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Supply Chain by the Numbers

- September 5, 2014 -

  Supply Chain by the Numbers for Week of Sept. 5, 2014

Tesla Motors will Build Giant "Gigafactory" in Nevada; US Companies Letting Production Equipment Get Old; Natural Gas Truck Growth Behind Expectations; What's the Nation's Biggest Manufacturing Metro Area by Jobs?


10 Million

Astoundingly, the potential size in square feet of the new "Gigafactory" that Tesla Motors will build to produce batteries for its vehicles, and which will be located outside of Reno, NV, the company announced this week. If the facility approaches anywhere near that size, it will make it the largest factory in the US. Tesla hopes to reduce battery costs by 30% from the scale of the facility, going a long way towards enabling the company to produce a new lower priced line of all-electric vehicles. Nevada was chosen to build the new factory for a number of reasons, one of which is that it has the only currently active lithium mine in the US - and lithium is a key input in battery making, while earlier Tesla committed to sourcing all mineral requirements from US sources. The factory will cost some $5 billion, eventually employ some 6500 workers, and is expected to open in 2017. Green energy (solar, wind) was also a factor in Nevada's selection.




Number of years old on average of US industrial equipment - the highest such average since 1938. That according to a new report from Morgan Stanley out this week, which also said that the growth in all capital spending rose just 3% in 2013, and is expected to be only 3.8% this year, far below the long run average of 8% growth. Of course, this slow down comes even as corporate cash levels continue to pile up at record levels - and as US companies seem much more interested in spending that cash hoard on acquisitions rather than plant and equipment. What's more, even as US manufacturing output continues to grow by most measures, US spending on machine tools actually fell 2.7% in the first half of this year, according to the Association for Manufacturing Technology. Of course, the lack of such capital spending is often cited as a key factor in the weakness of the overall economic recovery since the Great Recession. At some point though, experts note that aging equipment really will have to be replaced, and expect capital spending to rebound. But they said that a few years ago as well, and companies continued to sit on their wallets.


That's the number of workers in manufacturing jobs in Los Angeles and its southern suburbs of Long Beach, Santa Ana, etc., making it the largest such metro region for manufacturing jobs in the US, according to data this week from Los Angeles County Economic Development Corp. The area is known for factories that make transportation equipment, apparel, fabricated metal products, computers and electronics. That's the good news for LA. The bad news: even in the economic and manufacturing recovery in the US, that job total is down 14,400 workers since July 2013, the result of offshoring and automation. After the south LA area come Chicago and the surrounding cities, with 408,100 manufacturing workers, and then New York, northern New Jersey and Long Island, where there are 356,100 manufacturing jobs. But finding qualified workers has been difficult in Los Angeles, said James Tschortner, CEO of manufacturer Goldbrecht-Systems USA of Culver City, south of LA. "The education level and skill sets of the workers here is not ideal," he said. "We've been looking at using more machines."



That the number of heavy duty natural gas tractors that will be sold in the US this year, according to the analysts at Power Systems Research. That’s up 20% from 2013 sales of 8730 – but far below the 16,000 or so many thought would be purchased by carriers and private fleets in 2014. Meanwhile, North American sales of diesel-powered trucks are forecast to rise 17% to 281,620 this year, dwarfing nat gas truck sales. What is happening? There are a variety of factors in the relatively weak nat gas truck sales number, from the much higher initial price ($50,000+ more), the more rapid turnover of trucks in a fleet, which at every 3 to 4 years means just when a carrier gets its payback it may sell the truck, and most interesting of all current fuel surcharge practices, which in effect will often pass the fuel savings obtained by the carrier to achieve its ROI back to shippers in the form or lower surcharges.

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