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Supply
Chain by the Numbers |
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- April 5, 2018 -
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ISM Reports Input Costs Rising Quickly; Is Amazon Getting USPS Subsidy? US Spot and Contract Truckload Rates Continue Sharp Rise; Former Walmart Executive Says Amazon Needs to be Broken Up |
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78.1 |
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That was the incredibly high level of the March Prices Index from the Institute for Supply Management on Monday, up 4 percentage points versus February, reflecting higher costs for materials, components and supplies. That number was reported as part of the overall Purchasing Managers Index from ISM. That means a very high percentage of companies are seeing supplier prices rise, as an index score of 50 indicates that about an equal number of companies are seeing falling and rising input prices. In fact, March marked the 25th consecutive month of the higher raw materials prices in the US, as inflation appears to be creeping back into the supply chain. And the responses were gathered just before the new US tariffs on steel and aluminum took effect, after which ISM says distributors of those materials almost immediately raised their prices. The good news: the overall index PMI fell a bit in March but came in at a solid 59.3, well over the 50 market that separates manufacturing expansion from contraction.
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That's how much US spot truckload rates are up so far in 2018, according to analysis last week Bloomberg. And it is likely to get worse, as this week the Federal Motor Carrier Safety Administration (FMCSA) began enforcing in earnest this week the new mandate that all drivers use electronic logging devices (ELDs), with threat of shutting down drivers and carriers not in compliance. While there is debate on the impact of ELDs, which will make it nearly impossible to cheat on hours of service (HOS) logs, most estimates are that the rule will reduce effective trucking capacity between 2% and 5%, and with capacity already tight – with some shippers saying they have to send perhaps 15 tenders to get an acceptance in some lanes – that will send spot rates even higher. What's more, contract rates are expected to rise an amazing 12% this year, according to consulting group FTR Transportation Intelligence. That would be the highest increase in more than a decade. Contract prices rose just 3.9% last year.
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50% |
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That is the percent of US online product searches that begin and end on Amazon.com, according to Gerald Storch, a former vice chairman of Target stores, on a CNBC interview this week. We're not sure where Storch got that factoid, but it is a pretty amazing metric if accurate. What's more, also on CNBC, Bill Simon, former Walmart US CEO, said Congress should look into splitting up Amazon."They're not making money in retail, and they're putting retailers out of business," Simon said in an interview. Simon said the ecommerce giant has operated its retail segment at a loss for decades, subsidizing the retail portion of its business with profits from other areas, such as web services."It's anti-competitive, it's predatory, and it's not right," said Simon, adding that "It's destroying jobs, and it's destroying value in the sector." Amazon countered by saying that while the company's activities are primarily retail-based, it does not break out specifics. For that reason, it said that Simon has no real basis to say the company is operating at a retail loss. |
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