Supply Chain by the Numbers

- Oct.15, 2015 -

  Supply Chain by the Numbers for Week of Oct. 15, 2015

Time for Consolidation, Maersk Line CEO Says; Can American Apparel Keep Made in USA Model? Interesting Senate Ploy to Fund Highway Bill; BNSF Almost Done with Ambitious Parallel Track Effort


$500 Million

That's how much Maersk Line CEO Soren Skou says his company spends on IT costs each year, calling in a recent inteview with the Wall Street Journal for consolidation in the struggling container shipping industry so that these sorts of fixed costs can be spread over more containers. "It is big money," Skou said relative to the IT costs. "In consolidation, the cost would be shared. It is the same with operating individual headquarters and the cost of containers. If we drive cost down we will be able to live with low freight rates." Interstingly, Skou said Maersk Line itself, the industry's largest carrier, was not especially interested in any mergers - meaning, it would seem, tha Skou is encouraging his competitors to merge, perhaps to reduce effective competition.




That is about how many factory workers retail chain American Apparel still has in the Southern, CA area, as one of the very few apparel retailers to still operate in Made in USA mode. But that model is in big jeopardy, as the company, which has struggled financially for several years, finally filed for Chapter 11 bankruptcy protection last week. In its filing, American Apparel said it intends to continue to make its goods in the Los Angeles area, but many Wall Street types criticize that strategy as being unworkable. "There is too much emphasis being placed in having things made in America," Lloyd Greif, chief executive of investment banking firm Greif & Co. told the Los Angeles Times. The company needs to move offshore, he said, "If they want to survive." The retailer will also suffer under the planned increase in the LA minimum wage to $15 per hour over several years - more than its sewers generally make today.


Here's an interesting one. The Senate version of a new Highway funding bill includes a plan to generate funds to support it by cutting the dividend the Federal Reserve has been paying to member US  banks since about 1913 from the historic rate of 6% to just 1.5% for institutions with over $1 billion in assets. The dividend payment was created more than a century ago to get banks at the time to buy in to the Federal Reserve system with its 12 regional banks. Private banks bought stock in those regional Feds, and were promise the dividend in return. We're talking big money here - proponents say the change would result in $17 billion in diverted revenues over 10 years to fund infrastructure. Meanwhile, the banks are howling: Bank of America receives about $314 million in dividend payments, Citibank some $252 million. The House would also have to approve the measure.



That's about how much of the planned 2200-mile parallel track from Los Angeles to Chicago that rail carrier BNSF will have completed by the end of the year. That will leave just 7 miles or so to go - though that includes construction of three expensive and time-consuming bridges. With the parallel tracks, BNSF trains will no longer have to pull over onto side rails to allow trains heading in the opposite direction to pass. That in turn will allow faster average speeds, allow trains to pull more rail cars, and improve reliability, the company says. Other rail carriers have similar construction efforts going over shorter distances, all in the name of improving service to steal market share away from trucking.