Supply Chain by the Numbers

- Jan. 4, 2017 -

  Supply Chain by the Numbers for Week of Jan. 4, 2018

US PMI Very Strong in 2017; Construction to Start on New Logistics Hub in Port of Oakland; Nucor Thinks Supply Chain in Building New Steel Plant; Many Unhappy Returns in Retail



That was the monthly average score of the US Purchasing Managers Index (PMI) from the Institute for Supply Management in 2017 – the highest average since 2004. Of course, with the PMI any score over 50 indicates manufacturing expansion, under 50 contraction, meaning the 2017 average level of 57.6 signifies solid growth. Even better, the new orders index in December soared to an incredible 69.4, up markedly from the robust level of 64.0 in November, in a bullish sign for future US manufacturing growth. Interestingly, a common refrain from companies surveyed was difficulty finding highly-skilled labor, and some firms are paying higher wages to attract the workforce needed, ISM manufacturing survey committee chairman Timothy Fiore said on a conference call with reporters this week.

$250 Million

That's how much Nucor is spending on a new steel mill in Sedalia, Missouri to make rebar, the steel rods used in many construction projects. That despite the fact that imports of foreign steel continue to pressure US producers, keeping prices and utilization of some factories low. Why? Nucor want to produce rebar closer to where its customers use it in buildings, bridge piers and highways. "The closer we are to that market, the more successful we could be," CEO John Ferriola said. Meanwhile, startup Big River Steel in Osceola, Ark., recently accelerated production at one of the largest new steel sheet mills built in the US in years, the Wall Street Journal reports this week. The company plans to produce lightweight sheet steel for cars with an electric furnace, challenging established competitors that make steel for cars with coal-fired furnaces, and the plant will be able to produce more products than traditional mills, helping it whether ups and downs in any give product type.


$52 Million

That is the development costs expected for a new transloading and logistics hub right within the grounds of the Port of Oakland, on 360 acres where a US army base one sat. Construction is expected to begin in Q1 2018. The key question is whether shippers will be willing to pay much higher lease rates for this type of space versus similar costs at facilities maybe 20 miles away. The bet is the higher rates at the in-port hub will be worth it in reducing logistics cycle times, and in part paid for by eliminating most drayage costs. Developer CenterPoint Properties has not signaled its plans for rates yet. This move at Oakland appears to be part of a small trend, with for example Prologis breaking ground last year on a multi-level, 590,000 square foot logistics facility just two miles from the Port of Seattle, much closer than most other similar facilities located around the suburb of Kent, WA. In addition, the Port of Los Angeles is moving ahead with similar development on a 117-acre site that once held a coal-export facility.



That's about how much it costs a retailer to process a customer return at a general distribution or dedicate returns center, according to estimates by consulting firm AlixPartners. Naturally, that pushes brick and mortar retailers to push customers to their stores for returns, with Walmart, for example, releasing a program earlier this year called Mobile Express Returns, where customers using kiosks can complete a return for an on-line purchase in less than five minutes and receive a refund within a day or so. Many consumers returning items to stores also make additional purchases. Still, returns volumes are soaring and represent a huge cost, especially to on-line retailers, which generally pay for return shipping. The National Retail Federation estimates that 30% of items bought on-line end up being returned, versus 9% of items bought in stores, though of course those numbers vary by type of merchandise. In fact, Mark Cohen, director of retail studies at Columbia Business School and a former chief executive of Sears Canada, recently told the New York Times that the cost of returns "is principally a reason why many retailers aren't making any money."