Supply Chain by the Numbers

- Dec. 20, 2013

  Supply Chain by the Numbers for Week of Dec. 20, 2013

US Manufacturing Inches Towards Pre-Recession Levels; Ford Learns Its Risk is in the Small Things; A New Route from China to Europe? China Hopes if They Build It Manufacturers Will Come



The index level of US industrial output in November, according to the Federal Reserve, putting it above the baseline level of 2007 for the first time. However, the full number, which was widely reported, includes the output of mining and utilities, the latter of which especially can be highly volatile based on temperatures, and thus does not always represent real growth. The manufacturing only number still has a ways to go to reach the 2007 highs - it came in for the month at 97.2, 2.8% below the baseline. Manufacturing growth is up a modest 2.9% for the year.




The number of suppliers in Ford’s supply chain that represent the highest financial impact from a short supply chain disruption, according to a study from MIT and Dr. David Simchi-Levi. Interestingly, each of those firms in the 2% furnishes Ford with less-expensive components rather than, say, expensive car seats and instrument panels. Why? Because the big ticket items, with a large level of spend with those suppliers, get plenty of attention and risk mitigation strategies. But many inexpensive items that do not result in much spend with a supplier often fall outside the radar screen, even though an inability to source these products (maybe an o-ring) for even a short time could shut down production lines quickly, with a huge impact to the bottom line.



Number of days in which goods can move from China to Europe – using intermodal. A growing number of shippers are taking that path, which offers a nice balance for many between low cost but very slow ocean shipping and fast but very expensive air shipments. The two major routes from China are from central China through Kazakhstan and a more northern route via the Trans-Siberian Railway. Even Japanese and South Korean companies are now starting to ship their goods via ocean or air to the Chinese hubs for final transport toward Europe. Major shippers, including HP, BMW, Audi, Volkswagen and Samsung, already have embraced these China-to-Europe rail routes.



Occupancy rates at some 350 industrial parks in China, according to a recent government study. Yet, despite that state of affairs and growing over capacity in many industrial sectors, local governments keep investing in such projects, as the only path they see to continued growth. "Build it and they will come," seems to be the idea, according to an article this week in the Wall Street Journal. The city of Shiyan, for example, is spending $2 billion to blow up large hills surrounding the city to increase available land for factories by 70%. This expansion strategy may not end well for China, the WSJ says.