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Supply Chain by the Numbers

- Jan. 23, 2020 -

  Supply Chain by the Numbers for Jan. 23, 2020

XPO Logistics Dramatically Changing Direction; Nestle Investing Big to Get Rid of Plastics; Reducing CO2 in Ocean Shipping to come with Huge Price Tag; Global Economy to be Wobbly in 2020



That is how many simultaneous "auctions processes" giant logistics firm XPO will conduct for various company owned businesses, according to an announcement this week, saying it has hired high powered investment and legal firms to execute the processes. The four units up for review are: XPO's European transportation and supply chain units; its supply chain business in the Americas and the Asia-Pacific regions; and the company's North American transportation unit, excluding its less-than-truckload business (the former Conway Freight). The news is surprising, as XPO had largely built itself through a series of acquisitions through 2016. "We may not sell all four, we may sell none," said XPO CEO Brad Jacobs. He added that "We continue to trade at well below the sum of our parts and at a significant discount to our pure-play peers. That's why we believe the best way to continue to maximize shareholder value is to explore our options."


$1.5 Billion

That is the substantial amount of money that Nestle, the world's largest package food company, said it will invest in recycled plastics that are approved for contact with food. It also will invest another $250 million in startups researching new materials, refill systems and recycling technologies, funding the investment by reducing costs in other areas of the business. As part of its announcement, Nestle said it has set a goal of reducing the 1.67 million metric tons of fossil-fuel-based plastic it used in 2018 by 33%. Currently, just 2% of Nestle's plastic packaging by weight is made from recycled material. All this will be a real challenge, as specialty plastics are needed for packaging that comes in contact with food, and currently there is almost no market for recycled plastics. Other food companies are setting goals similar to Nestle. Unilever, for example, announced last year that it would reduce its use of plastics made from fossil fuels by 50% by 2025, saying much of that drop would come from an absolute reduction in plastic by switching to refillables, smaller containers or not using any packaging at all.


$1 Trillion

That, incredibly, is the estimated level of total additional spending that will be required if the ocean shipping sector is to meet the International Maritime Organization's goal of reducing carbon emissions by 50% from 2008 levels by 2050. That from a new study from University Maritime Advisory Services, a consulting firm affiliated with University College London, and the Getting to Zero Coalition, affiliated with the World Economic Forum. The report says it will take a giant $50 billion in spending per year on average from 2030 to 2050 to hit the target. The study said 87% of the investment will be needed for the production of new fuels and storage facilities for refueling ships at ports. As always, the key question will be who takes the financial hit, but in the end it is shippers and importers will pay. Over the next three decades, "we will see a disruptive and rapid change to align to a new zero-carbon system, with fossil fuel-aligned assets becoming obsolete or needing significant modification," said Tristan Smith of the University College London's Energy Institute, who co-wrote the report.



That is the new modestly downgraded forecast for 2020 global economic growth according to the International Monetary Fund, down from an estimated 3.4% in October. But that would be up from the 2.9% growth the IMF believes was seen in 2019. The IMF expects 3.4% growth in 2021. One of the biggest surprises last year was the collapse in the global volume of trade in goods and services, which went beyond just the US and China to drag down trade activity and investment across much of the world. Global trade growth slowed to just 1% in 2019, down from 3.7% in 2018. In the end, the IMF said warned that the outlook remains sluggish and there are no clear signs of a turning point.

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