Supply Chain by the Numbers

- August 28, 2014 -

  Supply Chain by the Numbers for Week of August 28, 2014

Nat Gas Trucks Face Tougher Climate than Expected; Nestle Making Changes Down on the Farm; Deal Reached on Contentious Healthcare Plan for Dock Workers; Old Dominion Results Astound



Estimate of the number of natural gas powered heavy-duty trucks that will be sold in the US in 2014, up from 8370 sold last year. While that 20% or so growth may seem strong, many were expecting much more rapid growth, with as many as 16,000 sold, according to one research firm. Why are the nat gas trucks taking off more slowly than many - including SCDigest - expected? According to the a Wall Street Journal story this week, the $50,000 premium for nat gas trucks is certainly a huge factor, especially when the return on that investment, in terms of fuel savings, could often be lost based on the way fuel surcharges are handled today. The shipper gets the savings, not the carrier. Continued improvements in mileage for diesel-based trucks is also whittling away at the cost advantage for nat gas. The still limited number of available natural gas filling stations is also a factor, as the "chicken and egg" situation with that issue continues on.



$150 Million

The approximate cost that the Pacific Maritime Association and the West Coast ports it represents would have to pay annually starting in 2018 if no changes are made to the group's healthcare plans for Longshoremen. That's because the current coverage would fall under the "Cadillac" plan designation as defined in Obamacare, subjecting the PMA to high penalties. The healthcare issue promised to be one of the key stumbling blocks to a new contract with the ILWU, as the PMA would want to make changes to keep the plan from Cadillac status, while the union would want extra compensation in wages for bearing more healthcare costs.  But this week, almost two months into the negotiations after  the current contract expired, the two sides said they had reached an accord on healthcare, subject to resolving other contract issues. Most believe this is a good sign that could lead to a complete deal rather quickly.


That is the number of vendors that food giant Nestle has worldwide that supply it with animal-derived products - and who will soon be forced to comply with a series of requirements from Neste relative to care of animals on the farm. That as Nestle signed an accord with World Animal Protection, an advocacy group. Under the pledge, Nestle said it would eliminate products in its supply chain that have been derived from cattle that are dehorned, pigs raised in gestation crates, and chickens housed in barren battery cages, among other commitments. Nestle also vowed to work with its suppliers to use antibiotics that meet World Organization for Animal health standards, while working to phase out the use of growth promoters. Suppliers who are found violating these and other animal welfare standards will be asked to work with Nestle to improve the treatment of their farm animals. Those that are unable or unwilling to show improvement will be dropped as a supplier, the company said. We say 7300 is a lot of farms to audit.



The incredible operating ratio (operating expense divided by operating revenues, and key transport industry metric) turned in by less-than-truckload carrier Old Dominion in Q2, as the firm continues to just blow away the competition at a level that is almost unheard of in any industry. That 82.5% OR is about 9 percentage points lower than next best Conway Freight’s 91.2%, and means Old Dominion takes about $90,000 more to the bottom line for every million dollars in revenue than Conway does. Meanwhile giant YRC Worldwide had an OR of 98.5%. There’s more: Old Dominion grew its revenue 19% in Q2, and said it will fund its $375 million in capital expenditures this year almost entirely from free cash flow. This level of performance in the financially beleaguered LTL industry is hard to fathom.