Category Archives: Strategy

4 Trends That Could Redefine Distribution in the US

You might not have seen this thought piece from Chris Caplice of MIT.  It seems we are betting big money on the import-from-china model, but there are some serious trends that will change things.

Decentralization of production will be good for the Chicago area, where there is already a capable manufacturing workforce. It may make sense to set up here in existing facilities than to build giant factories here. It might even be cheaper than the South.

Making products denser through design means they are cheaper to ship, and makes big factories built for economies of scale but requiring long distance hauls to some markets less practical.  Digitization of products— the shift away from physical product to knowledge based products supports this trend. It makes designs easier to distribute; and it makes products customizable, updatable, and configurable so that you do not need to throw away the hardware.

And now that online buying has taken off, retailers are combining their distribution for all channels, including online and walk in, so that inventory is being pushed closer to the customer.

 

4 Trends That Could Redefine Distribution in the US | Supply Chain @ MIT.

Zhengzhou-to-Europe Rail Freight Debuts

The Journal of Commerce reports that a new freight train service to Europe from China is available.  The service will take about 18 days to reach Hamburg, shorter than a sea voyage.  Container by rail is only slightly more costly than container by ocean shipping, and has a smaller environmental footprint, measured in carbon or particulate.  At sea the pollution is discharged in no jurisdiction, whereas rail discharges where people might live.In the vast expanses of western Asia, the effects will not be politically harmful.  So this line could indeed be competitive.

There will be 14 trains a year, or about one each month, so it won’t be the frequency of liner shipping.

Zhengzhou-to-Europe Rail Freight Debuts | JOC.

http://www.deutschebahn.com/en/hidden_rss/pi_rss/4261464/20130802_zhengzhou_train.html

http://www.scmp.com/business/china-business/article/1285721/train-cuts-time-europe-freight-deliveries

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Is bigger better in ocean shipping?

The P3 consortium may expand to more companies. This is a form of cooperation or collusion protected by law in many countries, so that guaranteed service can be provided when it would be too expensive and risky for one shipowner to do it.  But is bigger always better?  And how about the consumer, the shipper? Is there a chance of collusion on rates?

Faster clock speed of business may require more frequent service, and that makes it even harder to provide ships often enough.  Right now, freight rates are low, and we do not see the consortium as a problem.  In fact, it allows slow steaming to be offset by more frequent ships, which levels out the delivery time problem it causes. But in the future, there is some chance rates will go up.

Maersk cannot rule out a P4 network – Lloyd’s Loading List.