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 sustainable 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.
GE Appliances Furthers Sustainability Commitment with Fleet of Electric Trucks
GE Appliances (GEA), a Haier company, announced the deployment of electric freight vehicles in Kentucky, Georgia, and Tennessee for use on heavily used routes between U.S. manufacturing plants and logistics centers.
The three-state routes represent critical segments of the company’s supply chain. The initiative is part of GEA’s sustainability goals to increase efficiency, reliability, and lower costs, while providing significant data to assess the environmental benefits of electric vehicles (EV).
GEA has a partnership with Einride, a leader in providing electric and autonomous shipping solutions, which is now in the implementation phase.
Harry Chase, senior director for central materials for GEA, said, “We’ve adopted many environmentally sustainable manufacturing practices to reduce the carbon footprint of our operations,” he said.
“As we invest and expand our U.S. manufacturing to better serve our customers, we will deploy Einride’s EV technology on routes we frequently use to move materials. That’s where use of these vehicles can have a big impact on reducing emissions and costs.”
GEA states that the EV trucks are being used in the following priority locations:
- Georgia: Trucks are routed between the Port of Savannah’s Appalachian Regional Port, GEA’s nearby Southern Logistics Center in Crandall, and Roper Corporation, GEA’s cooking products manufacturing subsidiary in LaFayette.
- Kentucky: Trucks travel from the company’s Kentucky Logistics Center to GEA’s massive Appliance Park campus, carrying parts that make GE, GE Profile, and Café refrigerators.
- Tennessee: Starting next month, the focus will be moving finished Monogram refrigerators from the manufacturing facility to the warehouse to await shipping to customers.
US Foods Announces Science-Based Climate Goal and Investments
US Foods Holding Corp. announced its submission of formal greenhouse gas (GHG) emission reduction targets to the Science Based Targets initiative (SBTi) for approval. With the recent completion of its comprehensive screening of Scope 3 emissions, the company intends to submit a goal to engage key suppliers representing 71% of its emissions from purchased goods and services.
Specifically, US Foods states its commitment and pursuit of SBTi validation for the following goals:
- US Foods will reduce absolute Scope 1 and 2 GHG emission by 32.5% by 2032 from a 2019 base year.
- US Foods commits that 35% of its suppliers by emissions, covering 71% of purchased goods and services, will have science-based targets by 2027.
The company also plans for significant investments in several areas, including:
- Route optimization to reduce miles driven
- Deployment of new vehicle technology
- Investment in alternative fuels, such as compressed natural gas and renewable diesel fuel
- Addition of 30 electric vehicle trucks by 2023.
Kristin Coleman, executive vice president, general counsel and leader of CSR at US Foods, said, “These ongoing investments are a testament to our dedication to reducing our organization’s environmental footprint,” she said. “The expansion of our facility and fleet efficiency initiatives are a critical part of US Foods’ long-range sustainability plans to drive end-to-end change.”
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 sustained 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.
