February 22, 2023
February 2023
Editorial
February 2023 - This month, we see impact of covid on the supply chain trickling off - as shipping rates return to pre-pandemic levels, the pharmaceutical boom slows and travel restrictions are walked back.
Global Freight
A wave of new container ships may help easy inflation sting
- 900 new container ships - scheduled to be delivered between now and 2027 - will have the equivalent to ¼ of the existing carrying capacity.
- However, some analysts suggest there is too much container supply incoming to meet the demand which may result in another spell of depressed ocean freight rates.
- Hapag-Lloyd CEO, Rolf Habben Jansen stated that ‘we are back to normal shipping business’, after his company reported skyrocketing profits for three years.
- Jansen does not expect freight rates to fall below costs, citing high charter rates and fuel costs.
- Freightify wants to transform the global freight industry, by implementing a freight forwarding platform like Expedia or Booking.com whereby customers seeking information input their requirements and are shown several quotes from companies able to accept the shipment.
- The system is not able to accept bookings currently, but down the line this will be implemented.
- Gautam Adani’s ports and logistics company has announced plans to pay off some $605mn of borrowing and cut its spending as it seeks to improve its investors confidence.
- Adani’s group has been facing growing debt, and allegations of accounting fraud and stock manipulation; ranging from logistics to airports and electricity.
- FedEx will end a service that provides same day delivery in large metropolitan areas as the shipping giant grapples with cooling demand.
- SameDay City is described as the fasted local shipping option offering door to door delivery to residences and businesses within hours across 1800 cities.
Global Fulfilment
Amazon to shed UK warehouses as it halts growth plans
- Amazon is looking to sublet its warehouses following its worst annual loss on record.
- Amazon wanted to open more warehouse space across the UK, but has lost 30% of its value over the past year due to inflation concerns.
- The labour department cited warehouses in New York, Colorado and Idaho - stating workers were exposed to unsafe conditions and ergonomic hazards.
- This follows ongoing investigated by federal prosecutors into Amazon’s Warehouse safety.
- Ikea removed a brand of boxes from its warehouse in Singapore after a complaint went viral that claimed the items were infested with insects.
- The customer voiced their complaint on Tiktok, after initially discussing it with the Swedish furniture brand, and the company denied any wrongdoing.
- Aldi has opened a new distribution centre in Loxley, Alabama that is intended to service up to 100 grocery stores in Louisiana, Alabama, Mississippi and the Florida Panhandle.
- This facility reflects Aldi’s ambitions to significantly expand its presence in the United States where is runs 2300 stores across 38 states.
Manufacturing
The manufacturing economy is lousy. There are silver linings for stocks.
- The manufacturing economy is getting worse - but that may be good news for the stocks of manufacturing.
- The PMI for January was 47.4, down from 48.4 in December - a level below 50 indicates the sector is shrinking, and January marks the fifth consecutive drop. It is unclear when indicators will hit bottom, but if they are close the time could be near to buy manufacturing stocks as they tend to surge when PMI hits its lows.
- British manufacturers saw their manufacturing output shrink for the sixth consecutive month, as the country’s economy is set to fall into a recession.
- A reduction of output and new orders, as well as job losses were reported for a fourth month in a row.
- JANS Group; An Antrim-based manufacturing company is set to create more than 200 jobs after planning permission was granted to a multimillion dollar factory.
- The company will specialise in the manufacturing of luxury lodges and modular buildings.
- Peloton is struggling to sell some of its manufacturing assets, hindering the company’s plan to reduce costs and streamline operations.
- CEO Barry McCarthy said in an earnings call that Peloton rejected a deal to sell its equipment to subsidiary Precor after deeming the offering price to low.
- Maersk is deploying autonomous drones - supplied by Verity -throughout warehouses to help shippers better track inventory and potentially identify inventory errors.
- The drones will take photos of SKUs on pallets and compare their findings with data stores in the warehouse management system.
Procurement & Sourcing
GM investing $650M to develop Nevada lithium mine
- General Motors plans to invest $650 million in Canada based lithium mining specialist Lithium Americas.
- Under the deal, GM and Lithium America’s would jointly invest to develop the Thack Pass mine in Nevada - which the companies describe as the largest known lithium source in the U.S and the third largest in the world.
- Japan’s Panasonic Corp. lowered its annual operating profit forecast by 12.5% - hit by a slowing global economy and persistently high price of raw materials.
- This spells a challenge for the company as it builds out its energy business, which makes auto batteries for Tesla.
- According to a top Swedish official, Europe should consider stockpiling key minerals as part of its plan to reduce dependency of critical raw materials from outside the bloc.
- The EU is looking at ways to develop green technologies independently, as the US and China ramp up their production by providing subsidies at home.
- The athleisure brand Lululemon has launched a program to increase supplier diversity in its non-merchandise purchasing operations.
- The program will focus on U.S. based firms certified as 51% or more owned and operated by underrepresented racial groups, women, persons with disabilities, veterans and those identifying as LGBTQ2IA+.
- Germany wants to intensify cooperation with Japan to help secure supplies of raw materials, as part of a wider effort to make supply chains more resilient and avoid over reliance on sole countries.
- The focus of Japan and Germany is not random, as the German chancellor Olaf Scholz, has previously stated the two nations must work more closely together to counter the influence of economic rivals with different political systems.
Technology & Automation
Sam’s Club aims to modernize supply chain with expansion of automated fulfilment
- Sam’s Club - a wholesale chain - stated it will invest more into its automated fulfilment, as the store prepares to open 30 new stores across the United States over the next few years.
- In 2023, the retailer will open five fulfilment and distribution centres, with start of the art automation and robotics.
- The global market for food automation is estimated at US$10.3 billion in the year 2022 and is projected to reach US$15.1 billion by 2030.
- In the United States, this same market is estimated at $3 Billion in 2022, and in China it’s US$2.7 Billion.
- Robotic process automation is a software technology involved in building and deploying software robots that emulate human actions.
- The global robotics market grew to $41.7 billion in 2021 and is expected to reach $81.4 billion by 2028. Asian Pacific region is expected to lead the global robotics market, due to widescale automation increases in China, India, and Japan.
- AI and automation practices are starting to shift the way industries operate, a Deloitte study found that over 50% of organizations are planning to incorporate AI and automation in 2023.
- A survey of Global 500 companies found that leaders choosing to invest in these business tools and software solutions expect to see significant growth within the next few years.
Sales & Operations
Porsche dealership’s gaffe puts $148K Panamera up for sale for just $18,000
- A Porsche dealership in China was swamped with orders after it incorrectly advertised the price of a 2023 Panamera.
- The first customer who placed the order was contacted by Porsche and negotiated an agreeable outcome, while the rest of the orders were cancelled and refunded.
- British shoppers significantly cut their spending in January to cope with the soaring costs for energy, food and other basic essentials - despite retailers offering steep discounts.
- Total sales rose by 4.2%, down from December’s 6.9%.
- The cost of eggs is skyrocketing, as producers struggle to meet supply - as avian influenza has resulted in the culling of over 58 million birds.
- Policymakers and consumer advocacy groups are urging the federal government to take action against producers who they see as a monopoly of egg giants gouging customers.
- As demand for FedEx shipping services continues to dwindle, the company is planning to modify their operations and networks to reduce billions of dollars in cost.
- The delivery boom of the covid-19 pandemic has faded for FedEx, and the logistics giant is implementing cost cutting measures like service reductions, layoffs and fewer flights.
- Twitter has laid off around 3500 employees globally, since their $44 billion buyout from Elon Musk.
- Now, twitter has shut down its offices in Mumbai and New Delhi and told its staff to work from home. The Bengaluru office remains, and is primarily for engineers. Now - the India team of twitter, only has 3 employees remaining.
Company Focused
Nike is suing Lululemon over shoe designs
- Nike is suing Lululemon for patent infringement on four of the latter’s shoes, stating its suffered economic harm and irreparable injury.
- The two companies have a contentious legal history, Nike sued Lululemon previously in 2022 over patent infringement over Lululemon’s Mirror fitness device.
- Amazon warehouse workers in Coventry - Central England - staged their first ever strike, as staff are unhappy with below inflation pay increase and tough working conditions.
- The strike will last 24 hours - an expected, 300 out of 1000 employees will turn up to the walkout.
- Tesla sales in Germany have increased by 900% compared to January 2022.
- Tesla has consistently seen sales grow in Germany since it arrived on the market.
- Apple posted a decline in quarterly revenues for the first time in 3.5 years, after significant supply chain disruptions in China delayed deliveries of iPhones during the holiday period.
- The worse than expected performance highlighted Apple’s dependency on China for manufacturing.
- Nintendo has released its nine-month earnings report, and officially confirmed that the total hardware sales for the Switch have now exceeded the Game Boy and PS4 - putting it in second place behind the Nintendo DS.
- 55 million units of the Switch have been sold in its lifetime.
Country Focused
China tells Dutch it wants open supply chains amid US chip curbs
- China is having discussions with the Netherlands, to keep supply chains and trade open, a sign Beijing is trying to maneuver amid a US push to cut it off from advanced chip technology.
- China described the act as a safeguard to the international industrial and supply chains.
- The Biden administration is turning to India for help as the U.S. shifts supply chains away from China.
- Officials from both nations participated in meetings, to facilitate technology development and investment in India.
- Retail sales rose 7.4% year on year, beating the 5.2% growth forecasted by Bloomberg.
- December’s growth in retail sales comes amid the festive season and a rush to shop ahead of the GST hike in January.
- Special presidential coordinator Amos Hochstein states the U.S.’s dependency of China is a major concern for the country and the rest of the world.
- China controls 60% of the world’s production of rare earth minerals and materials.
- Singapore’s non-oil exports to its top markets led the wider decline, with exports to China falling by more than 41%, the U.S. by 31.5%, and Hong Kong by more than 55%.
- Oxford senior economist suggested the worst is still not over for Singapore’s export sector.
COVID-19
Merck Covid drug linked to new virus mutations
- Merck & Co’s covid-19 pill is giving rise to new mutations of the virus in some patients.
- Researchers are concerned the drug may create more contagious or health threatening variations of covid.
- Pharmaceutical companies that made billions from the pandemic over the last two years are now up against a steep covid cliff, and investor pressure to spend wisely.
- Analysts estimate sales could fall by two-thirds this year due to built up product inventories.
- EU countries have agreed to phase out their pre-departure covid-19 testing for travelers from China, by the end of February.
- Countries ramped up entry requirements in December and January, as concerns mounted about China’s lack of transparency when reporting on the virus.
- Deaths in state and federal prison across America rose 50% in 2020, as prisons were covid hot spots - the virus rampaged through crowded facilities, aging inmate population and lack of medical care made this a public health crisis.
- The states with the highest mortality rates in 2020 were Alabama, Arkansas, South Carolina, and West Virginia - with 96 deaths per 10,000.
Miscellaneous
Reuters wins George Polk Award for uncovering child labour in Hyundai supply chain
- Reuters reporters won a George Polk Award for reports of the widespread use of child labor among suppliers to Hyundai Motor Co in Alabama.
- The report has prompted at least 10 probs by the U.S. and Alabama authorities into suppliers of Hyundai, and sister brand Kia.
- Warehouse and distribution centers are pushing rates higher, with U.S. storage prices up 1.4% month-over-month.
- An inventory glut will impact consumer prices, with the latest consumer price index data due on Tuesday.
- S. Republican representative Mike Gallagher, met with officials from TikTok to discuss the U.S. data security plans.
- Talks stalled, and Gallagher found their argument unpersuasive and still seeks to ban the app in the United States.
Sources
- https://nypost.com/
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- https://www.barrons.com/
- https://www.bloomberg.com/
- https://www.cnbc.com/
- https://www.cnbctv18.com/
- https://www.euronews.com/
- https://www.forbes.com/
- https://www.ft.com/
- https://www.insidermedia.com/
- https://www.japantimes.co.jp/
- https://www.nasdaq.com/
- https://www.nytimes.com/
- https://www.retailgazette.co.uk/
- https://www.reuters.com/
- https://www.straitstimes.com/
- https://www.supplychaindive.com/
- https://www.supplychaindive.com/
- https://www.teslarati.com/
- https://www.theguardian.com/
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