In many retail and consumer-focused industry supply chains, the last three months of the calendar year represent the peak point of global supply chain resources as companies position for the end-of-year holiday buying season. The open question, however, is what to expect this year?
This is the period where supply chains are planning, procuring and positioning inventories for peak holiday buying and promotions in the coming months, and a lot of logistical volumes should be moving from Asia toward key market consumption regions. Then again, most of this year’s growth has come from emerging markets, and the question is whether holiday peak movement reverses, from west to Asia.
Traditional financial media has been focused on the executive commentary provided in the recent quarterly operating results from both FedEx and UPS. Scott Davis, UPS chairmen has been quoted that he expects “slow growth” to continue but does not anticipate another global recession. UPS continues to predict record healthy earnings in 2011, a “solid” upcoming holiday season but the company admits that it has observed shipment volumes in the U.S. “basically stall” during the recent quarter. Also noted, was that UPS international air freight originating from Asia has experienced a noteworthy slowdown.
FedEx experienced strong performance from its ground shipment segments in its latest quarter, but it, too, pointed to significant slowdowns in international air movements from Asia, so much so, that it has taken action to throttle back available airlift capacity. FedEx chairmen Fred Smith was a bit more cautious in his commentary, noting that while FedEx is not anticipating a “double-dip”, the company expects slower international economic growth. A key determinant noted was consumer sentiment.
So what is really occurring across global supply chains?
Consumer confidence seems to be in the dumper, since continuous news reports of global economic collapse and dysfunctional legislative actions in the U.S. and Europe have not provided any sense of optimism. China has experience significant spikes in inflation and Chinese consumers are reeling from larger increases in food and staples. The Chinese government is aggressively ratcheting-down China’s economy in fears of vast over-heating.
On the supply side, scanning the key China PMI index, it increased slightly in August to 50.9 from 50.7 in July, with unremarkable export order volume. That does not reflect that any significant ramp-up in production activities has occurred as yet. Global trade intelligence platform vendor Panjiva, who predominantly tracks water borne shipments, however, indicated a steady seasonal growth in August trade activity. The ports of Long Beach and Seattle, major transfer points for Asia to U.S. ocean container traffic each reported unremarkable inbound volumes, while the port of Savannah on the east coast recorded the lowest volumes since February.
The U.S. focused ISM PMI for August came in at 50.6, down from 50.3 in July, with the index for new orders only slightly up. Inventories however are spiking, which could be either good or bad, depending on seasonal holiday buying demand in the coming weeks.
In essence, the global supply chain picture appears very confused in terms of planning and ramp-up and teams need to be focused on various business scenarios.
Some readers may disagree, while others may add more insight as to what’s really occurring, and how to best prepare for efficiently fulfilling product and service demand for the remainder of 2011.
Supply Chain Matters offers two alternatives for sharing perspectives and current thinking.
Readers can respond in the comments section attached to this commentary and share what planning assumptions your teams are implementing for end-of-year plans to fulfill customer demand
Alternatively, readers can respond to our new interactive poll which is located in the right-hand panel. When we gather a significant sample of responses, we will report the findings.
In the meantime, insure that your sales and operations planning teams are keen to plan for various business scenarios since the end-of-year picture seems unpredictable.