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July 24, 2020 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet 1H 2020 Supply Chain in Numbers and Charts
bullet SCDigest On-Target e-Magazine
bullet Supply Chain Graphic & by the Numbers for the Week bullet New Stock Index/Green Supply Chain

Cartoon Caption Contest Winners

bullet Trivia      bullet Feedback
bullet New Expert Column bullet On Demand Videocasts



A new report from ARC Advisory analyst Clint Reiser lays out the
landscape across WMS, WES and Warehouse Control System (WCS)
software, detailing the WES value proposition, and describing
important changes in the WES market.


first thought


Supply Chain Graphic
of the Week
How will Panemic Change Sourcing Strategies?


This Week's Supply Chain

by the Numbers

Sailors Stuck at Sea See a Lifeboat
Women Gaining Spots Atop the Supply Chain Org Chart
Truckload Rates and Volumes Continue to Fall


New Retail Group Hopes to Reinvent Plastic Bags


May 27, 2020 Contest

See Who Took Home the Prize!

It' Back! SCDigest's Weekly

Supply Chain Stock Index



The State of Retailer-Vendor Supply Chain Relationships 2020

Are Things Getting Better and More Collaborative - or Heading in the Other Direction? Third Biannual Study - Please Participate


Weekly On-Target Newsletter:
July 22, 2020 Edition

Cartoon, Top SCDigest Stories of the Week

What to Do about Lack of Gender Diversity in Supply Chain Management

Abel Tamanji

Senior Student at University Of Wisconsin-Whitewater

The Foundations of Successful ASN Programs

Clarity, Detail and Sensibility

What year were the First Hours of Service rules for truck drivers issued?
Answer Found at the
Bottom of the Page

1H 2020 Supply Chain in Numbers and Charts

As I wrote about two weeks ago, there was only one real story in the first half of 2020 in supply chain and certainly beyond, and that of course is the coronavirus, which will have a profound impact on society and business and therefore the supply chain. (See Six Months that Changed the Supply Chain World Forever.)

But despite the dominance of the pandemic over everything, this week we offer our popular look at the first six months of 2020 in numbers and charts.



eCommerce is believed to have shot up much higher in Q2 due the stay at home economy, maybe jumping 20% or more, as the brick and mortar retail sector is in deep trouble.


Send us your
Feedback here

We always start with a check on the US and global economy, as that has such an impact in the end on supply chain practice.

Real US GDP was up 2.3% in 2019, as reported in early 2020. That was down from 2.9% growth in 2018, when the US came within a whisp of reaching 3% growth amazingly for the first time since 2005, before which it happened with regularity.


Nevertheless, the economy felt strong entering the year, with record low unemployment - then the virus came, first in China, then Italy before landing in the US.


That ulimately sent Q1 real GDP down 5%, but that ain't nothin, as they say. The official Q2 numbers aren't out yet, but the Atlanta Federal Reserse Bank's most recent estimate is for a drop of 35%. Yikes.


The International Monetary Fund expects the global economy to drop 4.9% in 2020, the largest decline since the Great Depression in the 1930s. It expects a rebound of 5.4% growth in 2021, but that won't get us back to 2019 levels. The IMF forecasts US GDP will fall 8% for the full year, far worse than in the 2008-09 steep recession, while Euro-zone economies are predicted to fall an even worse 10.7% in 2020.

Consistent with the rapidly falling economy, the US Purchasing Managers Index from the Institute of Supply Management fell to a dismal 41.5 in April, well below the 50 mark that separates US manufacturing expansion from contraction. As seen in the chart be
low, May saw another very lousy level of 43.1, but the PMI saw growth in June at 52.6.


Still the PMI has been below 50 for 8 of the past 12 months.



Another view of US manufacturing strength is the index on output for US factories from the Federal Reserve.


Before March, the index hovered around 104-105. What that means is the US manufacturing was staying between 4-5% above baseline 2012 levels (index = 100) - meaning growth of well less than 1% annually now 8 years later.

The index then dropped to 99 in March before collapsing to 83 and 87 in April and then May, rebounding a bit to 93 in June, though that is still 7% lower than 2012.

Oil prices had an odd six months. They started the year at abount $61 per barrel, falling about 36% to just over $39 for West Texas crude by the end of June, as shown below.



But in the middle, in mid-April, oil prices actually went negative, meaning you had to pay someone to take oil off your hands- about $37 it turned out. It happened due to a short term lack of storage capacity as demand for oil collapsed in the pandemic.


US on the road diesel prices started the year at $3.07, then fell slowly but steadily, bottoming out at $2.38 the week of May 18 and then again the week of June 11, before rising to $2.48 by the end of June.


Freight volumes took a hit overall with the virus crisis, but how much depends on where you get the data. The Freight Tonnage Index from the American Trucking Associations was down a very modest 2.4% for the first six months of the year. But the Cass Shipment Index took a dive in April, down 23% versus 2019. then down 24% in May and an only slightly less ugly 18% in June.


The Cass Linehaul Index, which tracks per mile truckload contracted rates in the US before any fuel surcharge or other accessorial fees, was down 5.9% year-over-year in June, That follows a 5.0% drop in May.


But spot rates tell a different picture. Cass says spot rates are currently tracking up 9.8% year-over-year (including fuel surcharges) in the dry van market, while reefer spot rates are up 4.6%.


It was a tough first half for US railroads. Total US rail traffic for 1H 2020 was down 13.2%, while the once fast growing intermodal component was down 10.6%.


In terms of ocean container carriers, the China Containerized Freight Index had started falling at the end of 2019, starting the year at about 840, which means averaged rates for container shipping out of China were about 16% below those seen in 1998!

The index stayed mostly flat for the rest of the first half, coming in last week at 862.

The World Trade Organization says global trade fell 3% in the first quarter and an estimated 18.5% drop in the second quarter - an unprecedented decline.

The growth of ecommerce sales in the US remains strong. Growth in Q1, the most recent number we have, was 14.8%, according to the Commerce Depart. But it is widely believed to have shot up much higher in Q2 due the stay at home economy, maybe jumping 20% or more, as the brick and mortar retail sector is in deep trouble.

Amazon stock is at about $3000 per share, up about 50% in the past year. Jeff Bezos apparently saw his net worth jump a staggering $13 billion on a single day this week.

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

What is your reaction to the 1H supply chain 2020 in numbers and charts? Let us know your thought at the Feedback section below.


On Demand Videocast:

Understanding Distributed Order Management

Highlights from the New "Little Book of Distributed Order Management"

In this outstanding Videocast, we'll discuss DOM, based on the new Little Book of Distributed Order Management, written by our two Videocast presenters.

Featuring Dan Gilmore, Editor along with Satish Kumar, VP Client Services, Softeon.

Now Available On Demand

On Demand Videocast:

The Grain Drain: Large-Scale Grain Port Terminal Optimization

The Constraints and Challenges of Planning and Implementing Port Operations

This videocast will provide a walkthrough of two ways to formulate a MIP, present an example port, and discuss port operations.

Featuring Dan Gilmore, Editor along with Dr. Evan Shellshear, Head of Analytics, Biarri.

Now Available On Demand

On Demand Videocast:

A Blueprint for WMS Implementation Success

If You Want a Successful WMS Project, You will Find the Blueprint in this Excellent Broadcast

This videocast lays out the keys to ensuring your WMS implementation goes smoothly, involves minimal pain, and accelerates time to value.

Featuring Dan Gilmore, Editor along with Todd Kovi of Radix Consulting and Dinesh Dongre of Softeon.

Now Available On Demand


After our column last week noting we've turned from toilet paper shotages to "where's the beef?", our friend David Schneider of David K. Schneider & Company sent us this nice email explaning how the meat supply chain works. Now you know!

Feedback on the Meat Supply Chain:


For beef (and lamb/sheep), there are two stages of meatpacking - Primal and Final.

Primal Cuts are the large cuts - whole sections of the animal, cut away from the carcass, later packed for processing into final cuts.

Some of the larger packing operations run from kill to final in the same complex - the traditional way that people think of a meatpacking plant. But many of the new massive campus operations, including the JBL and Tyson sites in the news, ship under long term contracts meat packaged for retail or portion control use.

For decades the meat supply chain operated at two levels; packing houses that shipped primal-and sub-primal - packaged into vacuum bags and frozen for shipping to grocery stores - where meat cutters cut and package the final cuts for sale at that location.

Today, a sizable portion of the production from the kill line is still primal to package and shipped to other companies/facilities that do the Final cuts. Most of the consumers of primal and sub-primal are wholesale distributors, local butchers, Costco, and Asian grocery, where there is still local meat cutting.

A large portion of the US grocery market no longer operates local meat rooms in their retail locations. Walmart is one significant example of the retail scene, as is most of the Royal Dalheize group (Stop-n-Shop, Giant), Aldi, Lidl, and other growing chains. Those contracts with retailers are under tight margins, costs supported by the typically much higher foodservice contracts with bigger and steady margins.

The supply chain innovation that Tyson, JBL, and the rest employed was centralization and concentration of labor into these large campuses - close to the production of the animals. Our modern network of refrigerated logistics - temperature controls trucks and warehouses - helps facilitate the consolidation of the final steps of meat cutting from local to the market to local to the source.

Primal cuts flow between companies in the meat industry like cash - and interesting features in the USDA regulations allow for long term freezing of primal cuts that can sell later as fresh meat. There are times where hundreds of millions of pounds of frozen primal cuts sit in 3PL freezer warehouses. I suspect at this moment, hundreds of millions of pounds of frozen primal cuts sit in warehouses, unable to move to the market because there are fewer places that can do the final cut. I suspect the owners of this meat don't want to ship these cuts because to ship now erodes the future profit margin of the packaged and portion-controlled product.

The COVID virus exposes a substantial risk of consolidation and full-integration of production in the supply chain.

David K. Schneider
David K Schneider & Company, LLC    


Q: What year were the First Hours of Service rules for truck drivers issued?

A: 1937

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