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Supply Chain by the Numbers

- March 1, 2017 -

  Supply Chain by the Numbers for Week of March 1, 2017

Cost of Manufacturing Regulations is Very High, NAM CEO Says; Wendy's Replacing Employees with Kiosks; Many Years Since the US has Seen 3% Economic Growth; Jersey Warehouse Marker Red Hot



That's how many federal regulations US manufacturing companies operate under, according to Jay Timmons, CEO of the National Association of Manufacturers (NAM). Timmons has been citing that number during a six-city “state of US manufacturing” tour that wrapped up this week, after stops in Austin, New York City, Detroit, Columbus, Pittsburgh, and Madison. Timmons said that the cost of compliance for that veritable mountain of regulations is $35,000 per employee per year at small manufacturers. Reduce that burden, Timmons said, and many jobs in manufacturing will be created. NAM is taking advantage of the Trump administration's focus on reviving US manufacturing to tout its case, focusing on what it calls the three “big ticket” issues for manufacturers: regulatory and tax reform and infrastructure improvements, all said to be on the Trump agenda. The Timmons tour has involved a presentation to an audience in each of the six cities, plus visits to several manufacturers in each area.




That's how many Wendy's restaurants in the US are soon going to be outfitted with automated kiosks for customer ordering, according to reports this week. Each of those stores is likely to be equipped with three of the machines, at a cost of about $15,000 total. The move comes in response to rising wages in the fast food sector, driven in many cases by local or state laws increasing the minimum wage substantially in many jurisdictions. "Last year was tough – 5% wage inflation," said Bob Wright, Wendy's chief operating officer, during his presentation to investors and analysts last week. He added that the company expects wages to rise 4%more in 2017. "But the real question is what are we doing about it?" Wright said. The answer: customer ordering through the kiosks, which will reduce the need for employees. Wright said the investment by the stores will have a payback of less than two years. Customers will still be able to order at the counter if they want, however, Wendy's says. Robotic burger flippers have to be just around the corner. Be careful what you wish for, higher minimum wage advocates.


11 Million

That's how many square feet of warehouse space that is currently under construction in New Jersey, the highest level since 2000, as developers and shippers take advantage of the state's central location in the Northeast and growing demand for distribution space for ecommerce fulfillment. Average asking rents for industrial space in the last quarter of 2016 rose to $6.73 a square foot, a 14% increase compared with a year earlier, according to real-estate services firm Transwestern. The state's industrial vacancy rate of 5.5% was at its lowest level since 2000. According to an article in the Wall Street Journal this week, demand is also driving developers to revive older manufacturing sites and build ground-up projects in places of the state that haven't seen new construction in a while, such as the 2 million square feet of space under construction is along the Interstate 287 corridor. As rents and competition for dwindling space near port facilities in Newark and Elizabeth continue to rise, tenants are broadening their searches for less expensive and more efficient modern space further south and west in the state, the WSJ says.



Amazingly, that is how many years it has been since the US last saw real GDP growth of more than 3% for a year, as the Department of Commerce issued its final numbers for Q4 and full year 2016 gains in the economy. The previous estimate of Q4 GDP was kept at 1.9% growth, which represents the annualized rate of real (net of inflation) economic increase in the quarter. That weak number for Q4 follows a very weak 0.8% growth in Q1, another weak quarter of 1.4% growth in Q2, and a reasonably strong 3.3% in Q3, all of which left the full 2016 growth rate at just 1.6%. The historical yearly average is 3.3%, and the US has not exceed the 3% growth level since 2005. The lack of stronger growth is a key factor in the large budget deficits, as tax receipts of course rise nicely along with economic growth.

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