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Supply Chain by the Numbers

- May 26, 2022

  Supply Chain by the Numbers for May 26, 2022

CBO Says 2022 Economy to Stay Strong; Apple Planning to move much Sourcing from China; Amazon Now has too much FC Space; Walmart to Greatly Expand Drone Deliveries




That was the rather surprising forecast for US economic growth in 2022 from the Congressional Budget Office (CBO) this week. We say surprising because Q1 GDP decreased by 1.4%, and economic conditions since then hardly feel better now, with record inflation, continued war in Ukraine, and rising interest rates. However, the CBO says inflation has peaked and will cool each month to around 2% by some point in 2024. It also says that growth will be fueled by strong consumer spending and demand for services. It also expects businesses to increase both investment and hiring for the rest of the year. The bullish report appeared to predict that the Federal Reserve will be able to raise interest rates throughout 2022 and 2023 without tipping the US economy into a recession.


4 Million

That is how many consumers will soon be in reach of Walmart drone deliveries, as the company expands its very local efforts currently with tests near its headquarters in Arkansas to six states. Walmart will begin using drone deliveries in parts of Arizona, Arkansas, Florida, Texas, Utah and Virginia. It says that it will be able to deliver more than 1 million packages by drone per year in as little as 30 minutes. It is partnering with operator DroneUp, which is interesting because Walmart had also been doing commercial tests with rival drone maker Zipline. Walmart also said that the service will come with a $3.99 delivery fee and can deliver up to 10 pounds per flight. On-line orders are fulfilled from stores, placed onto the drones and delivered to open spaces via a cable that lowers the package to the ground. Walmart invested in DroneUp in June 2021. The press release from DroneUp does not address approval from the FAA for the expansion, but one assumes that is in place. “We’re finding they [consumers] use it for sheer convenience, like a quick fix for a weeknight meal,” David Guggina, Walmart’s senior vice president of innovation and automation, wrote in a corporate blog post Tuesday.



10 Million

That is how square footage of fulfillment center space Amazon at minimum is going to abandon or sub-lease, as it finds it has excess space after years of adding square footage at a breakneck pace. According to this week, it could be as much as 30 million square feet. The excess capacity reportedly includes fulfillment centers in New York, New Jersey, Southern California, and Atlanta. But putting things in perspective, if the number is 10 million, it represents just about 5% of the square footage that Amazon added during the past two years of frenetic FC expansion. That after as SCDigest reported last week that it also had surplus fulfillment center workers after a similar hiring binge for the past two years. Amazon CEO Andy Jassy now says that the company is "no longer chasing physical or staffing capacity." Part of the issue is a massive slowdown in business, with on-line sales modestly declined in the last two quarters after years of rapid growth. Bloomberg also reports that West Coast carrier Dependable Highway Express recently sub-leased warehouse space from Amazon in the East Bay region of California measuring 300,000 square feet.




That is the estimate of how much of Apple’s iPhone, iPads and other products are currently made in China. But that could change quickly, as Apple has told some of its contract manufacturers that it wants to boost production outside China, citing Beijing’s strict anti-Covid policy and other factors, as reported this week by the Wall Street Journal. Apple is said to be evaluating India and Vietnamas as   potential sourcing locations, as well as other low cost countries. If Apple does make a move out of China, it could influence how other Western companies that have been considering reducing dependence on China for manufacturing or key materials think about the possibility. Apple was looking to diversify away from China before the pandemic spread in early 2020, but those plans were put largely on hold in the face of COVID issues. Those issues just won’t go away in China, with never-ending lockdowns to stamp out any sign of virus outbreaks.

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