Supply Chain by the Numbers for Week of June 24, 2015

Supply Chain by the Numbers

- June 24, 2015 -

China Adding Factory Robots at Frantic Pace; On-lIne Razor Sales Eating into Market Share of Brand Leaders; Lack of Boxcars Hurting Some Shippers; Predictions for World GDP Leaders in 2050



90%
That is the percent of current workers at an existing factory run by China's Shenzhen Evenwin Precision Technology Company that will lose their jobs when a new highly automated factory - with 1000 robots - is completed, after breaking ground in May. Chinese manufacturers are adding robots at a frantic pace, and will have more such robots in place than any other country by 2017, according to a robotics industry association, up from third place in 2014. In fact, there is an official Chinese government program called "replacing humans with robots" –which is apparently succeeding. We wonder how such an official initiative would go over in the US or Europe (even if the result may be much the same without the government backing). The current Shenzhen Evenwin factory has about 1800 workers; the new robotic plant will only need 200 to manage operations.

That's the share of the US razor blade market that new on-line companies have grabbed in just a few years, starting to put a hurt on traditional razor brands such as Procter & Gamble's Gillette that are sold through retail outlets. On-line sales have nearly doubled in the 12 months through May to $263 million, according to estimates from Slice Intelligence, a market research firm. This news just reinforces just the power of the ecommerce wave, and how it is roiling markets and supply chains. While Gillette's own sales on-line through partners such as Amazon and Walmart and its own recent “Shave Club” subscription service are growing, they aren't rising as fast as a whole new set of on-line rivals. While Gillette has a 60%+ or so market share in razors sold through retail, it has only a 20% share of the much faster growing on-line market, where it competes with Dollar Shave Club, 800Razors and more.



41%
That, perhaps surprisingly, is the percentage by which boxcars for railway freight movement have declined in North America over the past decade - putting a squeeze on the shippers that rely on that traditional method for moving goods. The decline has come as carriers and shippers continue to transition to intermodal containers that can easily be moved from truck to rail and back. But shippers such as paper, packaging materials, building products, lumber companies and more still rely on the traditional box cars, whose number in North America have fallen to just 125,000 in service. Georgia-Pacific, for example, has had to periodically slow production at some paper mills, and idled one mill for a short time recently when it couldn't obtain boxcars to move its paper. Federal regulations limit boxcars to 50 years in service, and more than 75,000 will reach that age over the next 15 years, while rail carriers seems little interested in investing in these assets.



$105 Trillion
That will be the size of the Chinese economy in nominal GDP terms in 2050, placing it far ahead of number 2 the US by then, which will have GDP of $71 trillion. That according to recent forecast by The Economist magazine's Intelligence Unit (EIU). The EIU actually predicts China will surpass US GDP in 2026 or so. In 2050, the EIU further predicts India will have moved into third place, with a $63 trillion GDP, up from ninth place in 2014. Combined, China, the US and India will have GDP of about $239 trillion in 2050 - versus about $50 trillion for the next 5 countries combined. The analysis does predict the US will maintain a big lead over China and India in per capita income, but China is projected to almost catch Japan in that measure by 2050, and be just under half the U.S. level from 14% in 2014. India's spending power will surge to about 24% of the U.S. consumer spending from just 3% or so currently, the EIU said. A "new world order" is clearly coming, some say.