4. So much for building fulfillment centers closer to customers. 

But it is hard to fully sort this out without a better understanding of how marketplace and fulfillment by Amazon is accounted for. But it's big loss on shipping no matter how you slice it.

I am out of room, even though I have more - such as doing the same sort of adjustment to Amazon's reported fulfillment costs. Will do a part 2 on this as I did last year in a week or two.

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.

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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


Ok, some of this is a bit dated, but there was lots of all the Feedback on Gilmore's First Thoughts column on The Trump Supply Chain? and then Readers Respond  - The Trump Supply Chain we never had room for in the e-magazine, and thought it would be fun this week to publish a few more a month plus into the Trump administration, so
here you go. All great Feedbacks.

Feedback on The Trump Supply Chain


Without knowing what Donald Trump has planned for the global supply chain in the way of Trade Agreements and tariff manipulation, the fact is that the impact of technology on the American blue collar workers and those white collar workers that are impacted by technology has been devastating.

It is widely reported that for every manufacturing job lost to off-shore manufacturing, 7-8 jobs are lost to robotics or other technologies - See Fortune article. This trend will only continue and exacerbate what is incorrectly being attributed to off-shore low cost manufacturing.

The potential negative impact of the Trump administration incorrectly diagnosing the problem can lead to catastrophic trade policy which can have devastating impact on industry and the consumer. The imposition of punitive tariffs can draw unexpected retaliatory measures that can directly lead to lost export sales, higher landed costs and resulting consumer prices, rise in inflation, higher interest rates, reduced disposable income for the middle and lower economic earners, etc. The cascading effect is potentially huge.

Ned Blinick
Chief Product Officer
Blinco System Inc.


You got some great feedback. I've heard Patrick Lemoine's argument from many people. Consumers want low cost goods. So, which came first? Low price desires? Or, did the desire for low cost goods depress employment and wages in the U.S. to the point where that 'desire' became a necessity? Remember, Wal-Mart was founded on 'Buy American'. Like many Americans, I have personally taken an over seventy percent drop in income since 2006. And that's income that was commission and profit margin based. Yes, my former employer continually cut commissions to increase profits. But, as retail prices dropped, and profit margins shrank in what has become a bit of a mature industry, all of the 'old timers' have told the same story. And, as this technology has become more 'plug and play' the sales forces selling it have become order takers.

Sadly, as profit margins shrink, the push for innovation and research also suffers. My Brother-in-law worked for Dell in the early days. One of the big parts of their success was an entire team devoted to product innovation and competitive positioning. But, you know that. You've showcased how Dell does things right on your webcasts.

Shelley Jordan hit the nail on the head about Chinese dumping of products here. Sato has done it with printers. The reverse is true as well. South American scanner and POS equipment prices are lower to distributors there, than on the exact same equipment sold in the U.S. I had international customers who bought from BlueStar's Miami office, and shipped into the U.S. locations because they could buy at lower prices as a South American, or European, 'customer'.

Jerry Salzman's comment that Pfizer thinks people are making more of this than is there, ignores the fact that the drug manufacturers are extremely profitable, and have patent protections which protect those profits. Pfizer, and Lilly, have been customers of mine for thirty years. Both in safety equipment, and barcode equipment. I did a project for Lilly a few years ago where they could easily cut the cost of a custom system from 70K to 25K per workstation. I pointed out the waste, and the fact that the added costs gained them nothing, and the engineers agreed. But, they replied "We don't care. We've got so much profit in this product, it doesn't matter." I'm sure you remember Gibson Greeting Cards. They too, bragged about the profit they had in their cards, which supported multiple levels of redundant management. They're gone.

Manufacturing may have crashed and burned in the U.S., but distribution is still needed. I think the companies that provide hardware, software, and the expertise to automate this portion of the supply chain beyond its current handheld and forklift technology will be the ones that will survive. (I won't go so far as to say thrive just yet.)

When I started in the business, barcode printers sold for over 3,500.00. Now there are printers that do more for 395.00. As with all technology, price drops, and products improve. Automation has, and will continue to replace workers. I currently have two projects totaling 400 - $500,000.00 where the U.S. Manufacturers (and I), may lose out to $200.00 Android smart phone style terminals as one of the possible equipment choices. Even one of our South Korean manufacturers cannot beat that price.

I still say that (at least here in Ohio), the line I told one of the founders of General Data in the early nineties still holds. "There are no new plants being built. The business we're going to get, is going to be business that we take away from someone else." (Fortunately, since then, there's been a bit of new DC activity in places like West Chester, Columbus, and N. Kentucky). I sold safety equipment to the coal mines. Their only way out of coal is to have subsidies which put the industries of high tech manufacturers right in the area. As one of your responders mentioned. Even if measures are taken to 'help' the industry, technology, and the low price of natural gas, make the prospect of many jobs returning very slim.

I think I mentioned my former safety equipment company. Boss Manufacturing. To get around U.S. content requirements. we would have products that were made in our plant in Mexico, packaged, or some minor assembly done here in the U.S., so we met the U.S. auto manufacturers made in the U.S. minimum content requirements to be considered as a supplier. We also had product shipped from China to Mexico, and into the U.S. which also qualified as 'U.S. content' by doing so. In the late seventies, our U.S. production plants were paying union workers 17.00 to 20.00 an hour. All of that production was moved to Juarez, Mexico, where workers were paid 2.00 an hour.

Side story: I sold safety equipment to the Norwood Chevy plant near Cincinnati. As you may have guessed, I was one of those 'How about this?' kind of vendors. I happened to be in our Dayton office one day when an importer of a glove they used called to say a deal had fallen through, and he had to unload container loads that were exactly like one GM used. I had the GM business, and they could have saved 300,000K with this 'special deal'. I called the purchasing manager, and he replied that it would be "too much trouble to create a new part number in the system to reflect the discounted price", on a product they were already buying. They're closed.

And, while I'm rambling, all of my competitors and co workers commiserate about another phenomena we've seen over the years. As companies cut staff, people are less likely to have the time, or the inclination, to try new things. As my boss at Lowry used to say to buyers who were considering a less expensive, or lesser known, 'alternative' when our offering was a more expensive Zebra printer, he would reply, "You know. It's not your money. But, it could be your job." These days, buyers are scared to try new things because they don't want to draw attention to themselves if it fails. Or, they're wearing so many hats, they simply don't have the time. I did projects with Verizon worth millions. One day I got a call from a VP I almost never spoke with. I said "Wow. I feel really privileged. I hardly ever get to talk to you." He replied "Don't get too excited. They've let most of the people under me who were handling this project go, so now you're stuck with me."

Your dedication, and the delight in your webcasts and reports shines through. You get it. You're still the 'kid in the candy store'. You are the Cliff's Notes version of industry education for those people who really do want to be informed. That enthusiasm, and additional knowledge, just might be the thing that moves them from a point of complacency, or being overwhelmed, to one of, Hey! Lets seriously consider something.

Bob McIntyre
National Account Executive
DBK Concepts, Inc.




Thank you for including my feedback in the responses to your great article. I am a she not a he, but that is ok because I am use to being called one of the guys since I play basketball (well I am worn out now) and work with men all the time. [Note from SCDigest - sorry about that!]

In response to latest:

I do believe Trump will have success in supply chain in manufacturing because he never quits, he is intelligent and he is working hard on getting teams together. He really does want to make America great again. Why would Trump risk his life and company to run for president if he did not believe he could accomplish great things. I believe he has been planning things out for years. Since he has Trump towers all over the world (global), he has more global business knowledge than most realize. He may not be a supply chain guru, but I believe he is wise enough to hire one or more to accomplish projects.

Overall, in terms of the manufacturing, yes manufacturing will revive in America but it will start off slowly. The manufacturing that will first revive may be steel and then other types that have very few parts. The more parts (skus) that are required to manufacture a product the more difficult it will be to bring the manufacturing back to America because the parts may come from many different foreign locations and take so much time to create a mass manufacturer for the parts in the USA for a low enough cost.

I believe the most difficult ones are with electronic and computer parts. The bad thing is that the quality we receive these days in electronics and computers is about 30% of what we use to get when it was made here in USA. However, the price with inflation is not 30%, it is at least 50%. So why are we Americans buying this junk?

Just to let YOU know I worked as a subcontractor under KPMG in 2000 as the supply chain strategy expert for Apple Computer when there stock was dropping daily and they didn't know if they were going to survive. So it was a panic attack environment. They changed there minds weekly. They still wanted to create a strategy for 5, 10, 15 and even 20 years. They gave us code names for there future products. The interesting part is there intention was to always manufacture completely in USA with USA parts for high quality. None of us had a clue how quickly manufacturing would leave America. The interesting thing is that I have a MacBook of 2008 that is the last version with no Chinese parts. So it is 8 years old and I have never had a problem with it. Now today, for the same price they last 2-3 years due to the Chinese parts. Now why do we Americans agree to this nonsense? Do we just like to waste money and have unemployment? That equation just doesn't make sense.

Something that does make sense is this:

1. Capitalism is the same thing as competition but you don't have to use the word capitalism, it's just a statement I am making.

People love to compete and don't want to be losers. The inner cities can compete for new business by attracting the business by working together and using their gifts to improve the area to be attractive, be ready to work and be trained to work, have the right attitude, fight crime, educate not just the students but the adults that want to work and more. There are people that are doing this to help already.

2. Businesses can decide if they want to mfg here or not, if so if they want to at reduced cost and get a tax break then they go to inner city where there is also great interstate connections. Also, there will be empty large buildings easy to get ready. Then it takes time and patience for training for each task. So you have upper management and mid mgt, but then the rest can be trained from the inner city which can include security. When you give people a purpose and you pay them and they are making a difference in the economy, their entire attitude shifts. Also, if you use industrial engineering methods, the business will be outstanding. So when this starts and one business or groups of businesses in a city is successful then other cities will say "hey we can clean up better than that and get more business".

It's all about competition.

Something starts that gets people interested and then it grows. That is what happened with cheaper products when the economy was down and people bought the cheaper products and did not even realize at first the products were from China or realize that it mattered. Given this fact, retailers competed with cheaper products over time so the manufacturers here lost business and moved overseas or closed.

So what needs to be done in America is start something new that gets people excited and even makes them want to get involved. So that is what I am talking about with the manufacturing in the inner cities.

So when USA products are made by people that were unemployed and living in poverty, I do believe that will start excitement in our country. More companies will follow the same path and people will want to buy the USA products even if they cost more, especially if Quality is emphasized!!

Additionally, retailers can also collaborate and have hubs in the inner cities to save on inventory, transportation, labor, systems, and back haul costs and more. This could also be a way for retailers to compete with Amazon by having hubs close to residents for overnight shipping. - more competition

This is another way of decreasing unemployment and possibly the retail cost of the product.

Thank you for your time and great work!

God Bless America!

Shelley Jordan
Industrial & Supply Chain Engineer / Consultant and Inventor plus more
Synergy Solutions Group



Q: What is the current average US hourly wage for warehouse workers?

A: $16.08, up about 2.2% over the past year, but up just 6.7% in the last decade, according to the Bureau of Labor Statistics, despite a huge growth in the number of workers.

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