Supply Chain by the Numbers

- Feb. 20, 2015 -

  Supply Chain by the Numbers for Week of Feb. 20, 2015

The Need for Two-Speed Supply Chains; Should Deflation be a Worry?; Toll of West Coast Port Turmoil Coninues to Grow; US Manufacturing Trending in Right Direction



That's how many cities there will be in China by 2020 that have at least 250,000 citizens and a largely middle class and affluent population. That would be up from 90 in 2010. That according to well-known consultant George Stalk of the Boston Consulting Group Thursday during a presentation to the CSCMP Toronto roundtable, where SCDigest's Dan Gilmore also presented. By way of contrast, there will only be about 60 cities in North America with populations of 250,000 or more in 2020 - actually down a bit from 2010. This and related developments will require Western companies to operate "two speed" supply chains, one for rapid growth regions in the developing world, and another model for slower growth domestic and developed economies, Stalk said. More on this soon.




That's how much producer prices in the US fell in January, primarily the result of declining oil and other commodity costs, the sharpest decline in 5 years. While most economist think the trend is temporary and likely not a sign of potentially devastating deflation, with continued worries about deflation in Europe and now even China, we'd say it is not a minor concern here either. U.S. inflation has undershot the Federal Reserve’s 2% annual target for nearly three years. Meanwhile, The Labor Department's consumer-price index rose at an annual rate of just 0.8% in December, with the January reading due out Feb. 26. If underlying inflation measures continue to soften, "it does open the door to the possibility that there’s more going on than simply weak energy prices," Bank of America Merrill Lynch economist Michael Hanson said.


Number of US manufacturing facilities that Honda would see stopped or reduce product next week - the result of delays at West Coast ports in the on-going labor saga out there, which is starting to take a real toll on supply chain and the economy. Toyota and Subaru were also among those saying they would modify their operations due to a lack of parts. The North American Meat Institute said its industry is losing $85 million every week while cuts of meat and poultry sit in freezers. Washington's apple crop is the largest in state history, but farmers are needing to literally dump to apples into canyons because they can’t get exports out of the country. You get the idea - what a mess, even without an official strike or lockout.



That was the level of the Federal Reserve's US manufacturing index in January, according to numbers reported last week, meaning US manufacturing output was 2.1% above baseline (index = 100) and peak year production levels in 2007. After falling to a level of just about 80 in mid-2009, the index has seen a slow but steady rise ever since, finally hitting the 100 level last July and staying there through January. This marks the third consecutive month the index has been at 102 or higher. January output was also 5.6% higher than seen in 2014. Is there a coming US manufacturing renaissance? The numbers really don't show it yet, but the trend is clearly in the right direction.