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July 20, 2017 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet 1H 2017 in Supply Chain 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 New Cartoon Caption Contest Continues bullet Trivia      bullet Feedback
bullet Expert Columns bullet On Demand Videocasts
  The State of Retail and Vendor Supply Chain Relations 2017

Example Chart from 2015 Report 



Are We Getting More Integrated and Collaborative - 
Or Heading in the Other Direction? Help Needed from 
Retailers and Vendors/Brand Companies.



first thought


Supply Chain Graphic of the Week
What are the Largest Barriers to Supply Chain Improvement?


Is the USPS Giving Big Subsidy to Its Parcel Shipping Side?

BP Says Energy Consumption versus GDP Growth Falling Sharply
Google Glasses Making a Comeback?
States with the Worst Logistics Infrastructure


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 19, 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


What are the famous "Three V’s" of supply chain, as first articulated by Art Mesher, then of Gartner, in the late 1990s?

Answer Found at the
Bottom of the Page

1H 2017 in Supply Chain in Numbers and Charts

It is a big time cliche, but a picture really is worth a 1000 words.

I can say that definitively, because when I put together these reviews of the past year or half year in supply chain, the graphics I use really do tell the story.


Hope you enjoyed this review in numbers and charts. Anything else you would like to see?


Send us your
Feedback here

Last week, I provided a month by month chronology of the top stories for the first six months if 2017, which you will find here: What Happened in Supply Chain in 1H 2017?


This week, I am back with a look at the 1H in what I call numbers and charts. So let's go.


In a bit of repeat from last week, the economic environment that has such a big impact on our supply chain was lukewarm in the 1H, as it has continually been since 2010 - the new normal.

Q1 US GDP growth was finally pegged at a weak 1.4%, with a slow start to the year yet again, repeating a recent pattern
The Q2 numbers when released are expected to be better, but not by much, maybe 2% real growth.

The IMF now forecasts annual US GDP to rise 2.1% in both 2017 and 2018, though the obvious trend in recent years is for the forecasts to be downgraded over time. The US amazingly has not seen 3% full year GDP growth since 2005, a longer stretch than has been seen for decades (I checked back to 1950) and maybe ever.


The IMF also predicts global trade growth of 3.5% for 2017, exactly equal to its forecast for global economic growth. Something has changed - until just a few years ago, global trade was growing much faster than GDP for about two decades.This change is of course playing havoc on container shipping lines, leading to substantial consolidation.


eCommerce rolled on, up 14.7% in Q1, the last data point from the US Commerce Dept., and 14.2% in Q4 2016, as the growth rate stays 14-16% quarter after quarter, much, much faster than brick and mortar retail growth. Amazon changed its reporting again, and I can't find the usual data on its growth in "merchandise" sales, but "retail product" sales were up just 15% globally (not reported just in the US) in Q1, about equal to overall US ecommerce growth. However, revenue (commissions) from Amazon's Marketplace, where others sell  goods on the Amazon platform, was up a very strong 34% in Q1.


US manufacturing, once a bright spot early on in the pseudo-recovery after the Great Recession, gave mixed signals. The US Purchasing Managers Index from ISM was above the 50 mark that separates expansion from contraction in each month of the 1H, with June's 57.8 the highest level since August 2014.

But, puzzlingly, US manufacturing output numbers have been flat for a year, according to the Federal Reserve estimates, with the index numbers as shown in the chart below relative to the baseline year (index = 100) of 2012. As can be seen, there has been almost no increase thus far in 2017, and the scores around 103 mean just 3% growth in US output since 2012 - well less than 1% per year.
 Not good.

After rising sharply in the few months before the start of the year, US oil prices fell slowly but steadily for the rest of the 1H, dropping from $55.98 on Jan. 1 to a low of $41.56 in late June, ending the month at $46.33, for a drop of 17% thus far this year.

But despite that drop, diesel prices were largely flat, averaging $2.58 in January and just a bit lower, at $2.51, in June. By way of comparison, diesel prices averaged around  $4.00 per gallon from 2011-2014.

Those lower fuel costs and a generally weak freight environment made it generally good times for shippers. Data on volumes were mixed, as always seems the case. Through June, the American Trucking Associations' Freight Tonnage Index finds freight is up just 1% versus 2016. But the Cass Freight Index, measuring shipment activity, has been up each month through May, the last data point, saying "that a recovery in freight had begun." Maybe. 

The Cass Linehaul Index, which measures per mile US truckload rates before accessorials, fuel and other charges, did in fact show modest year-over-year growth in the last three months, after an incredible 13 straight months of y-o-y declines before April.

From a long term perspective, at a June level of 123 versus the baseline level of 100 in January 2005, the Cass Linehaul Index is up an average of 1.74% over that period. Meanwhile, the ATA Tonnage Index is up about 2% per year since 2000.  So, it appears average rate increases have been modestly less than freight volume gains over the last 12-17 years.

In rail, through May the Cass Intermodal pricing Index was up year-over-year each month thus far in 2017, making the streak nine months in total, after having fallen an incredible 21 consecutive months before thatIt was still largely good times for ocean shippers and importers. Intermodal volumes broke the 1H record set in 2015, and were up 2.7% versus 2016.

The China Containerized Freight Index was up about 12% from the beginning of the year through the end of June, but at a level of about 850 that is still well below the 1100 or so the index was at through most of 2014, before a big plunge in the second half of 2015 that has left rates lower ever since.


I have more but am out of space. Hope you enjoyed this review in numbers and charts .Anything else you would like to see? Combined with the timeline last week, it's a pretty thorough review of what we seen thus far in 2017.


Anything we missed? What do these trends tell you? 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: What are the famous "Three V’s" of supply chain, as first articulated by Art Mesher, then of Gartner, in the late 1990s?

A: Visibility, Variability and Velocity.

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