Saturday, February 28, 2015


Target's actions raise its position and intentions with internet sales.  Those e-commerce retailers who do not understand the new e-commerce driven by the new supply chain are now deeper in trouble.  It is now about much more than having a website and shipping orders.


Target lowers its free shipping threshold to $25

The move gives Target the lowest free shipping threshold among retailers in the top 25 of Internet Retailer’s Top 500 Guide, except for Nordstrom.
Lead Photo
Target Corp. is cutting its free shipping threshold in half on all orders placed through in an effort to gain a bigger piece of the e-commerce pie.
The retailer, No. 18 in the Internet Retailer 2104 Top 500 Guide in 2014, announced Monday that it has lowered the free shipping threshold for all online orders to $25 from $50.
“We saw an enthusiastic response to our free shipping offer over the holidays,” says Jason Goldberger, president of and Mobile. “Now, whether guests are stocking up or doing fill-in shopping, we’ve enhanced our year-round shipping offer to be one of the best in all of retail.”
The move gives Target the lowest free shipping threshold of any similar retailer in the top 25 in Internet Retailer’s Top 500 Guide, with the exception of Nordstrom Inc. (No. 24), which offers free shipping on all orders regardless of price. Here’s how Target’s free shipping threshold stacks up against some of its competitors, along with their ranking in the Internet Retailer Top 500 Guide:
This marks the second time in the past eight months that Target has changed its shipping policies. In June, it announced that nearly all orders over $50 would ship for free, save for heavy and oversized objects, which would be subject to additional fees. In the past, only certain items in orders over $50 qualified for free shipping. The retailer also offers free in-store pickup of all online orders.
Last month, Target rolled out its Curbside app which allows shoppers to place orders online from a store, pay online and pick up orders without leaving their car. Employees bring the items to shoppers’ vehicles at designated locations within Target parking lots. In its Q3 2014 earnings report, Target reported year-over-year online sales growth of 30% for the quarter, and analysts peg that Q3 growth amount at around $160 million.
The Internet Retailer Top 500 estimates Target’s online sales totaled $2.3 billion in 2013.

Friday, February 27, 2015


Good for raising the topic.  But unfortunately, another story of risk by an insurance company and shows little/no understanding of actual supply chains and the underlying logistics and trade.

The Financial Risk Lurking in Your Supply Chain

When a brittle supply chain snaps, customers don’t get their products, companies lose revenue, brands are sullied, and the company suffers.
As CFOs, we wear a lot of hats. We oversee the treasury, monitor our markets and position our companies for the future. Let me suggest another hat we should be wearing: that of the champion of supply chain resilience.
Jeffrey Burchill, CFO, FM Global
Jeffrey Burchill, CFO, FM Global
This role entails taking a hard look at the vulnerabilities many companies have lurking in their supply chains. Manufacturers retain supply chain partners all over the world to take advantage of affordable labor, key customer clusters, and access to raw materials. This globalization, however, has made the typical company’s supply chain more complex and distributed than ever, leading to potentially greater vulnerabilities.
Careful management of such complexity often yields the best business results. Supply chain executives are lauded for driving out costs, making supply chains “lean,” and achieving just-in-time delivery.
Streamlining a supply chain, however, can be a gamble. The same efficiency that keeps costs down often creates vulnerability. And when a brittle supply chain snaps, customers don’t get their products, companies lose revenue, brands are sullied, and the company suffers.
Further, I worry a lot about the multiplier effect such disruption can cause for the companies my employer insures. A company can be running its own plants close to perfectly but can be severely crippled by the lapses of its suppliers. Although it’s not easy for a CFO to convince his or her company to probe the resilience of key suppliers,  it absolutely needs to be done.
Our  chip manufacturing clients, for example, are happy to have our semiconductor specialists visit their suppliers and assess them against the loss-prevention criteria we’ve developed for semiconductor fabrication facilities. In fact, we spent three days a few years ago looking at one of the world’s top-three chip foundries. We found some safety issues, which the supplier took care of quickly or at least budgeted for. The visit also gave us more information about our clients’ supply chain to help them better understand their risks and plan for contingencies.
The pharmaceutical sector is particularly sensitive to supply chain disruption. Pharmaceutical and medical products must pass numerous quality and safety tests and product trials that often take years. So when a drug finally hits the market, the manufacturer has to quickly recover its research and development costs and can’t afford a business interruption or a loss in revenue.
Moreover, any loss of a key supplier can take up to 18 months to replace because of the complex and heavy businesses and regulatory processes involved. Concerns like these resonate with all our clients in pharma and beyond. If finance chiefs aren’t investigating the vulnerabilities in their supply chain, they’re taking a big gamble.

The Risks Are Wide and Deep

In fact, supply chain vulnerabilities are  quite common. Four out of five of 525 business continuity, supply chain, and other professionals  based in 71 countries who responded to the Business Continuity Institute’s (BCI’s) Supply Chain Resilience 2014 survey  reported that their companies experienced at least one instance of supply chain disruption in the past 12 months.Adverse weather, IT outages, and outsourced-service failure were common sources of disruption.
The risks indeed run deep. For example, sometimes it’s not one’s immediate suppliers that disrupt a supply chain but the suppliers of those suppliers . More than half of the respondents in the BCI study indicated that the disruptions of the past year had come from suppliers below the top tier.
Perhaps more pertinently to finance executives, an Accenture study has shown that supply chain disruptions can reduce shareholder value in affected companies by 7%.
Perhaps unaware of that weight financial risk to their companies, many CFOs completely delegate supply chain risk management to a risk manager or supply chain manager. In my opinion, it’s beneficial for finance folks to drill more deeply into what these managers know about supply chain risks.
Here are some questions to ask them on a quarterly basis:
• What don’t we know about our supply chain that we need to know?
• Are we relying too heavily on single suppliers for important components?
• Are we focused too heavily on cost reduction, making our supply chain brittle?
• What could a closer look at our analytics tell us about these and other hidden risks?
• What exactly are the other risks we might be facing?
• Which particular risks are most insidious?
These questions are answerable no matter how complex or far-flung one’s supply chain.
Another approach to managing risk is a formal supplier impact analysis. Consider appointing or hiring a team to analyze the value of each link in the supply chain in terms of its contribution to business income.
At the same time, it’s a good idea to flip your perspective and look at the people you supply:  your customers. Do you need to diversify so you don’t end up sitting on supply if a major customer experiences a disruption?
Yes, it’s a lot to do. But whether you use these approaches or ones you devise yourself, a long-overdue investigation will help you better uncover, quantify, and manage your supply chain risk. As champion of supply chain resilience, you’ll be safeguarding your company from a crippling disruption and eliminating the kinds of surprises we CFOs dread most: the ones we might have foreseen.


China's Silk Road dream falls into place with US$40b fund

Beijing takes a long-term view on returns from investment as it seeks to boost its clout

PUBLISHED : Tuesday, 17 February, 2015, 12:56am
UPDATED : Tuesday, 17 February, 2015, 9:15am
Beijing has launched its US$40 billion Silk Road infrastructure fund along the lines of a long-term private equity venture to boost businesses in countries and regions along the route, the central bank governor said yesterday.
The announcement serves as a prelude to the publication of a blueprint that sheds light on the country's ambitions to create the New Silk Road economic belt and the 21st-century maritime Silk Road.
People's Bank of China governor Zhou Xiaochuan told China Business News that the fund would be similar to the World Bank's investment arm International Finance Corp and the African Development Bank's mutual development fund.
The funds are financed by a small group of investors rather than raising capital from the public.
People's Bank of China Zhou Xiaochuan says the Silk Road infrastructure fund would be similar to the World Bank's investment arm International Finance Corp. Photo: Bloomberg"These funds … normally take a long view for investment returns," Zhou was quoted by the paper as saying.
This also marks a practical new approach by China to seek better returns on its investments.
Some of its overseas investments, such as those in Venezuela, appeared to have been partly driven by political considerations with analysts openly questioning investments that carried high risks, especially when there was political turbulence in the host countries.
Xie Tao , a professor of political science at Beijing Foreign Studies University, said depoliticising the Silk Road fund was a move to protect investment interest.
"China is more cautious about investment risks and wants to focus more on business principle when investing overseas," Xie said. "The scale of investment for each project covered by the fund may be smaller, but China is apparently beginning to seek better returns on its investments."
The fund's investors included China's foreign-exchange reserves, Export-Import Bank of China, China Development Bank and the country's sovereign wealth fund, the PBOC said.
"The government is taking substantial actions to implement the ambitious plan despite doubts on the big project," said Li Huiyong, the chief economist at Shenyin & Wanguo Securities. "It will be an unprecedented effort to increase China's influence in the region and the world."
In 2013, President Xi Jinping called for a revival of the 2,000-year-old land-based Silk Road and a maritime silk route. The New Silk Road will encompass Central Asia and South Asia and end in Australia, while the sea route will link Chinese ports to the Belgian port of Antwerp.
China will shell out billions of dollars to build roads, railways and airports across Central Asia and South Asia to ensure the two economic cooperation blocs flourish amid soaring trade deals and strengthened political ties.
The fund targets infrastructure construction, exploration of natural resources, industrial co-operation and finance. It is part of preparatory work for the project that may cover 60 per cent of the world's population.


China to Spain cargo train: Successful first 16,156-mile round trip on world's longest railway brings promise of increased trade

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The China to Europe train was unveiled in Yiwu last November
Getty Images

Before the Yixin'ou line was opened, goods traded between the EU and China depended on inefficient sea or air transport, meaning higher prices in Europe

The first train to complete a journey on the world’s longest railway line, connecting Spain and China, has returned home. The 16,156-mile round trip on the new Yixin’ou cargo line through China, Kazakhstan, Belarus, Poland, Germany, France and Spain took four months. The train arrived laden with cheap goods and returned to China with expensive olive oil.
The 82-container cargo train began its journey in November in the eastern Chinese city of Yiwu. Packed full of Christmas trinkets and decorations, stationery and craft products, it arrived in Madrid on 14 December, in time for the thousands of small shops and Christmas markets to stock up on the cheap Chinese goods.
Before the Yixin’ou line was opened, goods traded between Europe and China depended on inefficient sea or air transport, meaning higher prices in Europe.
“The cargo train will boost economic exchange between Yiwu, the world’s largest small commodity market, and Madrid, Europe’s largest small commodity market,” said Li Huihuan, manager of Yiwu CF International Logistics, which operates the train.

The train returned to Yiwu last weekend, carrying olive oil and other Spanish-made goods that are becoming popular in an increasingly affluent China.
The line is 450 miles longer than the previous record holder, the Trans-Siberian Railway, which connects Vladivostok in the east of Russia, to Moscow. State media in Russia greeted the opening of the Yixin’ou by pointing out that containers on the new line must be changed three times during the journey from China to Spain, because tracks in the seven countries are of different gauges.
Nonetheless, the line’s supporters hope that it will boost trade between the EU and China, which already stands at more than €1bn a day. Traders at both ends of the new track point out that the train provides a vastly faster service than seaborne goods and is substantially cheaper than air cargo.
Yiwu, a city of 1.2 million, is a booming example of modern China. The city’s small commodities market is growing at an exponential rate and in 2014 combined imports and exports were valued at $23.7bn, a 28.6 per cent increase on the previous 12 months.
According to the Chinese-state run news agency, Xinhua, 60 per cent of the world’s Christmas trinkets are originally bought and sold in Yiwu’s annual Christmas market. While traders in Madrid’s Plaza Mayor and elsewhere will welcome the opening of the Yixin’ou railway, which should see the prices they pay for nativity scenes and Christmas lights fall, Yiwu is also famous for being the centre of the world’s illegal counterfeiting industry.
Eamonn Fingleton wrote in his book about China’s rapid economic growth that “Yiwu… functions as a sort of ‘Wall Street’ for the counterfeiting industry, providing a vast marketplace where… 100,000 counterfeit products are openly traded and 2,000 metric tonnes of fakes change hands daily”.

Thursday, February 26, 2015


TSA confirms rate increases in March and April

Transpacific carriers cite port congestion and stronger demand as economy improves.

   The 15 container shipping companies that are members of the Transpacific Stabilization Agreement said they are recommending carriers move forward with two previously announced general rate increases of $600 per 40-foot containers (FEUs) on March 9 and April 9.
   The carrier discussion agreement cited both congestion that has developed in recent months at West Coast ports during the negotiations between employers and longshoremen over a new contract, and what it expects will be stronger demand as the economy improves as reasons for raising rates.
   “Overall freight revenues must rise to levels that will address higher long-term rail, truck, equipment management and cargo handling costs, as a ‘new normal’ in shoreside and inland operations grows out of recent congestion difficulties and the new longshore labor agreement,” TSA said.
   “Carriers are mindful that all affected parties face higher operating costs as well as lost revenue and business opportunities amid the current situation,” said Brian Conrad, the president of TSA. “But it is also a reality that we are all not simply returning to business as usual. To the extent the U.S. economy is showing sustained recovery and the dollar is likely to remain strong against Asian currencies for some time, carriers need to step up their game, reverse some of the retrenchment seen since 2011 and complete the service integration necessary to fulfill scale and efficiency objective in the market. The limited improvement in freight rates to date neither addresses costs accrued since last September nor the network investment necessary through 2016 to meet customers’ needs.”
   “We are looking at several months ahead where demand, as we see it, will be increasing. We are going to be digging out of the current situation and trying to invest for the longer term. It is an attempt to bring the rate structure up a bit,” said Niels Erich, a spokesman for the TSA.
   Erich noted that the TSA has reduced the recommended guidelines for bunker surcharges. The bunker surcharge for the first quarter of 2015 for containers moving to the West Coast, for example, was $444 per 40-foot containers and is slated to drop to $336 per FEU for the second quarter. The low sulfur component during the same period is slated to drop from $53 to $49 per FEU.
   Many contracts with TSA carriers run from May 1 to April 30 of each year. In October, TSA said it had published guidelines that recommended carriers seek minimum eastbound rates in contracts of $2,000 per FEU and $1,800 per TEU from Northeast Asia ports to the U.S. West Coast and $3,800 per FEU and $3,150 per TEU to the U.S. East and Gulf Coasts, respectively.
   From Southeast Asia ports to the U.S. West Coast it recommended rate minimums of $2,150 per FEU, $1,935 per TEU to the U.S. West Coast and $3,950 per FEU and $3,285 per TEU to the U.S. East and Gulf Coasts.
   It noted intermodal base rates will vary by destination, but proposed CY rates to Chicago-area ramps of at least $4,100 per FEU from North Asia and $4,250 per FEU from Southeast Asia.
   TSA members include APL, China Shipping, CMA CGM, Cosco, Evergreen, Hanjin, Hapag-Lloyd, Hyundai, “K” Line, Maersk, MSC, NYK, OOCL, Yang Ming, and ZIM.
   TSA only recommends rates to members who negotiate contracts with individual shippers confidentially.


The new e-commerce, driven by the new supply chain, continues to escalate.


Macy's: Can same-day delivery deliver results?

Macy's (M), the largest department store chain, announced plans today to expand its successful test market of same-day delivery, which Web-based rivals such as Amazon (AMZN) and eBay (EBAY) are also providing. Macy's declined to provide any details, and investors were more focused on the mixed earnings report the retailer also announced today, pushing the stock down more than 3 percent.
The Macy's same-day delivery service began in eight major metropolitan areas in September and in four others under its Bloomingdale's brand. However, analysts point out that implementing same-day deliveries won't be cheap. Amazon reportedly has spent billions adding some 50 new warehouses over the past few years.
Indeed, Macy's announced earlier this year that it was planning to move its fulfillment center in West Sacramento, California, to a larger facility. The retailer expects capital expenditures to hit $1.2 billion this year compared with $1.07 billion in 2014.
But like other traditional bricks-and-mortar retailers, Macy's is adapting to a digital age in which people are growing accustomed to getting what they want when they want it. The chain probably has little choice but to face this new reality and take a risk on same-day delivery.
"It might be great when they kick it off, but I don't know if it's going to pay off in the long run since everybody is going to do it," said Paul Swinand, an analyst at Morningstar. He believes the company's shares are now fairly valued. "To me, it's still a business model that's a work in progress."
Shares of the Macy's, which operates 840 stores in 45 states, the District of Columbia, Guam and Puerto Rico under the Macy's and Bloomingdale's name, closed down $2.06, or 3.2 percent lower, to $62.10 on Tuesday in response to a generally disappointing earnings report. The shares have gained more than 15 percent over the past year.
Net income in the quarter ending Jan. 31 fell to $793 million, or $2.26 per share, compared with $811 million, or $2.16, a year earlier. Excluding one-time items, profit would have been $2.44 per share. On that basis, Wall Street was predicting earnings of $2.42. However, quarterly sales fell short of Wall Street's expectations of $9.4 billion, coming in at $9.36 billion, but still an increase of 1.8 percent. Same-store sales, a closely watched retail metric of performance at locations opened at least a year, rose 2.5 percent.
"While we theoretically missed the Wall Street estimates for topline sales, that is an irrelevant number for a retailer like us," wrotes Jim Sluzewski, a spokesman for the Cincinnati-based company, in an email to CBS MoneyWatch. "We believe our numbers are strong."
Macy's, which traditionally has been a Wall Street favorite, also gave disappointing guidance for fiscal 2015 of between $4.70 and $4.80 per share, below analysts' forecasts of $4.83. The company has been cutting costs and earlier this year announced plans to shutter more than a dozen stores and lay off more than 2,000 workers. It closed 22 stores in 2014 and opened five.
"Their apparel -- especially their women's apparel -- has been challenged lately," said Stacie Rabinowitz, an analyst with Consumer Edge Research, adding that many other retailers have the same problem. She thinks the stock is a long-term buy. "Women are buying less clothes. ... Macy's is definitely not a position to accelerate their topline overnight. They have a lot of ideas percolating right now. ... We are going to see some surprising and positive things from them down the line."
One of those things may be same-day delivery, if Macy's strategy works out as planned.


I will be doing two one-day seminars in Los Angeles on May 11 and 12.

May 11 will be a discussion of Global Food Supply Chain Risk.  Much of what has been written about the topic actually excludes the actual supply chain.  Pictures of a ship, for example, are used as used for the supply chain. 
Not dealing with the supply chain, logistics infrastructure, logistics service providers, Incoterms, and other trade activities increases risk.  Also, identifying supply chain risk is about more than data analytics.

Can you risk not know about the real global food supply chain and its risks?

Government agencies, buyers, and sellers should attend. Learn about logistics, how food moves through supply chains, risk areas, and more.

The May 12 seminar will be on Blue Ocean Strategy Using Supply Chain Management.