Take a Trip Down Supply Chain Memory Lane for the Year that was in 2016.
The Baltic Dry Index, a measure of the cost to ship bulk goods via ocean carrier and often seen as a sign of global economic strength or weakness, fell to its lowest level of all time, down to a level of just 369. The index was as high as 1,222 in August 2015, and is down 84% from a recent peak of 2,330 in late 2013
US oil prices fall to about $32 per barrel, gas and diesel prices plummet before move back close to $50 starting in April.
Sports apparel retailer Finish Line makes news when it says troubles with new Distributed Order Management and Warehouse Management System causes it to lose $32 million in sales over Holiday period. CEO resigns, chief supply chain officer let go shortly thereafter.
Google jumps into grocery delivery wars with new same-day delivery service for fresh, perishable groceries in an expansion of its Google Express offering. Google has been operating the service for non-fresh food items in many parts of the country, but the food delivery will initially operate just in areas of San Francisco and Los Angeles. Service will pick up orders at retail partners and deliver to homes.
Controversy as HVAC giant Carrier, a division of United Technologies, announces it is moving factory operations from Indianapolis to Monterrey, Mexico, eliminating 1400 jobs when transition is completed in 2020 (but then later largely reverses that decision after Trump election win).
Mercedes says it is scaling back the number of robots it uses on its manufacturing lines because they are not flexible enough to handle the customization in terms of features its consumers can order now.
Report from Bloomberg that Amazon seems to be taking steps to build out an end-to-end global logistics service capability that would compete with major 3PLs and carriers, perhaps not only to move its own freight but those of others. Moves include getting licenses in both US and China to act as a wholesaler for ocean container shipping.
Amazon confirms the lease of 20 Boeing 767 freighter aircraft from Air Transport Services, in a long rumored deal. Air Transport Services operated out of Wilmington, OH Air Park that was previously DHL’s US parcel hub before it shut down its US domestic service, and before that the hub for Airborne Express before it was acquired by DHL. Unclear exactly how they will be used.
Chris Welsh, secretary-general of the European-based Global Shippers Forum, an industry lobby, says at a conference that while the ever larger megaships may be reducing costs for container carriers, they are increasing costs for almost everyone else – ports, terminals, shippers, etc.
Legendary FedEx founder and CEO Fred Smith says in interview that B2C ecommerce shipping rates have to rise. “We can’t build these networks and spend this kind of capital and not get a return on it,” FedEx CFO Alan Graf adds.
Reports that Target is doing a deep dive on its SKU counts, in-store logistics processes and more in an attempt to reduce out-of-stocks and inventory levels. Retailer is testing putting more product on the sales floor rather than the stockroom by redesigning shelves, looking at case pack quantities from vendors, and reducing total SKU counts in many categories.
Meanwhile, Target also says it is largely dumping packaged software for forecasting and replenishment to write its own, more suited to needs of omnichannel commerce. Is the traditional DRP-based model dead, SCDigest asks?
The Federal Reserve makes major revision to its US manufacturing data. Among the changes, growth in US manufacturing output since 2013 now estimated at only about 3%, half the 6% reported previously.
Retail giant Walmart causes quite a stir in its vendor community, after recently releasing new standards for carton marking that have the potential to add huge costs to its suppliers. Requirements ban use of inkjet printing for case code bar coding, meaning suppliers would have to maintain inventories of cartons specific to each SKU, among other changes.
Canadian Pacific Railway says it has scrapped efforts to buy Norfolk Southern, almost six months after it launched its unsolicited $28 billion bid for the fourth-largest US railroad operator. US regulatory barriers were key factor. Turns out CP was also again trying to acquire CSX at the same time.
Final report from the Federal Motor Carrier Administration as expected concludes there simply isn’t enough data to make a call for support of either heavier or longer vehicles on US highways, the same thing it said in a preliminary report last June. Meanwhile, during its convention in Las Vegas, the Truckload Carrier Association (TCA) officially changed its policy stance, and now says it is against both heavier and longer trucks.
News that Target is telling vendors that it will issue a chargeback of as much as 5% of the invoice for shipments that arrive as little as one day late, plus chargebacks of $5,000-$10,000 for suppliers who fail to provide complete and accurate master data for their products.
Amazon releases Q1 numbers, with overall revenues up 28%, to $29.1 billion. In North America, Amazon’s merchandise sales were up an incredible 31.8%, to $13.5 billion, as it simply continues to defy the supposed law of large numbers. Amazon did manage some profits in the quarter for the second period in a row, but at $513 million that represented just 1.7% of total sales. Cash flow generation is stronger.
US Labor Dept. finalizes change that basically double the salary below which workers must be paid overtime for working more than 40 hours per week to $47,476 a year. Impact on supply chain costs not yet clear, with new rule in effect starting Dec. 1.
Game of musical alliance chairs in the container shipping sector continues, as “THE Alliance” is formed, led by Hapag-Lloyd and five other carriers. Follows announcement a few weeks before of the “OCEAN Alliance,” with members CMA CGM, newly merged China Cosco Shipping, Evergreen and OOCL. That leaves three major alliances, these two plus 2M with Maersk and MSC.
Gartner releases annual top 25 supply chains, with Unilever coming out on top, followed by McDonald’s, Amazon, Intel and H&M. Apple and Procter & Gamble remain in sort of “hall of fame” status outside top 25. New this year is a corporate social responsibility factor, with a 10% weighting.
BP releases 65th Statistical Review of World Energy report for 2016. Finds oil, at 32.9%, increased its share of energy consumption in 2015 for the first time since 1999, while coal’s share fell again but remained in second place. Renewables accounted for 2.8% of global electricity generation, up from 0.8% 10 years ago. Almost all energy consumption growth is in developing nations.
CSCMP releases 27th State of Logistics Report under new lead authors from AT Kearney. Headline news is that US logistics costs as percent of GDP fell just a bit to 7.85% in 2015. Bigger news may be that the last 10 years of data was adjusted down by approximately half a percentage point or more each year, meaning the logistics cost burden is lower than previously thought.
US FAA eases some commercial drone rules, but maintains regulations requiring line of site of each drone by a “pilot” and ban on flying over persons not involved in the test, effectively continuing to bar tests of drones for deliveries, though waivers may be available.
Walmart brings reporters into Bentonville DC for demonstration of a drone taking physical inventories on continuous basis, flying the aisles and using an imaging system.
Big news in materials handling sector, as giants Dematic (by Germany’s Kion) and Intelligrated (by Honeywell) are each acquired within a week or each other, as consolidation hits this industry too and ecommerce providing strong growth opportunities.
Expanded Panama Canal finally opens – two years behind schedule – with an 11-hour trip through the locks by a Chinese container ship. Increase in ship size capable of moving through the Canal connecting Atlantic and Pacific oceans from 5000 to 14,000 TEU may have huge impact on global logistics.
News that struggling retail Kmart is adopting strategy of moving all inventory out to store floor and getting rid of “back room” storage to reduce labor costs from double handling and reduce inventory levels.
Seattle startup Flexe raises $14 million from investors to develop its online marketplace that helps companies rent warehouse space when and where they need it – and those with excess space to rent it out.
A team from the Netherlands announced as winner of Amazon’s second “robotic picking challenge,” which requires selecting an oddball series of items from static shelving, as speeds greatly improve from the first such challenge in 2015.
Ride sharing giant Uber jumps into the self-driving truck market with acquisition of OTTO, a leader in the technology for trucks started by former Google executives. Plan seems to be to marry autonomous trucks with apps for booking freight moves over the web.
Walmart announces it will spend $3.3 billion to acquire ecommerce site Jet.com, as it hopes to supercharge its on-line success. Jet was just founded in 2015 by Marc Lore, who had also started Diapers.com and then worked for awhile at Amazon after it acquired Diapers.com. Lore will lead all of Walmart’s ecommerce efforts, as former head Neil Ashe resigns.
The Chinese government releases a six-year plan to reduce domestic logistics costs to make its economy more competitive. Says goal is to reduce logistics costs as a percent of GDP to 16% in 2020, versus 18% currently – more than double US ratio. The government urges cooperation across different regions and between modes of transport, including the cutting of red tape and toll fees, vertical integration of transport and warehousing service providers, and better synergies among seaports, airports, railway lines and expressways.
Sports apparel giant Nike signs a contract with giant private equity firm Apollo Global Management to create a new generation supply chain, including production facilities, in the Americas. Nike says it hopes change from former Asian-based production strategy will get products to customers more quickly, including more rapid support for a planned increase in customized merchandise.
Supply chain software giant JDA is almost acquired by industrial conglomerate Honeywell, but at last minute instead opts for $570 million investment from private equity firm Blackstone and its own current owner New Mountain Capital. The investment will allow JDA to restructure a portion of its some $2 billion in debt that had been weighing on its operations.
US FAA releases new rules for commercial drones that expand usage in some ways but maintains need for line-of-site operations and no flying over people, effectively prohibiting parcel deliveries as envisioned by Amazon and others.
News that Walmart is reducing the “window” for on-time deliveries from vendors from four days to two. The change will go into effect in February, 2017. In addition, the fill rate requirement is being raised from 90% to 95%.
South Korea’s Hanjin Shipping Company files for bankruptcy, amid dismal financial environment for container shipping. Tens of thousands of containers full of goods are stranded, as creditors seized ships and terminal operators refused to handle cargo for Hanjin ships, obviously concerned they won’t be paid for the work. Mess takes many weeks to sort out.
Wall Street Journal breaks story that despite numerous denials, Amazon really is working on plan to develop its own parcel delivery network for itself and others, competing with UPS and FedEx. The plan is code named “Consume the City,” and the story notes that Amazon has also recruited dozens of UPS and FedEx executives and hundreds of other UPS workers over the past few years.
The California Energy Commission approved a $1 million grant to develop a 12-liter natural gas engine for heavy-duty vehicles that produces near-zero nitrogen oxide tailpipe emissions, in partnership with engine maker Cummins.
At a conference, a Macy’s executive says the company plans to have 100% of all items in every store RFID tagged by the end of 2017, and that nearly all of those tags will be applied by vendors.
One of the US’s largest truckload carriers, Schneider National, announces it will go public some time in 2017 after decades of being privately held.
US Court of Appeals rejects lawsuit seeking to overturn the FMCSA’s requirement that all trucking firms install electronic data loggers by Dec. 2017. Move is being fought primarily by the Owner-Operator Independent Drivers Association, which eventually decides it will appeal the ruling to the Supreme Court. If rule is enforced, likely to reduce effective US truckload capacity by eliminating HOS cheating.
Cass Intermodal price index rises modestly year over year after 22 months of price declines in the once high flying sector.
GE’s aircraft engine division announces it has made major advances in 3D printing technology, capping multi-billion investments over several years in internal R&D and new external acquisitions relative to so-called additive manufacturing. The first large scale application will be the company’s clean-sheet design for its Advanced Turboprop (ATP) engine, which will power the all-new Cessna Denali aircraft. Additive parts will cut that engine’s weight by 5%, in what may prove an inflection point in 3D printing.
A federal judge in Texas issues a nationwide injunction against an Obama administration regulation scheduled to take effect on Dec. 1 that would have raise the salary limit below which workers automatically qualified for overtime pay to $47,476 from $23,660. Such a change would likely have big ramifications in the supply chain in manufacturing and distribution. What will happen now with new administration unclear.
Maersk Line announces its next orders for megaships will break for the first time the 20,000 TEU capacity barrier. 11 of the new Triple E’s are scheduled to be delivered to Maersk next April. One principal difference from the 18,340 TEU Triple-E predecessors is that the new ships sit deeper in the water and thus enable an extra tier of containers to be stowed on the deck.
The US division of consumer package giant Unilever announces it has signed a four-year deal with Convoy, an “Uber for trucking” software provider. Convoy will connect Unilever to trucks – mostly smaller carriers – for tens of thousands of shipments a year.
Amazon announces opening of its “Go” store in Seattle, which has no cashiers or traditional point of sale terminals. Store instead uses RFID, sensors and artificial intelligence to track what shoppers buy, in approach that is literally “grab and go,” with customers taking products off the shelf and right into shopping bags or backpacks and then out the door, the purchase quickly confirmed via smart phone app.
News that Congressional Republicans are working on something called a “border adjustment tax” that would tax imports to the US 20%, while reducing income tax on US manufacturing from 35% to 20%. Some say move would help revitalize US manufacturing, but big importers such as retailers lobbying hard against the move.
The US Congress sidelines, perhaps permanently, recent changes hours of service rules that required truck drivers to spend back to back 1 a.m. to 5 a.m. periods off duty before starting a new work week.
The legendary Jay Forrester of MIT passes away at the age of 98. Forrester first explained what is now referred to as the Bullwhip Effect all the way back in the early 1960s, then developed the famous “beer game” to demonstrate how lack of information between trading partners results in supply chain inefficiencies, among other contributions.