Supply Chain by the Numbers for Week of Sept. 12, 2014

Supply Chain by the Numbers

- September 12, 2014 -

China's Global Resources Play Not Panning Out; The USPS Making Bold Parcel Rate Moves to Gain Market Share; Ford F-150 Truck Replacing Screws, Bolts with Glues; Important Container Productivity Program at Port of LA/Long Beach



$10 Billion
The amount China now has in to develop an iron ore mine Australia that has just started to ship ore back to the country after eight years of development - four times the initial budget for the project. This is interesting, because in recent years there has been concern that China was buying up natural resources across the globe, especially in Africa, to lock in supplies for the future to feed its manufacturing-centric economy. But as with Japanese buying US real estate in the 1980s, conditions are now moving against the China strategy. Most commodity prices have been falling; China's growth is slowing; China appears to have often overpaid for the resources; and China also often acquired second rate assets others were happy to be rid of. The Australia iron ore mine is expected to lose hundreds of million of dollars this year, requiring a huge bailout from its state-owned parent company.

58%

The amount up to which the US Postal Service is now able to reduce its parcel shipping rates for large shippers, after such authority was given to it by federal regulators in August. The USPS is said to be especially targeting the ecommerce sector with the new lower rates - and many shippers are said to be interested . If the USPS can offer significantly lower rates than whatever a shipper is paying now, a change in carrier mix would obviously make it less painful for etailers to offer free or highly discounted shipping to entice buyers to check out with those on-line carts. Of course, UPS and FedEx are not at all happy with the USPS strategy, with UPS saying for example that the USPS plans "to squeeze as much revenue as the commission will allow out of [mailers], who have little or no alternative to using the Postal Service, while making a grab for competitive market share" in the parcel arena.



20
The number of containers that should be able to be delivered per hour under a new program being tested at the ports of LA and Long Beach, up from 8-10 currently. The program from PierPass is called Free-Flow, and allows containers belonging to an owner, a trucking company or logistics provider to be stacked in a separate pile so that a cadre of trucks can make a beeline to a marine terminal using a special lane and pick up the containers in bulk. Today, such containers from one importer are generally stacked in somewhat random fashion, often requiring port cranes to move several other containers before getting to the one needed - the average of such extra container moves is three. This is an important change, as no US ports are near the top of the world's facilities in terms productivity.



300%
The increase in the use of adhesives to connect parts on the 2015 F-150 pick-up versus the previous iteration of the popular truck series, according to the Wall Street Journal this week. This is part of a larger trend towards greater use of adhesives in the auto industry, aerospace and even consumer durable goods sectors. In fact, the market for structural adhesives is now growing about 5% annually, versus 2-3% just a few years ago. The drivers of this switch? In automotive and aerospace, they include lower weight for each connection versus screws and bolts. Adhesives can also connect aluminum to steel, a combination that doesn't lend itself well to welding, while composite materials can have problems with screws. "Bonding with adhesives is the new welding," says a Dow Chemical executive. Dow, 3M, Henkel and HB Fuller are among the companies benefitting from the trend.