Welcome to Procurement News, part of our ongoing aggregate news series covering recent supply management headlines and trends pertinent to Chief Procurement Officers and other procurement leaders. Contact us with your news story here.
U.S. Imports Hit Record High in May
Descartes Systems Group announced in its June report of the latest logistics metrics and global shipping analysis that container shipments into the U.S. reached an all-time high in May 2022. The twenty-foot equivalent unit (TEU) volume in May increased 7% to 2,622,465 from April.
Strong consumer spending coupled with a positive U.S. economic outlook contributed to the record monthly trend. However, increased TEU volume only exacerbates existing supply chain complexity and risk.
Chris Jones, EVP Industry & Services at Descartes, said, “May saw imports from China up 5.4% compared to April, as COVID lockdowns began to ease in major manufacturing hubs, especially Shanghai. Compared to May 2021, however, overall imports from China were down 2.1%, highlighting the potential volume still to come in the months ahead,” he said.
“Even as wait times at top U.S. ports continued to decline in May, the new overall high for import volumes, increasing production levels in China, and the approach of peak season indicate there’s the potential for high activity in ocean trade in the second half of the year.”
Global Natural Gas Demand Set for Slow Growth
As Russia’s war in Ukraine continues and pushes up prices and fears of further supply disruptions, expect global natural gas consumption to contract slightly in 2022 and grow slowly over the next 36 months, according to IEA’s latest Gas Market Report.
The firm states that record-high gas prices are depressing demand, causing some users to switch to coal and oil. Atop of high gas prices, concern is growing about gas supplies in Europe going into winter as Russia sharply cuts its gas flows to the region. Natural gas was expected to play a large role to help developing economies meet rising energy demand and transition away from more carbon-intensive fuels, but those plans are now in doubt.
Keisuke Sadamori, director of energy markets and security for IEA, said, “Russia’s unprovoked war in Ukraine is seriously disrupting gas markets that were already showing signs of tightness. We are now seeing inevitable price spikes as countries around the world compete for liquefied natural gas (LNG) shipments, but the most response to today’s global energy crisis is stronger efforts and policies to use energy more efficiently and to accelerate clean energy transitions,” he said.
Target Corporation Puts Inventory Optimization Plan into Action
To create flexibility and agility within a rapidly changing environment, Target Corporation announced inventory optimization plans for the balance of the year. With record growth and market-share gains, the company is planning several actions, including:
- Additional markdowns
- Removal of excess inventory
- Cancelation of orders
- Incremental holding capacity near U.S. ports
- Pricing actions to offset unusually high transportation and fuel costs
- Supplier collaboration to shorten distances and supply chain lead times.
The company stated that incremental holdings near U.S. ports provides needed flexibility and speed in those portions of the supply chain experiencing extreme volatility.
Brian Cornell, chairman and chief executive officer of Target Corporation, said, “Target’s business continues to generate healthy increases in traffic and sales, despite volatility in the macro environment, including shifting consumer buying patterns and rapidly changing operating conditions. Since we reported our first quarter results, we have continued to monitor external conditions and have determined the necessary actions to remain nimble in the current environment,” said Cornell.
“The additional steps we are announcing today will ensure that we deliver for our guests while driving further growth. While these decisions will result in additional costs in the second quarter, we’re confident this rapid response will pay off for our business and our shareholders over time, resulting in improved profitability in the second half of the year and beyond,” he added.
