Supply Chain by the Numbers

- Nov. 30, 2018 -

  Supply Chain by the Numbers for Week of November 30, 2018

Tariffs Really Impacting Chinese Manufacturers - and US Retailers; Oil Prices Collapsing; Volvo Trucks Offers Transportation as a Service; US Freight Volumes Stay Strong



That is how much business is down at Chinese company Sunshine Leisure Products, a maker of camping chairs located in the eastern province of Zhejian, largely as a result of the US tariffs, even as the company reduced prices about 7% to compensate for the effective rise in import costs to US buyers. According to an article last week in the Wall Street Journal, major American retailers are getting tough with Chinese suppliers as import tariffs bite, cutting orders, negotiating down prices and demanding faster turnaround. For example, Amazon is said to have cut back purchases and orders for certain of its private-label products that, because of tariffs, it can no longer sell profitably if they are priced as it usually does below competitors. Dollar Tree said in an emailed statement it has negotiated price concessions from vendors, canceled orders and changed its product mix. Target said in an emailed statement it has "many levers" it can pull to remain price-competitive, but didn't elaborate. Will China and the US find a path out of this situation at upcoming talks at the G20 meetings in Argentina? No one seems optimistic, including SCDigest.



Amazingly, that is where the price of West Texas Crude was at the end of the day Thursday, down almost one-third from the recent peak of $76.41 seen less than two months ago on Oct. 3. Back in early October, some pundits were predicting oil was once again headed back to $100 per barrel, a level not seen for many years. They were wrong. That drop is having a positive impact on fuel prices, with gas down below $2.00 per gallon in many areas of the country. Diesel costs have been slower to move, standing at about $3.26 nationally not much different than the early October price, but if oil prices stay low that will change too before lon. Why the plummet oil prices? Not clear. Could be a slowing economy. Could be the continued rise in US oil output. Or maybe it's the Saudi's opening the oil gates a bit to detract attention away from the murdered journalist.



That was the seasonally adjusted month over month increase in the Freight Tonnage Index from the American Trucking Associations in October, contrary to some indications that freight volumes were at last slowing. The ATA index was also up a robust 9.5% versus October 2017, and is up a solid 7.3% on a year to date basis versus the previous year. But there may be an explanation for the strength in shipments. "After slowing at the end of the third quarter, truck freight surged in October," said ATA Chief Economist Bob Costello. "Last month's strength was due, at least in part, to strong import numbers, especially on the West Coast. This is likely a pull ahead of imports as shippers try to take delivery of goods before January 1 when tariffs on a large list of goods China increases from 10% to 25%."



That is how many fully autonomous Volvo FH trucks Norwegian mining company Bronnoy Kalk AS will use to move minerals from the mines to a dockside stone crusher some 3.5 miles away, including travelling through some tunnels. OK, that sounds interesting enough, but here is the real twist: Bronnoy Kalk is not purchasing the trucks. Instead, the deal will involve an arrangement with Volvo Trucks in which Volvo will provide
"transportation as a service." Under the deal, the company will pay Volvo on a per-ton-delivered basis. So, fleet management, operation, maintenance, etc. will be totally handled by Volvo for a fix fee based on freight volumes. Successful tests of the trucks have been carried out, and the transport service will be fully operational by the end of 2019. Bronnoy Kalk in turn says it expects to see significant cost reductions from the arrangement.