Industry Insights
September Freight Index Drops
Tangible Benefits of a Paperless Supply Chain
Oil still continues to hover in the $80 per barrel range
New Airbus A330- 200F Air Cargo Freighter has made Maiden Voyage
For past Industry Insight articles, please visit the Industry Insight Archive.
September Freight Index Drops (11/18/2009)
After three strait months of positive activity, the Department of Transportation's Freight Services Index fell 0.5 percent in September from its August level. The index is currently at 95.7, which is down more than 15% from its historic peak of 112.9 reached in May of 2006.
There is speculation that retailer strategies going into the holiday season may be showing up in the figures. Retailers have signaled that they will go into the season lighter in inventory than in previous years. And, after carrying heavier inventory loads through the summer, many will try to get through the early part of the season on small increases to existing inventories. What this could set up is a bit of a scramble after Thanksgiving if sales are much stronger than had been anticipated. Retailers may be looking for quick order refills of smaller quantities of items to get through the Christmas shopping season.
Tangible Benefits of a Paperless Supply Chain (11/18/2009)
Companies that have embraced the green movement and have attempted to get to a "paperless supply chain" are finding that their efforts have multiple payoffs. One of the direct benefits that they see is an improvement in supply chain visibility as a result of the move. Since all of the paper documentation is moved into electronic form, it is more easily tracked by databases and monitoring tools. Once companies can get over the initial investment required to get the system in place, the direct return on investment (resulting from less handling of documents, storage, and the lack of efficiency that comes from having to re-key important data) moves right to the bottom line on profitability. And then, there is also the green benefit from taking on the exercise altogether. If carbon emission legislation is passed in Congress, it will force companies to document and catalog the impact of supply chain operations on carbon emissions. Tracking and data management will be important in meeting these requirements.
Supply chain managers know of the importance and advantages that visibility can provide them. Everything from the scheduling of personnel to inventory management and tracking is improved when full visibility is gained throughout the supply chain.
Oil still continues to hover in the $80 per barrel range (11/18/2009)
The impact of the dollar on oil prices is becoming more pronounced by the week. The dollar improved over a bundle of currencies and oil prices lost near $3 a barrel. There is a theory that the demand destruction forecast from the International Energy Agency (IEA) has many analysts worried about the demand for oil in 2010. That has put some pressure on prices.
But several media outlets reported last week that an investigation had uncovered some potential downplaying of the "peak oil" theory by the IEA. The accusation is that several prominent governments (including the United States) put political pressure on the IEA to keep comments about the risk of peak oil more positive. Peak oil is the theory that the world has a limited supply of oil reserves and that the amount of easy-to-reach oil is depleting fast. Peak oil theory suggests that supply of inexpensive oil will soon be surpassed by demand--and that the only two options for getting out of the situation is to increase production of expensive oil (deep ocean wells or oil that needs much refinement) or broad proliferation of alternative fuel cells and sources.
As we know, the commentary and tone of reports by large agencies like the Fed, Global Central Banks, and the IEA can move markets. As the IEA changed its tone on peak oil discussions, it gave the market more optimism that there are adequate oil stocks--and the price remains under pressure. This report has yet to affect oil markets and frankly, the world is waiting for the IEA to officially respond to the accusations.
New Airbus A330--200F Air Cargo Freighter has made Maiden Voyage (11/18/2009)
A new competitor under the Airbus brand for the Boeing 737 freighter was tested on a maiden voyage last week--and is likely to be ready for production shortly. The A330 is built to be a medium range air cargo craft with improved fuel economy. Airbus is competing with Boeing for several key contracts--among which is a large tanker deal for the U.S. military using a variation of the A330-200F. One of the most important aspects of this development is that Airbus is planning to produce the majority of the craft destined for the U.S. market--in the U.S. This is obviously not always a requirement for most contracts, but for a U.S. defense contract, it would be a wise move by Airbus (if not required).
Boeing has also been forced over the last several years to move some production to markets that are awarding it large contracts. China has been one of the most aggressive purchasers of aircraft to support its hyper growth and inner provincial expansion (using air cargo services until rail and highway infrastructure can be completed). Given the thousands of parts that go into the manufacturing of an aircraft, this will change the distribution patterns for supply chains that feed the aerospace industry
For past Industry Insight articles, please visit the Industry Insight Archive.
