Supply Chain by the Numbers

- Sept. 13, 2019 -

  Supply Chain by the Numbers for Sept. 13, 2019

US Consumer Spending Still Strong; Trucking Firms Closing Rapidly; Schneider Sees Results from AI App; Shopify Spends Big Money on Mobile Robot Maker, Shadowing Amazon



That was the rise in US consumer consumption in Q2, according to new data from the Commerce Dept. That was the highest rise in four years, as the economy continues to throw off mixed signals. In more good news, core retail sales were up in July at the fastest pace in 15 years. The unemployment rate remains very low at 3.7%. So the US consumer seems strong - the concern is more in spending by business. CEOs are widely saying they are delaying investments pending better news on global trade and the state of the economy. Manufacturing in some areas is also said to be a near recessionary condition, with the US Purchasing Managers Index falling in August below the key 50 mark, indicating manufacturing contraction. And while many surveys of economist show many predicting a coming recession, it seems to us many are now saying by 2021, versus by the end of 2020 they were predicting not long ago.



That was the improvement in its ability to estimate actual delivery times trucking firm Schneider has achieve using artificial intelligence, the company said last week. It's not clear how Schneider measured that improvement, but it was the result of a program the firm calls ETAAi.
Earlier this year, Schneider piloted the program with 4,000 drivers. Now, all company drivers in its truckload van division use it, over 8000 in total.
"When we studied it across the transportation industry, we were surprised by the level of ETA inaccuracy that has become commonplace," Chief Information Officer Shaleen Devgun said in a statement. Deployment to its entire fleet — about 13,700 trucks — should be complete by the end of the year. Schneider expects its new ETA estimates to be available to all customers over the course of the next year. The new ETAs are automatically updated without driver intervention, eliminating the need to stop driving to make updates to arrival times when a trip is impacted by traffic, weather or other unforeseen situations.



That's how many US trucking firms closed in the first half of 2019, according to fresh analysis from Broughton Capital. That means more trucking firms have shut down during the first six months of 2019 than in all of 2018. That's a worrisome trend, as the transport sector is often an indicator of the overall economy's direction. On average, the trucking firms that close in the first half employed about 30 drivers, resulting in 20,075 trucks being pulled off the road. Compare that to 2018, when freight was booming. During the first half of that year, Broughton said 175 companies closed — each averaging about nine drivers — removing just 1,550 trucks from the market. For all of 2018, 310 trucking companies closed. Broughton puts most of the blame on the impact of the US-China trade war, though we note that while the volume of imports from China has been down, they have been way up from other countries such as Vietnam. More directly, the 2019 closings are coming because freight rates have dropped significantly in 2019 after a robust 2018, when many carriers also increased driver pay in the face of the continuing shortage and a war to seat trucks. But with those now higher costs baked in and falling rates, the inevitable result for many was operating losses that led to bankruptcy.


$450 Million

That is ecommerce platform company Shopify is paying to acquire 6 River Systems, a maker of mobile robots for distribution. That even as Shopify estimates that 6 River will have annual revenues of only about $30 million in 2020. In June, Shopify introduced the Shopify Fulfillment Network, a fulfillment network intended to offer timely deliveries, lower shipping costs, and improve customer experience for merchants and their customers. In other words, the goal was to be a sort of mini-Amazon for etailers using its ecommerce front end. The 6 River mobile robots will apparently be an important part of that fulfillment network capabilities. However, Shopify made clear that 6 River would continue to sell and deploy its robots to other companies besides Shopify. That would be much different than back in 2012, when Amazon acquired Kiva Systems for some $770 million dollars. Amazon never fully divulged the strategy behind the rather unusual move of a shipper buying outright a technology vendor. Speculation was that either Amazon wanted to keep the Kiva system away from competitors such as, and/or wanted to lock up all of Kiva's production and deployment capacity for some period of time. Since the acquisition, Amazon has deployed more than 100,000 Kiva robots across its fulfillment network – and not sold the Kiva system to anyone else.

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