sc digest
July 13, 2017 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet What Happened in Supply Chain in 1H 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 Continues bullet Trivia      bullet Feedback
bullet New Expert Column and Supply Chain by Design bullet On Demand Videocasts
  The Retail Vendor Performance Management Bulletin


June 2017 Issue:

• Second SCDigest Retail-Vendor Benchmark Study Coming in July

• Decisions, Assumptions, and Retail Vendor Performance

• Three Retailers Make Gartner's Top 25 Supply Chain List for 2017

• Will We Really See "Ultrafast" Fashion?


TJ Maxx Sourcing Practices Questioned

first thought


Supply Chain Graphic of the Week
A Detailed Look at US Logistics Costs in 2016


Walmart Tightening Screws on Vendors Again

Consolidation Continues in the Container Shipping Sector
UPS Forced to Pay Weekly Retention Bonuses at Hub
Amazon Market Share Continues to Grow


June 26, 2017 Contest

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

Holste's Blog: The Case for Count-Back - Three Step Approach to Getting it Right the First Time

Supply Chain Executive Brief: How Distributed Order Management (DOM)  and WMS Work Together to Power Omnichannel Supply Chains

Satish Kumar from Softeon and Kevin Hume from Tompkins International
Answer Key Questions on DOM and WMS


Weekly On-Target Newsletter:
July 12, 2017 Edition

Cartoon, Augmented Reality in DC? BP on Energy 2017, Supplier Innovation and more

The Two Levers of Inventory Optimization
by Henry Canitz
Product Marketing & Business Development Director

WMS Vendors - the Walking Dead

by Mark Fralick

Four Supply Chain Lessons from the Amazon book The Everything Store

by Dr. Michael Watson


Nancy Nix was just announced as the 2017 CSCMP's Distinguished Service Award winner for 2017. How many other women have received the DSA?

Answer Found at the
Bottom of the Page

What Happened in Supply Chain in 1H 2017?

Wow - what a first half of 2017 in supply chain it was.

I am back as usual every six months with a look at the key trends and news in supply chain, and again it was a very noteworthy half year.

From a big picture perspective, the big theme was the Trump administration, with promises to bring US manufacturing back, pulling back business regulations, and getting tough on trade. Most controversial was a proposal for a "border tax" that would tax imports at perhaps 20% while reducing overall business taxes.


That's my list of the top stories in supply chain so far this year. What did I miss? Let me know.


Send us your
Feedback here

If adopted, this would have a major impact on supply chains, with winners and losers, and likely retaliation from trading partners. No action thus far. Threats of big tariffs or other barriers to Chinese steel imports, but no action so far. Some regulations have in fact been rescinded, and there are indeed hopeful signs for US manufacturing, with much good news, though jobs by the millions are unlikely to return.

As for several previous years, Q1 US GDP was weak, initially estimated at just 0.7% real growth, later revised to a better but still lackluster 1.4%. Expectations for Q2 are in the 2% range, while the IMF now forecasts annual US GDP to rise 2.1% in both 2017 and 2018.

On a global basis, the consensus forecast is for 3.5% GDP growth in 2017, compared with 3.1% in 2016. Europe's economy is bouncing back a bit, with 2017 growth for Eastern Europe forecast at 2.45,%, and 1.7% for Western Europe - weak, but better than recent years. Growth for Asia is forecast at 4.9%.

As for the past several years, ecommerce and efulfillment took center stage, but with some new twists. Brick and mortar store closings have accelerated, with Credit Suisse now projecting more than 8000 closures for the year, and saying that as many as one-in-five shopping malls across the country are expected to close over the next five years. The face of retail is changing before our eyes.

The second change is the battle has now to an extent become focused on Amazon versus Walmart, with each company taking shots against each other in terms of shipping policies (e.g., Amazon Prime at a discount for customers on public assistance), and acquisitions (e.g., Amazon-Whole Foods, Walmart acquiring several dot com retailers such as Bonobos.) It's a death match, and fun to watch.

The overall freight market remained weak, with truckload rates largely down or flat for first half of year but spot rates recently up. Air freight has made some nice recovery, while volumes and rates in rail have been up modestly. Ocean container volumes have been up, in the US as imports continue to rise, and there has been recovery in rates over the past few months and well off the bottom in mid-2016.

The market for distribution center space in the US remains red hot, with vacancies at near record lows and rates soaring, though we may be near a top.

Robots continue to advance at a mind-boggling pace and may soon take over the world.

With that brief 1H overview, here are the top news stories by month thus far in 2017. The full list is far longer than I have room for in this space, but can be found here:


Procter & Gamble announces it will make additional investments in recycling and beneficial reuse that will eliminate all manufacturing waste from its global network of more than 100 production sites by 2020.

Amazon raises eyebrows with announcement of plans for major $1.5 billion air shipping hub at the Cincinnati airport, with more than 200 flight departures and landings per day to be scheduled. Amazon denies it plans to enter parcel in a big way, saying facility is just to meet peak demand requirements. Sure.


In surprising move, Kellogg says it will end its direct store delivery (DSD) model for the supply chain of its snacks business (crackers, etc.), moving to shipments to retailers' distribution centers instead. As a result, Kellogg said it would close 39 distribution centers, which will all shutter by the fourth quarter of 2017.

Maersk says the fourth quarter of 2016 was the first quarter since 2010 where the demand for container shipping outgrew supply growth.

In probably the biggest labor action of the year, workers at Boeing's aircraft factory in South Carolina handily defeat a vote to join the International Association of Machinists and Aerospace Workers (IAM). 74% say no, continuing the unbroken trend of unions losing major votes in Southern states in recent years.


The US DOT has formally notified Congress that a required study on 2013 hours of service regulations pertaining to 34-hour restarts revealed those restrictions provide no safety benefit. This in effect will eliminate the regulations that were adopted under the Obama administration but suspended in late 2014 pending a study.

The American Society of Civic Engineers released in quadrennial study on the state of US infrastructure, and as usual it painted a dismal picture, giving the nation's overall infrastructure a grade of D+. Roads earned a D, bridges C+, ports C+, and perhaps surprisingly a B for rail.

PwC report says that 38% of US jobs could be at high risk of automation by the early 2030. The good news - wages should be up for those that manage to find a job.

Pizza giant Domino's says it is making real pizza deliveries over the roads in Hamburg, Germany using the six-wheeled robots that sort of looks like R2D2 from Star Wars with a storage compartment. The delivery robots are made by Starship Technologies, which has several tests going around the world.

Amazon postpones the opening of its first "Go" convenience store in Seattle, in which consumers literally "grab and go" with items without a stop at a point of sale register, using a combination of smart phone apps and unspecified technologies in the store. Reports are the store system has problems with more than 20 shoppers at once.


The new Ocean Alliance and TheAlliance container shipping consortia begin operations, with shared operating assets among member carriers, joining the Maersk-led 2M agreement to leave three major alliances.

Truckload carriers Knight Transportation and Swift Transportation announced plans to merge in a $6 billion deal. New company to be called Knight-Swift Transportation.

Tesla shocks the truck manufacturing sector when CEO Elon Musk announces in a Tweet that company will unveil its design for an all-electric big rig in September. The vehicle will include autonomous driving technology as well, though details remain vague.

Walmart announces that it will offer discounts on products ordered on-line if they are picked up in-store rather than delivered to the consumer's home. Discounts are as much as 5%.

New CSX CEO Hunter Harrison says the rail carrier has already closed a number of inefficient "hump yards" as part of an effort to drive major operational efficiencies through what Harrison calls "precision railroading."

Walmart, saying it can't battle climate change on its own, announces Project Gigaton, which has goal of reducing a gigaton of CO2 emissions from its extended supply chain by 2030, in part by putting pressure on its suppliers. Citing its own efforts on greenhouse gases, Walmart says "We need our top suppliers to take more action."


A contract Amazon delivery driver is caught twice in two days on home video cameras rather violently hurling parcels onto a driveway and over a fence. The woman is later let go by Amazon.

Amazon holds a meeting of leading consumer packaged goods companies trying to convince them to sell direct via Amazon instead of relying on traditional retailers. "Times are changing," Amazon says in an invitation obtained by Bloomberg.

Gartner announces it top 25 supply chain for 2017, led by Unilever, followed by McDonalds's, Inditex (Zara), Cisco, and H&M. Procter & Gamble and Apple not on list after again being placed in a sort of hall of fame.


President Trump announces the US will not abide by the UN Paris Climate accord, amidst great controversy.

The expanded Panama Canal celebrates its first year of operation and is already having a big impact on global logistics, with volumes and ship sizes up sharply.

Amazon announces its plans to acquire grocer Whole Foods and its 400+ well-placed stores. Speculation is rampant on what the strategy will be, but general consensus Amazon will take big costs out of the grocer's supply chain and use the stores as a platform for ecommerce pick-up and delivery services. Stock prices of traditional grocers fall by almost double digits on the news. Some react to the announcement by calling for Amazon to be broken up.

Ocean carrier Maersk Line, FedEx's European TNT units, and several manufacturing plants hit with cyber-attacks they take down their services for a day or more, as efforts seem focus on disrupting supply chains.

UPS announces a 27-81 cent per package surcharge, depending on service type, for a few weeks of peak season deliveries in the US, in an effort to recoup the higher costs that come with managing the peak surge.

CSCMP releases annual State of Logistics Report, with headline news that 2016 US logistics fell as a percent of GDP for the third year in a row, at 7.5%, down from 7.84% in 2015.

That's my list of the top stories in supply chain so far this year. Again, longer list here. What did I miss? Let me know.

What is your reaction to Gilmore's summary of 1H 2017 in supply chain? Any top stories we missed in our list? Let us know your thoughts at the Feedback button below.

View Web/Printable Version of this Column

On Demand Videocast:

How DOM and WMS Work Together to Power Omnichannel Supply Chains

Experts from Tompkins International and Softeon Set the Record Straight in Fast Paced, Q&A Format

This discussion will be based on an outstanding new "Executive Brief" on this same topic, developed jointly by Kevin Hume of Tompkins International and Satish Kumar, a vice president at Softeon.

Featuring SCDigest editor Dan Gilmore, Kevin Hume of well-known consulting firm Tompkins International and Satish Kumar, a vice president at Softeon.

Available On Demand

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:

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.


Available On Demand


Some more of the many emails we received on SCDigest Editor Dan Gilmore's column on Irrational Shipping Prices and the Demise of Brick and Mortar Retail and Reader Respond - Irrational Shipping Prices and the Demise of Brick and Mortar Retail.


Feedback on Irrational Shipping Prices and the Demise of Brick and Mortar Retail Parts 1 and 2


Another great discussion. Keep up the great work of tabling interesting issues like this! I am surprised that no one has highlighted the cost-to-serve differential.

There is a common upstream sourcing organization that ensures available supply that can serve any downstream demand, so we can consider that cost neutral.

From the consumer's perspective, there are store replenishment costs that will include replenishment, inventory planning, order (and payment) processing, picking, packing & shipping, freight, delivery, store shelf replenishment, cashier, store supplies and maintenance, return, and distressed sales costs, as well as the fixed costs of rental, utilities, insurance, security and so on. These can be performed in an organized and productive way, with use of consolidation techniques that drive marginal costs down. If ecommerce operates out of retail stores, the efulfillment costs come in addition to the store costs above. This cost model is clearly higher than the classic retail go to the store and shop. I guess many retailers adopted it so they could offer ecommerce without disorganizing their bulk-optimized facilities or creating green-field operations with the ensuing fixed costs. I hope theses operations were never intended to be as profitable as the store itself, which is a high fixed cost model.

Where things get complicated is when there is an efulfillment operation that is optimized for piece picks and appropriately automated, with effective delivery route optimization. It seems obvious that this is a more expensive operating model than the pure retail setup as shipment volumes are simply smaller, delivery is less dense, and operations are more difficult to predict and therefore plan. But they are a largely proportional to volume.

So the crux of the cost discussion comes down to break even points between the two operating models. The largest cost element is delivery freight, or the last mile. Hence the discussion about who pays the true cost of delivery.

I think the convenience of piece picking and home delivery has value and that it must be remunerated (it costs you tie and expense to do it yourself), so ecommerce orders should capture a higher price. I remain baffled by the ecommerce business model end game. In the meantime, enjoy the battle at the margins where you can obtain superior value for money - as long as it lasts.

On another but related thought, I read recently that ecommerce deliveries are sucking up all the traffic congestion gains that were obtained through the massive tolls charged to enter downtown London (UK) - average speeds are lower than before the toll was introduced, even though the car traffic has fallen as expected. So there are also hidden costs to the ecommerce model that we have yet to understand.

Nick Seiersen


I sell a fair amount of items on EBAY as a "Top-Rated Seller". While we do enjoy some discounts from FedEx and the USPS, they are nowhere near what a large online retailer would receive. In fact, the recent price increases from all of them (UPS as well) in my opinion, can only be attributed to the growth of Amazon.

If you have to keep upgrading your delivery infrastructure (trucks, DC's, drivers, warehouse workers) and you cannot raise your prices on your biggest customer, you have to fund it somehow. That falls on the back of everyone else. Of course, everybody expects free shipping, so any price increase comes right out of your pocket.

Gary Hemmingstad




The dot-com bubble was heavily fueled by customer acquisition at all costs. Since then, Amazon and others have been acquiring customers at a lesser cost and that investment/cash flow has sustained, enabling them to slowly and steadily habitualize customers to e-commerce shopping. Bolstered by convenience as well, the tactic has worked and slowly web-only players are growing their profits. Help from carriers in the form of discounts also makes the strategy possible.

One day however, when physical retail is damaged enough, the market conditions allow it and the desire for bigger profits is vocal enough, "free shipping" is certain to be reflected in pricing that exhibits the true costs of e-commerce. A good measure of this can be gleaned today: Amazon is quite often not the lowest-priced vendor for many goods, even with shipping factored in, but with their dominant market position they make it work. It's a telling sign for the future, especially the future of "free shipping."

Ken Lonyai




What is important is for today's retailer to compete online — and to market and emphasize to customers that they have click and collect capabilities. Going omnichannel and promoting it vigorously means more customers will pick up in-store, which cuts shipping costs. As online is pressured into increasing order sizes for free shipping, or is forced to charge for shipping, the opportunity for omnichannel retail will grow.|

Omnichannel retailers are just NOT promoting their in-store pickup services enough. There is a big opportunity to both cut costs and to grow sales as in-store pickups result in around 59% more purchases.

Actually charging for what it cost to pick, pack and ship will be a boon for brick-and-mortar, and omnichannel retail is the way thrive.

Charles Dimov
Director of Marketing



Q: Nancy Nix was just announced as the 2017 CSCMP's Distinguished Service Award winner for 2017. How many other women have received the DSA?

A: Just one, Ann Drake of DSC Logistics in 2012.

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