Supply Chain by the Numbers

- Aug. 16, 2018 -

  Supply Chain by the Numbers for Week of Aug. 16, 2018

 Supplier Parts Deliveries in theg Slow Lane; China Investing Big Time in Foreign Ports; US Retail Sales Looking Rosy; East and Gulf Coast Ports Agree on New Contract, which Bars Automation



That is how many consecutive months that the little cited Supplier Deliveries index from the Institute for Supply Management (ISM) – reported along with the much more well-known monthly Purchasing Manager's Index – has indicated delivery times are increasing. In fact, a shortage of parts and components needed to make finished products is reaching something of a crisis state in the face of robust demand. Those shortages are hurting the bottom lines of a growing array of US manufacturers, the Wall Street Journal reported last Saturday and threaten the broader economy. An example cited by the Journal of the impact that the supplier delays are having on the bottom lines of manufacturers is Terex Corp, a maker of construction equipment. The company recently said its mobile-crane-making unit incurred a loss in the second quarter as parts shortages hurt output and costs at its plants. "The reality of it is that elements of our supply base could not keep up," CEO John Garrison said on its Q2 earnings call. Some manufactures are responding by bulking up on parts inventories.



That is now the forecast on the growth for US retail sales - excluding automobiles, gasoline stations and restaurants - that will be seen in full year 2018. That according to a revised estimate from the National Retail Federation this week. That's compared with a prior forecast range of 3.8 to 4.4%. Retail sales for the first half of 2018 were up a strong 4.8% from a year earlier, NRF said. As if on queue, Home Depot announced very strong Q2 numbers this week, with profits up 31%, as raised its forecast for 2018 same store sales growth to 5.3% from 5.0% previously. "We knew this would be a good year, but it's turning out to be even better than expected," said NRF president and CEO Matthew Shay Still, the NRF warned there is uncertainty around how a trade war with China could impact retail spending, and also concerns about rising inflation. But for now, good times for retailers - even of the brick and mortar type - roll on.



That's how many ports across 34 countries in which the Chinese government or state-owned companies have made investments - often in the billions of dollars - under China's Belt and Road initiative, according to China's Ministry of Transport. The Belt and Road initiative was launched in 2013 to boost China's trade with some 70 countries in Asia, Europe and Africa through massive investments in railroads, ports and power plants. It consists of a land-based Silk Road Economic Belt running from China's western parts towards Europe and the Middle East, and the 21st Maritime Silk Road that links China's coastal parts to the South Pacific and Australia and to Europe and Africa through the South China Sea and the Indian Oecean - and most recently the Arctic. A large part of the overseas port investments has been carried out by state-owned companies, especially China Ocean Shipping Company (COSCO), a major ocean container carrier. While all this may greatly strengthen China's global influence, others say China is overextending itself and may actually hurt its economy in the end.



That is how many years East and Gulf Coast ports will be unable to pursue highly automated operations, according to a new tentative agreement between the International Longshoremen's Association and the United States Maritime Alliance, which represents ports and terminals. The good news for shippers is the proposed deal will help ensure labor peace on the docks through 2024, versus potential disruptions that might have occurred when the contract expired on September 30.. The bad news is the prohibition on full automation means the terminals may still lack high levels of productivity, which at US ports is well below leading terminals internationally.  Those productivity issues also make many US ports - among them the Port of New York and New Jersey - high cost in terms of moving boxes. The contract would also give terminals greater flexibility in managing union workers by allowing a reduced mandatory work period, needed in situations in which a vessel fails to arrive on schedule. The contract also gives union members a $1 an hour base pay increase in four years out of six, increases by $104 million the worker share of container royalties generated, and sets aside money for a defined contribution retirement plan.