Supply Chain by the Numbers

- Feb. 14, 2013

  Supply Chain by the Numbers for Week of Feb. 14, 2013

GE's Immelt Says US Manufacturing is More "Material"; JB Hunt Isn't Much Hunting for Straight Truckload Carriage; Don't Expect Practice of "Slow Steaming" to Slow for Years; Japan Playing Yen Games




The amount of improved material yield that would probably offset any difference in factory labor rates in terms of deciding where to produce, according to GE CEO Jeff Immelt last week at a conference on US manufacturing produced by The Atlantic magazine. The likelihood for higher material yield in the US versus offshore is among the reasons that US manufacturing is relatively more competitive with the rest of the world than at any time during his 30 years at GE, Immelt said. Material costs continue to rise as a percent of GE products versus labor costs, he added, in part because GE favors "advanced" materials that allow greater manufacturing consistency.




Amount that the Japanese yen currency has depreciated against the US dollar since September, even as the dollar itself has fallen against most other major currencies over the same period as a result of the Federal Reserve's aggressive "quantitative easing" (i.e., money printing) program. The move comes as a result of an explicit strategy by the Bank of Japan to reduce the value of the yen in the hopes of stimulating exports and the country's stagnant economy. This and other similar moves by other nations have many worried about a global "currency war," which also happened in the 1930s and is thought to be a key factor in the depth of the Great Depression. But SCDigest asks: How are global procurement managers supposed to factor all that currency dynamic into sourcing decisions? We're not sure ourselves, but we are asking the right people right now.


The expected cost per metric ton for the "bunker fuel" used by ocean container and bulk ships in 2013, up another 2.7% from 2012's average of $672, as fuel cost continue to eat up the ocean carriers' bottom lines. That according to a new report from McQuilling Services, a Garden City, NY-based ocean shipping advisor. Bunker fuel will keep climbing to $760 a ton by 2017, McQuilling forecasts, on top of the 600% climb over the last 10 years. Fuel cost generally represent some 50-70% of total operating costs for a ship (estimates seem to vary). But one sure thing is that shippers can expect a lot more slow steaming for some time – that practice reduces fuel costs by more than 20%, according to Maersk Lines.



The measly percent of profit that traditional truckload carriage represented out of JB Hunt's total profit in Q4, as the once mighty truckload carrier continues to dramatically transform its business. Truckload carriage as a percent of revenue also dropped from 12% in Q4 2011 to just 9% in 2012, as Hunt reduced its TL fleet by some 19% during the quarter. Wow. But the strategy to focus on intermodal and dedicated seems to be paying off, as Hunt's profit of $84 million in the quarter was up another 15%. Intermodal saw revenue growth of 12.7%, and now represents some 73% of total profits. It may be a different business than the iconic founder JB Hunt built, but he would sure like the bottom line results.