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Archive for the ‘Logistics’ Category

IKEA has big growth plans. According to the Wall Street Journal, it aims to increase its revenue by €50 billion by 2020 — 74% higher than its 2014 revenue (IKEA Can’t Stop Obsessing About Its Packaging, Jun 17). Part of that growth is going to come from expanding into new markets, some may come from new formats, but a lot of it has to come from selling more stuff through existing stores. And that is going to require finding ways to cut prices to move more volume.

That’s where design comes in. IKEA is reviewing products in order to find ways to reduce their production and — importantly — their distribution costs. As this graphic demonstrates, this is pretty much a war on air.

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When a firm makes something, should it also take responsibility for delivering the product? For many firms, the answer is a firm”no”. They happily hand over the logistic of schlepping products to some third party. Most firms are happy to let someone else own trucks and recruit drivers. That’s what make the story of Ashley Furniture so interesting (A Radical Supply Chain Idea: Own Your Trucking Operation, Apr 29, Wall Street Journal).

Ashley Furniture Industries Inc., the largest U.S. maker and retailer of furniture, has resisted that trend. It owns and operates about 800 trucks and delivers the vast bulk of its own products from factories to stores. “We think it is a core competency,” says Todd Wanek, chief executive of the family-owned company.

Ashley employs about 3,000 people in transport and warehouse functions in the U.S., nearly a quarter of its U.S. head count. Its distribution centers feature racks specially designed to speed loading, and its managers arrange for trucks returning after they deliver their furniture to carry loads for other companies for a fee. Its drivers, dubbed Ashley Ambassadors, are also charged with building customer relations.

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The West Port labor strife is now over but issues remain. There are still dozens of ships waiting for their turn at Southern California ports and there are numerous bottlenecks in getting containers off ships and to their destinations. The Wall Street Journal has had a couple of recent articles dealing with how these logistical disruptions have affected supply chains as well as how the ports might possibly run better.

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First up is how the ports customers are reacting (Ports Gridlock Reshapes the Supply Chain, Mar 5). The West Coast doesn’t have a monopoly on US ports, of course; they are just the most convenient to Asia. However, as the graphic above demonstrates, shipping to the East or Gulf Coasts are an options if you are willing to wait a bit longer to get your goods. Currently, the West Coast handles about half of US cargo shipments but, according to an executive of the Port of Los Angeles, a third of their volume is “purely discretionary” in the sense that it could go to another port.  (more…)

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As you may have heard, West Coast ports are having some labor issues. The Pacific Maritime Association (which represents the shipping lines and terminal operators) and the International Longshore and Warehouse Union have been going at it, affecting about 20,000 workers at 29 West Coast ports. (Can’t name 29 Wet Coast ports? See here.) The LA Times has a nice summary of what is in play. In a nutshell, management claims that the union is engaging in a slow down (effectively striking while getting paid, see here) while the union claims that they are responding to safety concerns (at LA and Long Beach) and that management is misrepresenting their position. In any event, what has resulted is lots of delays and a  slew of ships waiting off the coast for their chance to unload. (Never seen a slew of ships? Check out these images.)

OK, that’s all well and good, but how is this affecting supply chains? The sheer scale of the problem is rather mind-blowing. If it were just a question of losing one port, things wouldn’t be too bad. Ships bound for LA, could be sent to Oakland or Seattle. But it’s the entire West Coast. If the goods need to be offload to an US port, that means going all the way to the Gulf Coast or the East Coast. It’s not clear that is an easy solution. Part of why LA and Long Beach are such busy ports is that they have an entire infrastructure to support them. Even if a ship could get to, say, Charleston, it’s not clear that it would do a lot of good for some of the customers whose stuff is on the ship. If a company’s whole logistics system is based on breaking bulk in the Central Valley, having a bunch of containers in South Carolina is, at best, an inconvenience. (more…)

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Over time, this blog has had a lot of posts about shipping containers. Here is another one.

More specifically , we have from Vox and short video on the history and economic impact of shipping containers and why container ships keep getting bigger and bigger (How cargo ships got so huge — and transformed the world economy, Jan 22).

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Today is a big day for companies in the shipping business. Coming off of the last weekend before Christmas, it is not too surprising that the likes of UPS and FedEx are expecting a massive rush of packages ordered by everyone who gave up on the mall and just ordered it online. In case you couldn’t have guess that for yourself, both the New York Times (Crunch Time for FedEx and UPS as Last-Minute Holiday Shipping Ramps Up, Dec 21) and the Wall Street Journal (A Test for UPS: One Day, 34 Million Packages, Dec 21)have articles today about how shippers have planned to deal with the deluge.

For my money, the Journal article is more interesting if only because it contains nuggets like that e-commerce will soon account for half of all U.S. packages. This video summarizes some of the main points of the article.

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So what should be more profitable for a retailer, selling from physical stores or selling over the web? That’s the question that a recent Wall Street Journal article considers (How the Web Drags on Some Retailers, Dec 1). At first glance, the answer seems straightforward. Web sellers don’t need to rent stores or have staff cooling their heels waiting for customers. However, the reality isn’t necessarily so clear,

While conventional wisdom holds that online sales should be more profitable, because websites don’t need the pricey real estate and labor necessary to maintain a store network, many retailers actually earn less or even lose money online after factoring in the cost of shipping, handling and higher rates of returns.

For retailers that outsource their Web and fulfillment operations, costs can run as high as 25% of sales, industry analysts said.

Kohl’s Corp. says its profitability online is less than half what it reaps in its store. Wal-Mart Stores Inc. says it expects to lose money online at least through early 2016 as it invests to build its technology, infrastructure and fulfillment networks. Target Corp. says its margins will shrink as its online sales grow. Best Buy Co. said faster growth on its website will weigh on its profitability at the end of the year.

Click here for a video of the reporter discussing her findings.

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