Supply Chain by the Numbers

- July 9, 2015 -

  Supply Chain by the Numbers for Week of July 9, 2015

Walmart Charging Vendors for Inventory? The Panama Canal is Filling Up; Apparel Companies See Africa as Next Source of Low Costs; China Stock Market Tumbling, Impacts to Follow



That is what Walmart said it plans to start charging vendors off of the invoice for goods moving through its distribution centers, according to reports last week – a sort of handling or carrying cost charge. In fact, Walmart said the new charges were needed in part because many of its vendor SKUs were slow moving, and Walmart had to carry that inventory. And Walmart appears to be asking some suppliers to pay as much as 10% of invoice for goods shipped to new stores and new warehouses. The details are vague, but a letter Walmart is sending out to 10,000 suppliers also says it will take another 1% - making it 2% total - off the invoice for quick payment, even as it plans on extending the meaning of quick payment to a full 90 days. Walmart is trying to juice its bottom line, hit recently by massive spending on eCommerce and recent hefty wage hikes to workers. Will other retailers jump on this carrying cost bandwagon? That is a big dollar question.




That's how many gallons of water per minutes are being pumped right now into the Pacific side locks of the new expanded Panama Canal, after the Atlantic side locks were finally filled in May. Even at the enormous rate, it will still take 90 days to fill those Pacific side chambers. So we are getting close to reality of the new Canal, which will be able to handle ships with capacity of 13,000 TEU, versus just 5000 today. It is expected to have a major impact on global supply chains, though how it will play out in the end is far from clear. The Panama Canal Authority recently said the project was now about 90% done - after a series of delays in recent years – and that it expects operations to open in April of 2016. It will usher in a new era of logistics when that happens.


That's how much the Chinese stock market is down over the past three weeks as we publish this, after having jumped an absurd 150% or so in the past year. Many expect the rout to continue, which could have all kinds of impacts: sell offs in other world markets, steep drops in demand from China after the loss of wealth (especially for those who got in late), dropping oil and commodity prices, as Chinese demand there slows too. This is one to watch for sure. The government seems panicked, and has forbidden large shareholders from selling stocks for six months, encouraged financial firms to load up, suspended new IPOs, and changed rules so people could use their homes as collateral to borrow money to invest in the market. Maybe the leaders there are not so smart as we think, or at least have little understanding of how markets work.



That's about the average wage for an Ethiopian working in an apparel factory, versus a whopping $67 per month in Bangladesh, about three tiimes as much, though of course both numbers are miniscule compared to developed country rates. In China, wages are in the $155 to $300 range. But yes, retailers and apparel brand companies are now looking to move sewing work to Africa to save a few more bucks over Asia. It's really more than just the labor costs - many African countries have free trade agreements with the US, and can grow their own cotton in-country, something most Asian nations cannot. Several clothing giants are beginning to source in Africa, including PVH Corp., Walmart, J.C. Penney, and Levi Strauss. VF expects to start getting some of its pants sewn in Ethiopia this year. "Light manufacturing" can move very quickly on a global scale.