Monday, November 30, 2015

HONG KONG RETAIL SALES SLIP

Retail sales volume slips

Tuesday, December 01, 2015

Total retail sales volume in Hong Hong slipped 3percent in October from a year earlier, data from the Census and Statistics Department showed yesterday down for eight months in row.
Monthly retail sales amounted to HK$37.2 billion, down 6.4 percent from September, which was the steepest drop this year. From January to October, retail sales fell 2.7 percent from a year back.
A government spokesman said sales somewhat improved in October, helped mainly by the growth in the sales of certain consumer durable goods amid the launch of new smartphone models. In October, the sales of jewelry, watches and clocks, and valuable gifts slumped 17 percent, followed by a 13.7 percent drop in fuel from a year earlier.

Meanwhile, the biggest mall on Hong Kong Island, Cityplaza, operated under Swire Properties (1972), says Christmas sales will be better this year than last rear.General manager Kieran Bowers is optimistic.
There is 5.7 percent growth in the customers coming to the mall for the first 10 months this year, compared to a year back. Bowers said the Tai Koo Shing mall targets mid-market and 97 percent of shoppers are locals, it is therefore less concerned with the tourist slowdown from China.
A 6.7 percent sales growth was recorded for the mall in the third quarter, at a rate slower than the first half of the year at almost 11 percent.
Local retailer Dickson Concepts (International) (0113) continued to be hit by the weakened consumption in the SAR, posting an interim net loss of HK$76.2 million
During the fiscal half year, excluding a non-cash impairment loss of HK$23.1 million, the loss was HK$53.1 million. The loss was narrowed from HK$133 billion from a year earlier. Its revenue also fell 11.21 percent to HK$1.81 billion. The firm mainly operates retail outlets in Hong Kong, accounting for 65 percent of earnings with 41 stores.
The group kept the same dividend policy from a year back. No dividend was declared. Loss per share was 19.7 HK cents.
Same store sales dipped 10.5 percent although overall gross profit margin improved by 2.9 percent by a change of sales mix and tight control of promotional activities. ESTHER YU and KATE LIN

SUPPLY CHAIN RISK--MODEL AND METHODOLOGY TO IDENTIFY AND ASSESS TO MITIGATE

Supply chain risk gets global attention. The World Bank and World Economic Forum comprehend the issue and its importance.
The term covers broad issues and narrow topics. Insurance companies talk about supply chain risk in terms of assets. Others talk about sources for particular products. Some take a near-apocalyptic view. These diverse interpretations make identify risks more challenging.
Surprisingly, many supply chain risk discussions exclude the actual supply chain. They do not recognize logistics infrastructure, logistics service providers, and how products move through supply chains. Many times, a picture, such as a ship, is used to show the "supply chain". As a result, they overlook risks.

These also do not present the information supply chain and how it affects movement of goods. Nor are Incoterms mentioned and what they mean to buyers versus sellers controlling the passage of goods. Yet, such details can cause risk.
Supply Chains. Three key components of supply chains are -

Product / material / commodity / component sources
Logistics infrastructure
Logistics service providers

Supply chains originate at their sources; those are often factories. For commodities, such as food, there are multiple sources, the actual farms and the locations where the food is processed, chilled, frozen, or however treated. In those cases, both places should be included in the supply chain scope. Also, the review should continue through to destination delivery.

Causes. There are many kinds of risk-- organizational, operations, strategic, and commercial. Causes can be pervasive. These disrupt the availability of products or their flows. They vary by products and industries and include -

Weather
Geopolitical
Terrorism
Natural disasters
Inadequate logistics infrastructure
Logistics service providers bankruptcies, mergers, or other actions that impact the supply of and ability to provided needed services
Infrastructure breakdowns
Suppliers
Markets
Prices
Company management
Logistic service providers that do not operate and perform as needed
Improper or unmanaged outsourcing
Regulatory
Bottlenecks / Congestion
Strikes
Combinations of the above

Risk is also caused by the trade parties. Buyers and sellers in their pursuit of best prices or their lack of understanding supply chains create risk.
Model. The supply chain risk model blends principals of supply chain management.

The model reflects--
1) Security. Supply chains should be protected from loss, deterioration, contamination, theft, and other vulnerability issues.
2) Accountability. This goes beyond sales agreements and Incoterms. It is the responsibility for the safe flow through the supply chain and encompasses many stakeholders.
3) Visibility. Knowing where items are throughout the entire movement is critical. Technology plays a vital role to facilitate traceability, trackability, and chain of custody. It is also important if there is a recall or safety issue, and the cause must be traced back.
4) Product / Logistics Specifics. Products may require special handling for logistics infrastructure and service providers. The necessary temperature, humidity, cleanliness/sanitation, weight, heavy lift and other factors must be properly utilized.
5) Sourcing This is more than buying or many suppliers in a region. It includes multiple sources and risk diversification.
6) Supply Chain Best Practices. Supply chains involve more than managing freight and logistics components. Best practices manage flows for protection, including integrated process, supplier performance, segmentation, and time compression.
6) 7) Chain of Custody. This is one that is often overlooked. There are many parties involved in an international order and shipment. How the product moves with and through all these players is challenging. It is especially important for products such as pharmaceuticals and for food stuffs, ingredients, and food-grade items.
Methodology. Risk detection has three steps—analysis, validation and assessment. Deliverables are mapping, macro and granular determinations, and priorities. This approach combines data analytics, supply chain expertise, and confirmation. It elevates results from conceptual to actionable.

Step 1) Analysis
Analysis has two parts--
A) Data analytics. Internal data is not enough. With the geographical scope, complexity, and stakeholders of supply chains, data from multiple sources and in different formats is needed. No other part of a company has as many stakeholders, both internal and external as the supply chain.
Analytics should investigate supply chains and risks by -

product / commodity
supplier
country
logistics infrastructure
logistics service provider

B) Logistics / supply chain domain expertise. Real-world supply chain, logistics, and international trade experience are required to complement analytics.
The examinations should aggregate and segregate across trade lanes and products. Doing these provide important insights into exposure scope.
Step 2) Validation
Analytics presents macro views that can have gaps. It does not provide needed granular information. Validating actual supply chains-- sources, logistics infrastructure, and logistics providers-- is needed. This provides acumen that analytics alone does not.
The best way to attest to key supply chains and possible disruption issues is to verify them. This involves walking through select purchase orders as to the actual locations and steps of each order. Inspect origin facilities. Verify how well orders transit the product and information supply chains. Evaluate how the logistics infrastructure meets requirements. Confirm how logistics service providers perform. Determine if there are hidden issues. These are beyond business intelligence questions and require on-site reviews.

Step 3) Assessment
With analysis and validation, potential risks are recognized. More must be done as to the various risks. It should be determined what each one means. This is what assessment does.
Assessments alone can be too subjective. Thanks to the two prior two steps, both quantitative and qualitative information is available to appraise vulnerabilities.
Each risk is evaluated as to probability of occurrence and impact. A Risk Index is developed with axes of impact and likelihood. The impact of a disruption is the financial effect and the time to recover. Likelihood reflects the probability of an event happening.

Plot each risk on the index. This prioritizes and focuses on high impact and high probability risks for mitigation.
What Next. Hazards have been analyzed, including inherent ones, along with interdependencies of components, critical paths along supply chains, and more. Practicable items are found, and there is now a solid foundation for mitigation. Root causes should be determined. This may necessitate going deeper into certain supply chains for threat reduction.
The risk project is not a one-time effort and should be done every two or three years.

RETAILERS LOSE $1.75 TRILLION

These are retailers refusing to change to New SupplyChain for omnichannel. Forcing same old Supply Chain Management in new retailing!

Retailers are losing $1.75 trillion over this

Krystina Gustafson | @KrystinaGustafs

6 Hours AgoCNBC.com

COMMENTSJoin the Discussion

Shipping costs aren't the only thing weighing retailers' digital profits this holiday season.
As operations become more complex for companies doing business both online and in store, out-of-stocks, overstocks and returns are costing retailers $1.75 trillion a year — a number that's only moving higher.
What's more, as retailers struggle to get a read on how much merchandise they have and where it's located, many are falling short on their promise to make it easy for shoppers to pick up their online orders in store. As a result, these businesses are likely to miss out on future sales from consumers whom they've disappointed in the past.
"This is the time of year when it really becomes acute," said John Squire, CEO of retail analytics firm DynamicAction .

Digital Vision | Getty Images

According to a study commissioned by his company and conducted by IHL Group, "out-of-stocks" accounted for $634.1 billion in lost retail sales for the year ended in the spring — 39 percent higher than in 2012. Likewise, overstocks contributed $471.9 billion in lost revenues, up 30 percent from three years prior. When a retailer has too much merchandise, it cuts into its margins.
The slide in performance comes as retailers are struggling to utilize the mounds of customer data they've acquired over the past few years and accurately forecast demand. Further complicating things is that as consumers buy more online, it's getting even harder for retailers to keep tabs on their inventories.

Overstocks, in particular, are expected to be a big issue this holiday season, as a delay in cold temperatures has left retailers with too many jackets and boots. The industry has already warned that this will lead to severe markdowns toward the end of the season, eating away at their profits.
"You can only imagine what retailers have ahead of them as they try to manage this overstock problem that they have," Squire said.
While margins are expected to contract even further as the season progresses, they're already taking a hit. According to separate analysis by DynamicAction, retailers ahead of Black Friday were already selling about 21 percent fewer items at full price than they did at the same point in 2014.

On the flip side, a separate study by the GT Nexus, a supply chain platform, found that 75 percent of U.S. adults have come across an unavailable product in stores over the past year, with 63 percent encountering that issue online. As a result, the majority of these frustrated shoppers decided to shop at another retailer or buy nothing at all.
This shortage intensifies over the holiday season. Data from Adobe's Digital Index found that 35 percent of online sales volume went toward retailers' Thanksgiving Day doorbusters, leading to "a lot more out of stocks" on Black Friday than the firm expected.
Items that were either out of stock or running low included Hasbro's Pie Face game and the 7-inch 8-gigabyte Amazon Fire, Adobe said.
Scot Wingo, executive chairman and founder of ChannelAdvisor, said retailers are particularly concerned about having deep enough inventories on peak shopping days, so that they don't disappoint consumers who woke up early for deals.
"That's what retailers are spending a lot more time on," he said.

12 gift ideas for a healthy New Year

Source: Lululemon

They're also spending time working out the kinks in their "buy online, pickup in store" capabilities. According to a recent study by JDA Software Group, nearly 40 percent of consumers who have elected to use this service have encountered issues with the store's employees along the way. The most commonly stated problem was that workers took a long time, or were unable, to find an order in the store or system.
Along with these issues, returns are also placing a bigger strain on retailers. Because many online purchases are made without a shopper seeing the product in person — meaning they aren't totally certain of its color or fit — returns are already 9.3 percent higher this holiday season compared with last year, according to DynamicAction.
Exacerbating the issue is the fact that many online shoppers, who are unsure of their size, will place multiple orders and return what doesn't fit. And retailers, who are trying to capture a larger share of online sales, are making it easier — and cheaper — for shoppers to return these items. Returns accounted for $642.6 billion in lost sales for the year ended in the spring.
"We're seeing higher returns and more profitable product coming back in those returns," Squire said.

SUPPLY CHAINS AFTER CONTAINER LINE CHAOS

Will the survivors of container line financial collapse step up and reestablish reliable service so BCOs can manage their Supply Chains?

Sunday, November 29, 2015

CATHAY PACIFIC TO PAY C$6MIL TO CANADA FOR CARGO PRICE FIXING

Cathay in C$6m settlement

Monday, November 30, 2015

Cathay Pacific Airways (0293) yesterday said it would pay C$6 million (HK$34.77 million) to settle an antitrust class-action case in Canada involving its cargo operations.
The settlement agreement is pending approval by the Canadian courts, the Hong Kong-based carrier said in a filing to the local exchange."Cathay Pacific does not admit any unlawful conduct, wrongdoing or liability in the settlement agreement," it said.The company added that it had made sufficient provisions in its accounts before 2015, therefore the settlement will not have any material effect on its future results.Apart from being subjected to antitrust charges in several countries in recent years, the carrier also suffered from a HK$3.74 billion loss from oil hedging in the first half, rising from a HK$1.02 billion loss for the same period last year.

Any drop in the oil price will trim the company's profits, as it does not plan to adjust the proportion of the fuel that it is hedging, said chief executive Ivan Chu in the half-year results press conference.Cathay Pacific saw net profit for the first half surge 468.3 percent to HK$1.97 billion from a year earlier, mainly due to improved contributions from its subsidiary and associated companies. Revenue dropped 0.9 percent to HK$50.39 billion.DAISY WU

RETAIL CEOs, OMNICHANNEL

It seems like many retailer CEOs do not understand omnichannel. Why?

2016 OUTLOOK

Home > News > 2016 outlook

2016 outlook

By Walter Kemmsies |Wednesday, November 25, 2015

As the year draws to a close it is time to look forward to the new one. At this point, the trends in place indicate that 2016 will be much like 2015, punctuated by low economic growth and low inflation. Therefore, trade growth is also likely to continue slowing. For the freight movement industry, this indicates that for most segments, competition will remain intense and it will be difficult to raise prices and therefore grow profits. However, some possible events could improve the outlook.
The fundamental reason for slow economic growth is that improving consumer spending is offset by weak business and public sector investment.
In Europe, the United States and China, the growth rate of retail sales has been increasing over the last six months. Growing consumer spending has induced companies to hire more employees, which in turn results in more consumer spending. This virtuous cycle has been boosted by central banks in all three economies either lowering interest rates or keeping them at historically low levels, as well as the decline in energy costs.
Over the same period, industrial production growth has slowed to less than 1 percent in the United States and declined significantly in China. Europe has had steady, but low industrial production growth. The global slowdown in industrial production is driven by the mining and energy industries. These industries have been incurring losses as commodity prices have fallen below the cost of production in many locations. Investment in plants, property and equipment in the United States contracted 4 percent in the third quarter, led by a 46 percent decline in investment by the mining and oil industries.
The pain that the mining and energy industries are going through traces back to high growth rates in production capacity investment in anticipation of sustained high demand growth from China. Over the last 15 years, China has become the world’s largest consumer of many commodities such as oil, coal, metals and agricultural products. Since 2011, the pace of investment spending in China has declined and, therefore, growth in demand for raw materials has slowed.
As if slower demand growth from China wasn’t enough, the U.S. dollar has been strengthening against most currencies over the last 12 months, gaining on average 20 percent. The significant negative correlation between the commodity price indexes and trade-weighted U.S. dollar exchange rate indexes was illustrated and discussed in the September edition of this column (“Consequences of a stronger dollar,” page 16).
As commodity prices, denominated in U.S. dollars, decline, U.S. exports become less competitive with that of other countries because they benefit from their currencies losing value. For example, if the price of a commodity denominated in U.S. dollars falls 10 percent, the U.S. exporter’s revenues will fall by 10 percent. If the Brazilian real depreciates by more than 10 percent against the U.S. dollar then a Brazilian exporter’s revenues in reals will increase. Under those circumstances, the Brazilian exporter can undercut prices offered by U.S. exporters.
U.S. exports are struggling because the dollar is cyclically strong. However, the U.S. dollar is structurally weak due to various long-term demographic and economic trends. It is hard to see how the U.S. dollar will appreciate another 20 percent. It is reasonable to expect the U.S. dollar to begin losing value against other currencies over the next few years as other economies, particularly Europe, continue to recover. As that happens, U.S. exports will pick up. For the next few years, it is likely that imports will grow faster than exports, worsening the trade deficit.
It is also likely that economic growth will outpace trade growth in the United States and Europe. The service sectors, like leisure, healthcare, finance, legal and education, account for most economic activity in developed economies. About 90 percent of U.S. employment is in services industries. In both the United States and Europe the service sectors have been expanding.
Global economic growth is likely to be below its long-term average in 2016. While this is not a particularly bright picture, at least it doesn’t seem likely there will be a contraction. Furthermore, it seems the balance of risk to that view is to the upside. If governments were to take advantage of low commodity prices to improve and build new infrastructure, many of the trends dragging on economic growth could reverse. A removal of the trade embargos between Russia and Europe and the United States would also help matters. On the downside, if inflation were to pick up then central banks would have to raise interest rates aggressively, which would slow economic activity and maybe even result in a contraction. However, there appears to be little risk of inflation rising. If anything, a modest rise in inflation would be welcome.
For the freight movement industry it might make sense to back off a bit on capacity investment. At least until economic activity picks up a bit more.
Kemmsies is chief economist at Moffatt & Nichol, an infrastructure engineering firm. He can be reached at (212) 768-7454, or email at wkemmsies@moffattnichol.com.

Saturday, November 28, 2015

UK OMNICHANNEL, RETAILERS

Read more stories on UK omnichannel and continue to be amazed how both retailers and logistics providers just do not get it. Incredible.

SUPPLY CHAIN AGILE

Is agile the most misused and over used word in Supply Chain Management? Does it really mean having to do more than you were designed to do? Is agile a version of--anything is possible when you are not the one doing the job?

CONTAINER LINES, ECONOMIES OF SCALE

Can container lines get too big or have assets too big to create diminishing economies of scale, or even reverse economies of scale?

OCEAN SHIPPING, PRICING, ARBITRAGE

Why not shift ocean shipping pricing contracts from index based to arbitrage, especially given all the volatility and risk?

Tuesday, November 24, 2015

OMNICHANNEL SUPPLY CHAIN

For Omnichannel, the New Supply Chain is agile—and more. It is dynamic and fluid.

TIFFANY, OMNICHANNEL

Does Tiffany's have an omnichannel strategy? Do they have the supply chain to drive it?

Here's Why Tiffany & Co. is Losing Its Sparkle

by
Phil Wahba

@philwahba

November 24, 2015, 12:28 PM EST

A gloomy forecast for the jeweler

Tiffany & Co’s iconic flagship store on Fifth Avenue in Manhattan is one of the most popular destinations for international tourists visiting New York.
That’s long been a boon for the jeweler. But these days, with the U.S. dollar at very high levels, the store’s reliance on foreigners is proving to be a drag on its results.
Tiffany TIF 3.62% on Tuesday reported a 6% decrease in comparable sales in the Americas, which account for more than half of its business, and lowered its full-year forecast, saying it now expects its annual profit per share to drop 5% to 10% from last year.
“We once again saw a substantial decline in sales to foreign tourists in varying degrees by nationality, with pronounced weakness in the New York area,” Mark Aaron, Tiffany’s vice president of investor relations, told analysts on a conference call.
The Fifth Avenue store, in the heart of the city’s luxury shopping district, generates about 8% of company sales, and some 40% of revenue at the store comes from international customers. But perhaps of greater concern, Tiffany said the pressures on its business weren’t limited to tourists in New York.
Indeed, sales to U.S. customers were flat, a result that echoes tepid numbers at Nordstrom JWN 1.67% , which recently reported a meager 0.9% increase in comparable sales last quarter, as well as Neiman Marcus and Saks Fifth Avenue, suggesting that the luxury sector is being hurt by the volatile stock market and macro-economic concerns in the U.S.
Laurent Vasilescu, a Macquarie analyst, says Tiffany’s lower U.S. sales point to “a larger luxury issue,” according to Bloomberg News.
Tiffany’s challenges extend beyond the very high end. The jeweler gets about a quarter of its sales from less expensive silver jewelry pieces that cost less than $500. The company is trying to rev that business up, recently introducing a new line called “Return to Tiffany.”
Still, Aaron spoke of “continued softness in broader consumer spending trends.”
Elsewhere, Tiffany’s results held up well, notably in China, whose stock market has been pressured, raising fears of a pullback on luxury spending. And the Chinese are still spending when traveling abroad, something that is limiting the pinch of Tiffany’s U.S. concerns.

EXCESS INVENTORIES?

Maybe all those stories on excess inventories were not correct?

Target Expands Inventories to Repair Stock-Outs

The retailer built up stocks ahead of sales in the third quarter to ensure more goods were on store shelves

ENLARGE

Target Chief Financial Officer Cathy Smith said the company feels “very good” about its inventory position heading into the holidays. Photo: Bloomberg News

Erica E. Phillips

The Wall Street Journal

CANCEL

Biography Erica E. Phillips
@eephillips_wsj
Erica.Phillips@wsj.com

Nov. 24, 2015 11:56 a.m. ET

1 COMMENTS

Target Corp. is expanding its inventory but the retailer says it is doing it for the right reasons.
Target improved its in-stock levels by as much as 50% for many items in the third quarter, Chief Operating Officer John Mulligan said, addressing a key concern the store chain has said was dragging down sales growth.
The result was a 4% increase in inventory in the quarter ending Sept. 30 that was greater than Target’s sales growth of 1.9% compared with the same quarter a year ago. Mr. Mulligan said the company has increased stocks of “fast turning” items in stores to reduce the regularity with which those items need to be replenished.

Like other big-box retailers, Target has sought to develop an efficient way to fulfill online orders while continuing to keep store shelves stocked. The retailer has also been adding smaller, urban stores that require different supply chain planning. This year, Target spent around $1 billion on updating its supply chain and technology infrastructure.

Target Chief Financial Officer Cathy Smith said the company’s higher inventory in the third quarter was a sign that new strategies are working. The 4% gain in inventory was an improvement from earlier quarters, she said.
“We feel very good about our inventory position going into the holiday season in relation to both our sales planned and our work to improve in-stock reliability,” Ms. Smith said

BIG DATA AND SUPPLY CHAIN MANAGEMENT

How much of the big data / data analytics hype for supply chain management is useful and how much is puffery?

UPS AND LAST MILE DELIVERY

How many Ecommerce firms and customers understand that UPS uses USPS for last mile deliveries?

CARRIERS AND THE HOLIDAYS

Some Shipping Companies Gain an Edge During Holidays

As retailers rethink inventory strategy, transportation companies see fortunes change; e-commerce to buoy UPS, FedEx, DHL

Laura Stevens

The Wall Street Journal

CANCEL

Updated Nov. 22, 2015 7:57 p.m. ET

23 COMMENTS

Peak season usually is the most wonderful time of the year for shipping companies thanks to a surge in holiday orders. But this year, it is highlighting the growing gap between the transportation industry’s haves and have-nots.
Peak season was a no show for railroads, truckers and ocean carriers—a time when incoming containers to ports in the fall can rise as much as 15%, according to Hackett Associates.

Top Logistics News

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That is a big difference from UPS, which predicts its deliveries will increase 10% to a record 630 million packages between Black Friday and New Year’s Eve, compared with last year. The U.S. Postal Service announced earlier this month it expects to deliver 600 million packages during the same period, an increase of 11% from last year, while FedEx has said it would deliver 12% more packages from last year, or 317 million, between Black Friday and Christmas Eve.
Retailers have painted a mixed picture so far for the holidays, with some mall-based chains issuing warnings on weak consumer spending, and other big-box stores including Wal-Mart Stores Inc. and Home Depot Inc. reporting rising sales. Amazon.com Inc. said it expected its fourth-quarter sales to grow between 14% and 25%.
“Obviously the economic news has been mixed, but at the end of the day—even on the consumer side—you see a larger, faster paced strength in the e-commerce space as compared to retail,” said UPS Chief Financial Officer Richard Peretz in an interview.
DHL Express, which in the U.S. primarily handles international shipments, expects its peak season volumes there to be more than 40% higher than its average daily volume in the third quarter. Its busiest day is forecast to be Dec. 22, when the company expects to deliver 250,000 shipments from around the world arriving in the U.S.
Already, October was the company’s biggest month ever for U.S. inbound delivery volume, and November hasn’t slowed down, said DHL Express U.S. CEO Mike Parra in an interview. “I think it’s all associated with the strengthening of the dollar,” Mr. Parra said, adding that the company’s growth was driven by e-commerce.

ENLARGE

Companies specializing in online holiday shipping—UPS, FedEx, the U.S. Postal Service and DHL—are expecting a big surge in deliveries. Photo: Michael Nagle/Bloomberg News

Online holiday sales will grow as much as 8% this year, compared with 5.8% a year ago and flat retail sales overall, according to the National Retail Federation.
A large piece of the disconnect between freight and small parcel stems from currently high inventory levels, which retailers think they can sell off online come December. When store shelves are full, manufacturers produce less and fewer freight shipments are sent, said Joseph LaVorgna, chief U.S. economist for Deutsche Bank AG .
In addition, retailers are changing the way they manage that inventory, according to both retail and delivery experts. Instead of stocking 50 sweaters at each store, some retailers will keep just 10 on hand, leaving the rest at a centralized distribution center that also fills online orders. When that store runs out, it will order 10 more for just-in-time restocking, and UPS or FedEx will get it to the door.
At other store locations, retailers are stocking up to use those as mini distribution hubs, employing holiday workers to pick and pack that same sweater for pickup by a delivery man for shipment to an online shopper.
DHL’s Mr. Parra said that more retailers are stocking up via smaller airfreight orders from international suppliers, a method they discovered was more cost effective than expected during a slowdown of the West Coast ports last year. “There’s no need for having large inventories sitting in brick-and-mortar stores,” he said.
Retailers are currently working toward full visibility of every item in stock, in stores and distribution centers, in real time, said Steve Osburn, a supply chain consultant with Kurt Salmon. While it’s a work in progress, “ultimately the long term play is if you get better use of inventory, you don’t have to carry as much inventory,” he said.

OMNICHANNEL SUPPLY CHAIN MANAGEMENT

One big lesson from omnichannel is there is no one way to do supply chain management. Those days are gone. The New Supply Chain includes Duality.

Saturday, November 21, 2015

CONTAINER LINE CAPACITY AND SOLVENCY

Is removing capacity--as in 2009-- the only viable choice left for container line solvency? Or is it too late for even removing capacity?

RETAILERS AND E-TAILERS IGNORING AMAZON IMMEDIACY

Why are so many retailers and e-tailers ignoring/not changing for ecommerce immediacy set by Amazon? Hello omnichannel and the New Supply Chain.

Friday, November 20, 2015

STIFEL INDEX AT THREE-YEAR LOW

Home > News > Stifel logistics index hits 3-year low

Stifel logistics index hits 3-year low

The index, which measures confidence in European ocean freight and air freight lanes, has declined for six consecutive months, with the Europe-to-U.S. lane the only glimmer of hope.

By Eric Johnson |Friday, November 20, 2015

A measure of confidence in the third party logistics industry has declined for the sixth consecutive month in November.
The Stifel Logistics Confidence Index, which measures sentiment on European ocean freight and airfreight lanes, both inbound and outbound, fell to the lowest reading in three years in November, Stifel said. The index is produced by the investment bank’s logistics and transportation group in partnership with the consultancy Transport Intelligence.
The monthly decline registered in air freight (0.4 points to 48.9) was more moderate than in ocean freight (2.8 points, amounting to 46.1), the companies said.
“The continuation of negative macroeconomic trends at the global level, principally emanating from China, represent the principal cause of this,” Stifel and Ti said. “Chinese retail sales were up by 11 percent year over year in October, but the country saw exports fall by 6.9 percent over the same timeframe in value terms, while the import decline was even worse at 18.8 percent.”
The six-month outlook for both air and ocean freight fell at the same rate as the present situation, declining 1.6 points from October to total 50.2. When compared to the figures measured in previous years though, it is significantly lower. The Logistics Expectations Index is down 12.4 points against November 2014, and 11.6 points against November 2013.
“The source of the decline is clear when expected performance is broken down,” Stifel and Ti said. “The reason for this is the systemic overcapacity that has come to characterize container shipping, which is driving carriers to consider desperate measures in order to survive. A stark reminder of how damaging the situation has become was Maersk’s decision to lay-up one of its 18,000 TEU Triple-E class vessels in what Drewry has described as a ‘wake up call’ for the industry.”
Last month, the Europe-to-U.S. lane represented the sole bright spark within the index, and that trend continued in the latest index. Stifel and Ti cited the strength of the U.S. dollar against the euro as a likely reason for the relatively positive performance of that lane.

SUEZ CANAL

6 facts about the second Suez Canal

By Donald Armbrecht

Jul 29 2015

The first ships have passed through Egypt’s Suez Canal expansion in a trial run ahead of next month’s official opening. If completed on time, the $8.5 billion project will have been finished in only 12 months.
Egypt ranked 119th out of 144 economies in last year’s Global Competitiveness Report, and 97th out of 138 in its Global Enabling Trade Report. The canal expansion is intended to improve these performances. It’s also intended to address youth unemployment, a particular concern in a country where 60% of the population is under 40 years old. Egypt’s President Abdelfattah Said Hussein Alsisi told delegates at the World Economic Forum’s Annual Meeting that once the expansion is open, “the second phase will entail developing the canal zone and opening the door for investment”.
Here are some facts about the Suez Canal expansion:

TRANSPACIFIC GRI

And yet another attempt by container lines for a rate increase. Does anyone want to wager on it success?

NEWS FLASH: TSA seeks to shore up rates; impose hefty GRI in January

The Transpacific Stabilization Agreement's 15 members plan a $1,200-per-FEU rate hike on Asia-U.S. West Coast trade Jan. 1 and want a minimum rate of $1,700 per FEU to the U.S. West Coast in 2016-17 contracts.

By Chris Dupin |Friday, November 20, 2015

The Transpacific Stabilization Agreement (TSA), a group that represents 15 liner carriers that move nearly all the container cargo between the Far East and the United States, has announced recommended freight rate increases and 2016-17 service contract guidelines.
The TSA lines are recommending adjustments to minimum rates across the board on Dec. 1 and a GRI on Jan. 1, 2016.
For Dec. 1, the lines will be seeking to restore the lowest current market rate levels to at least $950 per 40-foot container (FEU) to the U.S. West Coast; $1,700 per FEU to the U.S. East and Gulf coasts; and $2,950 per FEU for intermodal moves to key Chicago-area inland point destinations.
The announcement came on Friday, after the Shanghai Shipping Exchange said the Shanghai Containerized Freight Index (SCFI) estimated the spot rate from Shanghai to the U.S. West Coast was $922 per FEU, down 9 percent from $1,009 last week. The SCFI is estimated once a week on Fridays by a panel of carrier and forwarding executives.
Richard Ward, a container derivatives broker at Freight Investor Services, said in a statement the SCFI rate to the West Coast was "a new all-time low on the trade. This represents the first time that the trade has been under the physiological $1,000 mark since August 2009 having been in nearly constant freefall since the end of the port congestion debacle at the start of the year."
The SCFI pegged the rate from Shanghai to the U.S. East Coast on Friday at $1,688 per FEU, down 8 percent from $1,834 per FEU a week earlier.
For Jan. 1, TSA members are recommending large general rate increases - $1,200 per FEU to the West Coast and $1,600 per FEU to the East and Gulf coasts. That's about a doubling of the spot rates.
Carriers say their objective is to "establish more compensatory baseline revenue levels as they head into service contract negotiations, and in advance of the Lunar New Year holiday in Asia that begins in early February."
"Transpacific lines are adjusting to a new normal of larger ships and complex alliances, necessitated by cost and environmental compliance pressures – all in the context of an uncertain global economic environment,” explained TSA Executive Administrator Brian Conrad. "Irrespective of cyclical supply-demand issues, it is critical that these global infrastructure providers get their pricing right and fully recover their costs through meaningful, staged rate increases heading into 2016."
Most service contracts in the transpacific trades run from May 1 to April 30.
For all 2016-17 service contracts, TSA lines are recommending longer-term minimum rates of $1,700 per FEU to the West Coast and $2,900 per FEU to the East and Gulf coasts.
That is actually less than the recommendation for the current contract year. For the 2015-2016 service contract year, the TSA had recommended minimum rates of $2,000 per FEU for cargo moving from North Asia to the U.S. West Coast and $3,800 per FEU for cargo moving to the U.S. East and Gulf coasts. The recommendation was that rates be $150 higher for cargo moving from South Asia ports.
TSA said for the coming contract year it will include adjustments to "non-rate charges and practices in areas such as absorption of chassis costs; free-time allowances; port and rail demurrage charges; equipment detention and per diem; full recovery of current and projected trucking costs; intermodal pricing; credit policies; and contract boiler plate terms."
"Lines have learned the hard way that small concessions to a customer here and there expand quickly across the trade and add up, over time, to a lot of money left on the table," Conrad said. "Beyond that, addressing these non-rate items will also help to improve equipment velocity and availability, toward a more efficient and robust supply chain."
TSA said the fact that its members are using larger line-haul vessels making fewer port calls means that they have higher feeder service and other transshipment costs in maintaining route coverage throughout Asia. “Lines will be closely reviewing their schedules of feeder port add-ons in light of rising costs, and will make specific adjustments to those add-ons as warranted in upcoming contracts,” TSA added.
The TSA's members include APL, China Shipping, CMA CGM, COSCO, Evergreen, Hanjin, Hapag-Lloyd, Hyundai Merchant Marine, “K” Line, Maersk, MSC, NYK, OOCL, Yang Ming, and Zim.