Articles in Category: Logistics

Check out the details below on this new survey by MetalMiner’s sister site, Spend Matters. This survey aims to examine the potential demand for supplier information and enrichment content primarily on the item/material level, including products/components/chemicals that may be subject to regulation or restriction based on their base components, inherent hazards, or intended usage.

This survey will also be used to judge the broader marketplace interest in these new solutions and the findings may be shared, in the aggregate, with a range of organizations as well as with Spend Matters and MetalMiner readers. We look forward to taking our supplier management coverage to a new level, inclusive of broader CSR and regulatory compliance initiatives like Dodd-Frank, and we thank you in advance for providing key insights into the market’s direction.

Also, please don’t forget to join us for next week’s webinar: Conflict Minerals – A Sourcing Manager’s Legislative Guide to Implementing Frank-Dodd

Create your free online surveys with SurveyMonkey, the world’s leading questionnaire tool.

Andrew Browning, executive vice president of Consumer Energy Alliance (CEA), speaks with MetalMiner Editor Lisa Reisman at CEA’s offices in downtown Chicago. In this segment, Browning answers questions about current and future infrastructure for domestic natural gas production, and whether it will help the US gain competitive advantage.

MetalMiner has covered the importance of shale gas and shale oil in recent weeks, which not only have a lot to do with the Western world’s energy independence from OPEC-dominated markets, but how their production contributes to a fast-growing chunk of carbon and stainless steel demand.

MetalMiner recently had the chance to speak with Andrew Browning, CEA’s executive vice president, about the organization’s work and the importance of not only advocating for the continued, responsible use of oil, natural gas and other sources, but for a domestic energy policy tying it all together. In the segment above, Browning addresses the infrastructure challenges of producing natural gas on a mainstream level and what it has to do with US manufacturing and economic growth.

Check back in tomorrow for a discussion on the Keystone XL pipeline.

–Taras Berezowsky

Andrew Browning, executive vice president of Consumer Energy Alliance (CEA), speaks with MetalMiner Editor Lisa Reisman at CEA’s offices in downtown Chicago.

MetalMiner recently had the chance to speak with Andrew Browning, CEA’s executive vice president, about the organization’s work and the importance of not only advocating for the continued, responsible use of oil, natural gas and other sources, but for a domestic energy policy tying it all together. In the segment above, Browning addresses the controversial process of hydraulic fracturing, known in shorthand as “fracking.”

The process is controversial mainly because it has been blamed — perhaps not entirely accurately, according to this Wall Street Journal article — for increased methane levels in drinking water, among other things. While Browning stated that the process of fracking is safe, according to the CEA and the natural gas industry, he also hinted at continued room for improvement.

Check in later today for more on the connection between shale gas production and the growth of the US economy.

–Taras Berezowsky

A year and a half ago, I took aim at a story first reported in the New York Times touting the benefits of the “slow steam initiatives as put in place by leading shippers. “Slow steam refers to the shipping industry initiative designed to slow down ships to create greater fuel savings, as well as reduce greenhouse gas emissions.

A commentator to that original post suggested the initiatives began as a result of EU regulatory oversight and/or increased taxes on fuels used in the shipping industry. In other words, the shipping industry may have suggested the initiative to reduce taxes on fuel. Regardless of motive for the initiative, we suggested back then that manufacturing organizations could expect to receive some of the following “benefits (sarcasm intended):

  1. Manufacturers will need to adjust (upward) inventory levels to account for the longer lead times
  2. Manufacturers will run a higher risk of not meeting demand (e.g. fulfilling customer need)
  3. Finance costs will increase
  4. Increased WIP (work in process) due to decreased throughput

That original post elicited a comprehensive response from the head of corporate sustainability at Maersk Lines. That response suggested that Maersk makes up for the slow-steam initiative with additional value-added services specifically by finding or offsetting “the additional ocean transit elsewhere either on our side (we can do a lot more to increase efficiencies in connection with port arrivals as an example) or on our customers side, as well as by stressing that customers demand reliability “of equal or greater value than speed. But now a new study published by Centrx, BDP International and St. Joseph’s University measures the specific impact felt by manufacturers as a result of the slow steam initiative.

And the Survey Says¦

Of all the different potential impacts on businesses (freight rates, inventory levels, cash flow, production scheduling, customer service, competitive position or no impact), inventory levels impacted a majority of companies (52%), followed by customer service (ed. note: fulfilling customer need) (50%) and finally, production scheduling (45%). I failed to note production scheduling in my original hypothesis on the impact of these initiatives.

Other interesting findings include Asian manufacturers citing decreased customer service levels as their No. 1 supply chain impact, while the Europeans have noted greater impact from cash flow challenges when compared to North American and Asian Pacific manufacturers.

In response to “slow-steam, manufacturers have, according to the survey, undertaken a number of initiatives including: increased inventory levels, added technology to improve supply chain visibility and a greater number of strategy decisions (though the study provides no additional information on that last point).

Of course from a sourcing perspective, it should come as no surprise that manufacturing organizations have thought through how ocean carriers ought to use the fuel savings from these initiatives not surprisingly, the vast majority of firms stated that freight rates should decrease, though nearly half in the Americas noted the cost savings could go toward improved customer service on behalf of the steamship lines.

But perhaps the most interesting finding tells us more about how industry views ‘green policies’ in general: “When asked if the economic benefits of slow steaming are worth the cost and inconvenience, 50% of respondents agreed, 40% disagreed, and 10% had no opinion.”

–Lisa Reisman

Harry Moser is still at it.

The founder of the Reshoring Initiative, whom MetalMiner has interviewed before, recently preached the valuable message of considering total cost of ownership (TCO) when making all kinds of ‘shoring’ decisions (off-, re-, near-) during a recent webinar sponsored by MFG.com.

While much of the webinar felt more times than not like sales pitch (even though Moser’s Total Cost Estimator, an application that can help companies calculate their total cost of offshoring/reshoring, is free) rather than super-meaty intelligence, there were a few takeaways, including cases and examples.

  • Flawed economic models. Moser sees flawed economic models used by a lot of the companies that could or already do use his help. In his estimation, 60 percent of manufacturers apply rudimentary total cost models and ignore 20 percent of the total cost of offshored products. “Faulty data leads to faulty decisions, he said during the webinar.
  • Pay attention to the “new usual suspects. That phrase may sound contradictory, but you all know what they are: Fragility (natural and political disasters), China (wages rising, currency rising), US dollar declining, oil soaring¦It seems harder now than ever to overlook carrying costs, travel costs, risks (natural disasters, political instability, intellectual property, etc.) when you take sourcing into account. (The most chuckle-inducing risk by far? Pirates.) Essentially, non-price-based costs are factoring in more heavily for companies with every successive quarter.
  • Shipping is a big suck. Many wasteful segments of offshoring, including waiting, half-full boats, over-processing, safety stock issues and inspections, center on the logistics of shipping halfway around the world.
  • The GE example. GE brought water-heater production back to a unionized facility in Kentucky from China. Some reasons for this were tax incentives, and ease of design collaboration with workers and a 2-tier contract. On price alone, China was still 30 percent cheaper, but ultimately, adding all the relevant costs made the China cost 6 percent greater than the local reshored cost.

  • Reshoring could solve US debt and unemployment problems. As Moser sees it, successful, broad reshoring efforts could eliminate the trade deficit to the tune of $600 billion a year, add 3 million manufacturing jobs, and 8 million total jobs, effectively cutting the unemployment rate to 4 percent. Quite a forecast and perhaps a bit too optimistic — yet undeniably, reshoring ostensibly means more people put to work domestically.

So why hasn’t TCO factored in as heavily for firms before, as opposed to price-based decisions? Simply put, because it’s easy, Moser said. “Price is readily available,” Moser told me after the webinar. “TCO is not available from any ERP/accounting softwares that I have found.” Also, “supply chain managers and other executives are often bonused on price savings. A recent survey said 43 percent [of them] are bonused on price,” he said. Not to mention that price is “real,” whereas risks generally are less tangible.

More can be found at The Reshoring Initiative, including the TCO Estimator.

–Taras Berezowsky

Borrowing the name of a regular feature on our sister publication Spend Matters, we give you a MetalMiner “Friday Rant.

Source: gargles.net

Ok, all votes are in for the best headline I’ve seen this week. And by “all votes, I mean only mine, because I feel as though nearly anyone and everyone (with any sense of humor) would agree that this Economist head and subhead are unequivocally awesome:

Robots don’t complain.

Or demand higher wages, or kill themselves.

True to form and style, the Economist melds the bare truth with biting wit and sometimes-callous disregard for sensitivity. But in times like this, I guess it helps to tell it like it is.

In this case, the story revolves around the oft-covered exploits of Foxconn in Taiwan, noted for their sheer, mind-blowing assembly productivity for companies’ supply chains (such as Apple’s) and notorious for the suicides committed by burned-out workers. (This is literal and extreme “burn-out, unlike any known in the Western world since, say, the early 20th century.)

The solution to this? Clearly, bring in the robots!

So says Foxconn’s chief exec, Terry Gou, who called for “hiring one million (!) robots for the company by 2013. That’s as many people as the company currently employs one million (!!).  I can barely paint a mental picture of a population slightly bigger than Detroit’s fervidly putting together circuit boards or chips or whatever for iPad 2s.

Robots in contemporary industry are nothing new, and the automobile sector (certainly in the US and Japan) is a shining example of what automation technology can do. We recently theorized on what automation may mean for the productivity and efficiency in the mining sector, especially in politically unstable and outright dangerous regions such in Africa.

Clearly, the big benefit in all these cases: cost savings. Robots won’t cost Gou’s company more money than the wage increases and psychological health consultations that they’re already shelling out for at least that’s the thinking behind the proposal.

Is “bring in the robots the go-to mantra, then, of the 21st century? It seems that costs of supporting human resources in the rush for uber-production have no place in our current society. What if certain swaths of displaced humans don’t have the propensity to move up “into sexy fields such as research, as Gou is reported to have said?

I guess this is just another chapter in how humans and machines continue to live and evolve together, as we keep producing more and more stuff for the bulging population of this planet. But as the article forewarns, perhaps it’s another straw hitting the camel’s back, before the back finally breaks and the Chinese riot in the streets.

–Taras Berezowsky

MetalMiner came across the Reshoring Initiative at a recent IMEC supply chain conference here in Chicago, and has separately touched on reshoring in recent articles. We got in touch with the initiative’s founder, Harry Moser, to clarify just what his firm does, why total cost of ownership (TCO) matters and why it’s important for US metals companies to consider reshoring.

Moser is the retired ex-president of AgieCharmilles, a leading producer of EDM and HSM (High Speed Milling) machine tools; serves on the board of the National Institute of Metalworking Skills (NIMS); and started the Reshoring Initiative in 2009.

(This edited and condensed interview continues from Part Two — check out parts One and Two.)

MM: Have you found anything of note for the metals sector as far as reshoring is concerned?

HM: There are repeated stories about the developing countries putting out metal that wasn’t properly specified, i.e. the specs are wrong meaning you’re not confident in it. Often, incorrect metal is being substituted. Specification [standards aren’t] as tight as in they are in the US. Mold makers here say that Chinese molds don’t last as long.

MM: What are the main risks involved in reshoring?

HM: There’s the risk that the dollar could strengthen. When that happens, offshore production will become relatively more attractive. Unionization is also more of a problem here than in emerging countries but they can be helpful. I’m currently working with IUE-CWA to train people on how to manage reshoring. They have a program for more companies to become lean.

MM: What’s your take on training the next generation for US manufacturing jobs?

HM: The US does not do the best job on training Germany and Switzerland do better. They set up apprenticeships, and we have the shortage of those. Those countries have better trade balances. The biggest problem is recruitment. Everyone wants to be lawyer, doctor, or a reporter to make their money. The US universities have such pull that a third of their students would never go into [technical/manufacturing training programs] … One reason the smart kids don’t get into manufacturing is that they hear about all the work going offshore, so why would they get into it? We need a society committed to bringing work back here, and [make it known] that there’s a future here.

Our thanks to Harry Moser for his time and insight. Moser has worked with the Morey Corporation and Hydraforce, among other companies, in helping them consider reshoring options. For more on how to access the Reshoring Initiative’s Free TCO Estimator, go to their Web site or send an email to harry(dot)moser(at)comcast(dot)net

–Taras Berezowsky

MetalMiner came across the Reshoring Initiative at a recent IMEC supply chain conference here in Chicago, and has separately touched on reshoring in recent articles. We got in touch with the initiative’s founder, Harry Moser, to clarify just what his firm does, why total cost of ownership (TCO) matters and why it’s important for US metals companies to consider reshoring.

Moser is the retired ex-president of AgieCharmilles, a leading producer of EDM and HSM (High Speed Milling) machine tools; serves on the board of the National Institute of Metalworking Skills (NIMS); and started the Reshoring Initiative in 2009.

(This edited and condensed interview continues from Part One — check it out here.)

MetalMiner: An article in the Times tries to make a trend story from the fact that some companies are now investing more in automated equipment than employees. How heavily do labor costs actually factor in here?

Harry Moser: There’s a mistaken belief that labor is only 5 or 8 percent of the total cost of making things, and that’s absolutely wrong. If it were only that much, companies wouldn’t go to China. If it’s ever that low, its direct labor only (meaning the worker who actually touches the work piece). In a low-labor environment, that’s 5 or 10 percent. If you compare US sourcing to Chinese sourcing, you have to factor in direct and indirect workers (forklift operators, foremen, managers, secretaries, service people, etc.). Then the 5 or 10 percent is only in-house labor content at the supplier, it’s not the labor content which is embedded in the components they buy.

Take GM — they make the sheet metal, engines, etc., but almost all other components they buy from somewhere else. That’s material cost. But at the company that made them, a significant percentage of that component is labor. If you’re in China, the components cost less. If you add all that labor up, there’s a factor of 40 or 50 percent of labor costs. That’s what drives people to look to reshoring. The steel, aluminum and oil all cost the same the difference is in the labor. The cost gap is closing.

MM: Your site mentions that one benefit of reshoring is getting operations closer to R&D, which would drive innovation can you talk a little bit about that?

HM: Innovation is enhanced by keeping the engineering close to research and marketing. Pisano and Shih at Harvard Business School have written that if you separate the two of them, you degrade both. Everybody says we should be an innovation economy. If you look at Apple as a model, you have 25,000 employees here in US and 250,000 in China actually making those products Apple, in that sense, is a poor model, and certain imbalances exist.

(The interview concludes in Part Three.)

–Taras Berezowsky

A bit of a lesson in supply chain management of sorts is under the microscope in the aluminum market these days. And it seems to center on the Motor City.

The ‘supply chain’ issue the terribly long wait times for loading out the physical metal from Detroit-based LME warehouses, as reported by Reuters’ Andy Home. Current LME warehouse load-out rates, he writes, are at six months.

(See how this ties into physical metal ETFs in a previous MetalMiner story.)

By the Numbers

According to Reuters, Detroit warehouses hold a whopping 25 percent of the LME warehouse system’s aluminum stock (which, at the end of last month, stood at about 1.17 million tons). The tonnage of Detroit metal awaiting load-out nearly doubled between its 2010 peak and current levels, rising 97 percent. From Sept. 2008 to the start of 2011, those stocks rose 372 percent.

The LME conducted a study to get to the bottom of this issue, which came out last week. They gave several reasons, among them that post-2008, concerns about getting metal into warehouses to prevent supply constraints; and that Detroit warehouse owners were offering incentives and outbidding others for fresh metal.

Weirdly, according to Reuters, aluminum stocks in Detroit are still growing even though industrial demand appears strong. “It has accounted for over 30 percent of all deliveries out and over 40 percent of cancellations in the system this year, Home’s article states. “Right now it also holds 50 percent of all the canceled tonnage in the system. You can see this disparity in the graphs below:

Source: Reuters

Source: Reuters

What It Means for Buyers

“Bad news for you the buyer, particularly if you actually need the metal right now, Home writes.

Because of the warehouse system structure, most buyers must go through Detroit. But the wait times mean that one will have to incur greater costs. This is because, as Home explains, the load-out “queues are essentially nullifying the arbitrage between the LME and the physical market arbitrage ends up costing more because you must pay rent on the metal while it’s in the queue, and the length of wait time, at this point, is a big fat unknown.

Also, in terms of the rest of the total LME tonnage, the authors of the LME study pointed once again to the amounts of aluminum tied up in finance deals (or Ëœcash-and-carries’). Due to the way these work, many warehouses are not involved in finance deals, the warrant cancellation distribution gets skewed to others and that’s where aluminum ends up being concentrated.

The disproportionally large percentage of LME aluminum being held in Detroit is the only reason that these backups may be good for buyers to watch; this could be a driver in the metal price going up. Whether aluminum demand at this point is real or not, when the true rush does hit, this small link in the supply chain could have a pretty big effect.

–Taras Berezowsky

 

Don’t miss the upcoming Harbor Aluminum Conference 2011!

When: June 20 22, 2011

Where: Swissotel Chicago

For: Aluminum-buying organizations, metals traders, ETF investors, et al.

Price: $1665 through April 26; $1765 after

*Discount: All MetalMiner attendees will receive a $200 discount by typing in the letters “MM before their names on the registration form!

Click here to see the brochure and register for the event!

Also, sign-up for a Free Trial to Harbor Aluminum!

[youtube]http://www.youtube.com/watch?v=4t1oLz3wiQk [/youtube]

Joe Coleman, commodity manager at Spain-based Acciona Wind Power, spoke with MetalMiner about what he’s seeing in the steel markets, and how to engage American suppliers in a relationship with Acciona’s wind turbine assembly plant in Iowa. (Video: Taras Berezowsky/MetalMiner)

At first blush, attending a supply chain conference may not exactly scream “Metals! but this specific one hosted by IMEC in Chicago last week certainly has a lot of implications for steel plate and aluminum buyers and suppliers. Of particular note was the lineup of industries that IMEC had invited to be represented: wind energy, aerospace and railroad, and health care.

As our sister site Spend Matters prepares to launch Health Care Matters, the third category of the conference seemed rather enticing, but knowing how much aerospace, rail and increasingly, wind, depend on steel, I decided to focus on the latter route. Not only that, but I soon learned that the government and the businesses in these industries might just improve the landscape for American manufacturing jobs. Nearly 100 percent of the federal funds (American Recovery and Reinvestment Act ARRA and others) apportioned through various programs for rail investment have Buy America clauses attached, said Karen Rae, deputy administrator for the Federal Railroad Administration (FRA), during the conference. (Realistically, the percentage may actually end up being between 60 and 90 percent.)

Rae delineated the dollar amounts for broad investment announced by Secretary of Transportation Ray LaHood, and provided a scope of what’s to come for high-speed, commuter and freight rail travel. Rae said four significant pots with $4 billion (originally turned down by Florida Governor Rick Scott) would be redistributed to other regional projects. $800 million will go to significant upgrades in the Northeast corridor, as well as continued investment of $400 million in the Midwest. The FRA is also looking at improving the Detroit and Chicago link, and Rae expects the creation of 1000 construction jobs in Michigan related to that project. The FRA is also continuing with $300 million to invest in California’s high-speed rail system. Lastly, Rae said, a significant commitment to equipment was made $336 million for pooled purchase in the Midwest for locomotives (seven new ones) and rail cars (48 new ones), added on to previous orders.

Recent data show that the rails are a major part of the US commodity exports. The American Association of Railroads saw year-over-year a drop in rail freight carloads this April, for only the second time since the beginning of the recent economic recovery, according to the Financial Times. However, there is a 94 percent correlation between industrial production and rail traffic, and the numbers showed that “there were several bright spots within this measure grains, metallic ores, chemicals and motor vehicles that correspond to buoyancy for those industries and robust export demand. The good news? Perhaps the National Export Initiative doubling exports over five years will actually have a chance of being achieved. The not-so-good news? When the conference’s keynote speaker and founder of the Reshoring Initiative Harry Moser asked how many attendees were familiar with the export initiative, by my count, only 5 or so out of a couple hundred raised their hands.

Looks like we all government, manufacturers and MetalMiner have some more work to do.

–Taras Berezowsky

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