A 25 year veteran of the supply chain and logistics industry blogs on all things logistics. Experience in 3PL, automotive and consumer goods logistics help bring a unique insight to this topic
I am a big fan of the "control tower" idea and think it is absolutely a necessity. Whether you outsource it or not is an entirely different question. Outsourcing is a decision concerning what the core competency of your company is and where you want to put your capital to work. A manufacturing company who has a core competency in manufacturing may choose to outsource logistics. A retailer who believes their competitive advantage is logistics may choose not to.
Either way, you should embrace this control tower concept. It is an idea which has seen many lives over my 20+ years of logistics experience and it keeps getting better with age and technology.
Conference Board's perspective on the Q3 "growth" spurt. Personally, I cannot imagine GDP continuing to grow when we are at 9%+ unemployment. Just the simple economist in me coming out.
I had a great week visiting with many logistics providers and trying to get insight into just exactly what is going on in this business. Some will tell you the business is collapsing due to low demand, some believe the transportation business is ripe for a great uptick in profitability due to constrained capacity (the jury is still out, in my mind, on whether this is artificial or not), some believe it is all just the same.. we are moving around the margins.
I get conflicting signals. For example, everyone tells me the driver shortage is wildly acute and we run the risk of just not having enough capacity to service the industry because of a lack of drivers. Many say if the GDP stays above 2.5% or greater then we will just not have enough capacity to service the shipper market. However, using "Econ 101" this would tell me driver wages should be increasing. That is not the case. Driver wages are flat.
The next question is whether the increase in intermodal actually is absorbing the otherwise demand for driver capacity? This seems to be a plausible answer. Container capacity is up 10% to 20% (depending on who you talk to) and this means those containers have to be filled. They will not let them just pile up in a container yard. Add to the fact that many shippers are lowering their point of indifference of choosing between trucks and IM (Indifference is the length of haul in miles where a shipper sees the two as interchangeable) and more shippers are choosing IM on more lanes. Obviously, this reduces the need for drivers on long haul runs.
So, data is really mixed. The analysts are all saying most of these companies (public) are "fairly valued" and the industry should not be overweighted in a stock portfolio. Projections for pricing have been reduced (early this year most were claiming a 4% price increase but that does not seem to be happening) and capacity has freed up.
The one caveat? Last year we were saying this same thing and the market for trucks and transportation went on fire in the first quarter. So, this post did not give you an answer (sorry) but may have provided some things to think about.
I think we have all learned over the last few years why home construction is always looked at by economists. It is probably the single biggest indicator of the health of the economy. When people buy homes all sorts of things happen:
Construction materials are bought
People are employed en masse
Peripherals are purchased (appliances, lights, drapes etc.)
Landscaping is performed...
I do not know the exact number but my guess is after someone buys a $200K house they most likely, over the next year, spend another $20K at least on "stuff".
This drives all sorts of logistics activities - warehousing and most importantly, transportation volume. Transportation is inbound into the manufacturing plants which gear up for the activity and outbound finished goods going to all those new homes.
OK, now we know why this is so important. This is also why it is depressing to hear home construction will be muted for a while - most likely 5 -8 years. The inventory is just too high and there are still a lot of adjustable rate mortgages to reset in 2012. Not a good sign.
For those of you who say, "Yes, but those staying in a home will remodel" I would say this "rule" (if it ever was one) does not hold up anymore. The reason is most people, intuitively, know they are now living in a depreciating asset and not an appreciating asset. Remodeling makes sense in the latter as it is much like a bank account. However, in the former remodeling is like buying a consumable product which has no sustainable value. People know this intuitively and will not, in total, increase dramatically their major remodeling (assuming they are sane and rational).
Sorry to be the bearer of bad news.
Thursday, November 17, 2011
Leasing companies see their supply chain as a competitive advantage.
Things are slow and everyone is in a "wait and see" mode is what I believe these numbers are telling us. Unemployment stayed high at above 9% (9.2%) while all orders (durables and non-durables) increased slightly from manufacturers. The question of course is did that result in sales or did it result in inventory? We shall see as companies report their 2d qtr earnings.
In my mind the equation is fairly simple: No jobs and no job growth leads to a lot of uncertainty which leads to consumers not spending which starts the "death spiral". Tax cuts for the wealthy will not put people back to work as the wealthy can make a lot of money right now "trading paper" and they do not need to open factories and stores.
The real scary thing is the fact that the one economic engine which has driven even the meager recovery (if you can call it that) we have had so far is Government spending. Now we will see what happens when the Government retrenches spending in a recessionary environment. I think we know the answer and it is not a good one.
The Government is playing with fire and unfortunately they are going to have to be burned to have them learn the lesson of implementing contraction policies in a time of a no growth economy.
Tuesday, July 5, 2011
A very sad day as Dr. Bowersox, the founder of the supply chain industry has passed away. Look for more on this great man.
Took a ride in my new Hybrid Ford Fusion yesterday and as always, everything causes me to think about logistics. First, I will have a "call out" to Ford Motor Company as this is an incredible car. Write me if you would like more information but suffice to say, I am thrilled about the automobile (and the 39.5mpg I had driving to Chicago).
OK, but the one issue (if there is one) with Hybrids is there is a giant battery pack in the back of the car. As others have asked (rightfully so), "what happens when that dies"? Ah, this is where the reverse logistics industry comes in. There will have to be a way to recover the batteries, ship to a central point and a way to disassemble and recycle the components. A big business just waiting to be started.
A quick google shows Toyota (as you would expect) has started a service like this and I am sure others will follow. Amazing how new needs are created, then people fill those needs and all of it requires logistics!
