The Supply Chain Matters blog provides a weekly summary capsule of news reports that have implications for various industry supply chains.
With COVID-19 coronavirus news once again on the rise, we provide this feature to assist our readers in their efforts to keep updated on noteworthy developments. For reference, our previous capsule update was published on September 2nd.
Companies and institutions included in this capsule update include:
U.S. Railcar Company Cutbacks
European Union Pledges Less Reliance on Imported Critical Materials
Container Shipping Volume Increase
India’s Coronavirus Infection Rate on Steep Rise
Amazon Again Announces New Hiring
Both the Associated Press and Business Network CNBC report that online retail platform provider Amazon.com is seeking to hire an additional 33,000 workers during the next few months for reportedly corporate and technology support roles.
An Amazon spokesperson told CNBC that these corporate and technology jobs are located across the U.S. and not just in major cities. The online provider recruited a considerable number of warehouse and customer fulfillment center workers at the initial height of the COVID-19 outbreak in late March across the U.S., but this round of recruiting involves other administrative, management and technology support needs. The online provider indicates that average compensation for its corporate and tech workers are upwards of $150,000.
According to these reports, the company’s total global headcount is expected to reach 1 million employees once this latest hiring is completed. The AP report indicates that the company has received more than 200,000 applications for the currently available jobs.
Major U.S. Railcar Providers Slash Jobs and Evaluate Outsourcing of Manufacturing
The two largest railcar producers in the United States are reportedly slashing costs and evaluating manufacturing outsourcing as a result of declining rail freight volumes and consequent high levels of rail car oversupply brought forward by the COVID-19 pandemic.
The Wall Street Journal reported that industry railcar demand had been declining prior to the pandemic amid global trade tensions but has since further declined. Cited was data indicating that 29 percent of the U.S. rail industry’s fleet of rail cars are currently in storage yards. The industry’s prior boom in transporting U.S. crude oil product, agricultural goods for international export, and of late automobiles, have since declined dramatically.
Dallas based Trinity Industries is reportedly evaluating ways to outsource production of railcars in order to permanently reduce labor costs. The company has identified upwards of $70 million in cost savings through shedding of jobs and elimination of administrative tasks, reportedly the majority of which will be implemented this year. Trinity reported a nearly $207 million operating loss during the second quarter.
Portland Oregon based Greenbrier Companies has reportedly also slashed costs in recent months, eliminating 40 percent of its North American workforce. Upwards of 11 production lines have been closed during the past nine months.
In the end, there is a belief that industry-wide overcapacity might have been exposed by ongoing multi-industry supply chain disruption.
European Union Pledges to Cut Reliance on Imported Raw Materials
Bloomberg reported that the European Union has stepped-up efforts to become less dependent on imported raw materials such as rare earths and lithium, seen as a measure directed at allowing industry supply chains to become more self-sufficient.
The European Commission has vowed to create an alliance by the end of this year to address this reliance challenge, and over time, address the scope to other deemed important raw materials.
The report notes that this effort may be interpreted to be viewed as a more active industrial policy making, a long-time sensitive topic across the trading region, especially among free market and interventionist factions.
Container Shipping Volume Surge
The Wall Street Journal reports that shipping containers bound for U.S. ports are now surging ahead of traditional holiday fulfillment quarter.
Indications from the Port of Los Angeles are that August ‘will more than likely be” the best August in history in terms of port volume. During the week of August 23, dockworkers were reportedly processing 15 container ships in a single day. Vessel booking further indicate that this month (September) will have strong volumes as well.
A London based shipping analyst is quoted as indicating that Asia to U.S. West Coast traffic is 25 percent higher than it was in May and 7 percent higher for the year.
This week’s industry reports now indicate that this surge in inbound container volumes has led to new congestion and strained capacity among inland logistics and distribution lanes serving major U.S. West Coast ports. The WSJ reported this week that intermodal freight railroads and trucking companies that previously had cutback on capacity and resources during the early phases of the pandemic are now struggling to manage this surge of inbound containers. That in-turn is pacing added pressures on freight-rates.
As highlighted in a prior Supply Chain Matters blog, the spot price for shipping a container from Shanghai to the U.S. West Coast reached $3,758 of late, more than double from the start of the year. In a September 4th commentary, we noted that container shipping lines are suddenly benefitting economically from the current surge in volumes, while transportation budgets and service levels may indeed be strained.
While retailers and manufacturers may indeed be supplementing inventories for fourth quarter demand, uncertain at this point is whether a virus resurgence or added layoffs and business cutbacks could once again disrupt product demand.
COVID-19 Outbreaks Across India Exploding at Rapid Rate
Reports indicate that India is now experiencing a coronavirus infection rate averaging more than 80,000 cases per day, currently centered across the large cities of New Delhi and Mumbai, and now reportedly spreading to the country’s interior regions.
In excess of 75,000 deaths have been reported with an infections now exceeding 4.5 million. It is widely believed that the actual infection rate is likely far higher. At the current rate, India could reportedly pass the United States as a leader in infection occurrence.
With infections accelerating, the central government is under increasing pressure to provide added assistance to local governments and healthcare providers that are becoming overwhelmed.
The country instituted lockdown measures in late March to stop the virus spread but reportedly dense slums and populations living in very close quarters are believed to have caused the ongoing resurgence. The lockdown was lifted in June because of concerns for the country’s economy. Reportedly upwards of 120 million people, many depending on daily wages, have been out of work with very little financial stimulus or support available.
A published Bloomberg report indicates in the midst of expanding virus infection:
“Meanwhile, fear of impoverishment is starting to outstrip fear of Covid-19, a trend exacerbated as migrant workers return to the cities. The lockdown and economic slump means many poor families have suffered a double blow: the loss of remittances, plus more mouths to feed at home.”
While citizens have endured what might be considered as high infection rates from many varieties of diseases in such dense and rural population centers, COVID-19 seems to be viewed as yet another disease to be concerned about.
As our readers are likely aware, India serves a key node for industry supply networks, especially pharmaceutical API, pharmaceutical generic drug as well as vaccine production and distribution. The country is further a key provider of information technology development and services for many global based companies.
We extend our heartfelt thoughts and concerns for the people of India.
This concludes our September 11, 2020 COVID-19 Industry Supply Chain News Capsule.
As the news cycle warrants we will continue such updates initially on a bi-weekly cycle.
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