Supply Chain by the Numbers

- Oct. 26, 2017 -

  Supply Chain by the Numbers for Week of Oct. 26, 2017

Distribution Centers Bringing Many Jobs to Small US Markets; Truck Driver Shortage to be Worst Ever by End of Year; Amazon has Huge Number of Bids for HQ2; Container Volumes - and Capacity - on the Rise



That's the current level of distribution center jobs in the two-county area that includes Bethlehem, PA, up from 5200 in 2010, some of those jobs in facilities built on properties that once contained Bethlehem Steel plants. In fact, this story is being repeated itself all over the country, with DC jobs often coming to rural or former rust belt areas and leading to improvements in local economies, according to a story this week in the New York Times. In another example, in Bullitt County, KY, south of Louisville, distribution center employment surged to 6,000 in 2017 from 1,200 in 2010, according to the Labor Department. "These fulfillment center jobs are not being created in the tech hubs that were growing before. We've broadened the winner's circle," Michael Mandel, chief economic strategist at the Progressive Policy Institute, told the Times. All told, since 2010 US DCs have added workers at four times the rate of overall job growth. "These are secure jobs," says one Bethlehem area worker. "With the steel, you didn't know if you would have a job the next day."



That is how many metro areas have submitted proposals to be selected as the location for Amazon's second headquarters campus, the on-line giant said this week after the deadline for bids was reached. The prize is a big one – as many as 50,000 jobs at HQ2 over time, and many thousands in the very short term. The proposals come from 54 states, provinces, districts and territories, and included Puerto Rico and several locations in Mexico and Canada. Amazon released no other details, but many bidders did. Boston, for example, boasted of the state's strong higher education network, with 125 colleges and universities in the area. Crowded New York City said that it was proposing four different locations: Midtown West, Long Island City, the Brooklyn Tech Triangle and lower Manhattan. And incentives will be key of course. Newark last week said it would offer a package of $7 billion over more than a decade to land the headquarters – though a bid from Toronto came with no incentives. Stonecrest, GA near Atlanta voted to de-annex 345 acres of land to use it to form the city of Amazon if it wins the bidding war. Amazon has said it would make a decision on the new location next year from a short list culled from the 238 bidders, and that it hopes to move into a phase-one site as early as 2019. There has really never been anything quite like this process in terms of scale and attention.



That will be the shortage of US truck drivers by the end of the year, up from 36,500 in 2016, according to a new detailed analysis from American Trucking Associations' chief economist Bob Costello. Interestingly though, the 2016 level was actually down from the 2015 figure of 45,000. The projected shortfall of 50,000 drivers by the end of this year would stand as "the highest level on record," according to the report, with the rise attributed to recovering freight volumes and the mandate for electronic logging devices to track drivers' hours, which will prevent drivers at smaller carriers and independents from cheating on hours of service rules (most large carriers already use electronic loggers). What's more, Costello says if nothing much changes, the shortage could jump to 174,.000 by 2026 – though the ATA and others have predicted potential shortages of 100,000+ drivers in the past without that worst case scenario ever really showing up. Still, there is no question that the urgency on drivers has ramped up significantly in recent months after laying low for awhile, with JB Hunt, for example, recently telling its truckload customers to expect short term rate hikes of 10% or more, primarily due to a shortage of drivers. Relatedly, the American Transportation Research Institute just announced findings that driver wages and benefits increased 5% and 18%, respectively, over the past year, putting driver cost as the largest single expense for carriers for the second year in a row, again ahead of the formerly perennial top cost of fuel.



That is the expected to be the multiplier of global container shipping growth relative to global GDP growth in 2017, according to new estimates from the maritime analysts at Alphaliner. In other words, container traffic will increase about 70% faster than economic growth. Prior to 2008, that would have been at the low end of the spectrum, with container volume growth often coming in 2-3 times global GDP growth. But that really changed after the Great Recession, and the recent downward trend saw the multiplier actually drop to below 1.0 in the previous two years. In other words, the global economy grew faster than the number of containers on the seas. That is generally good news from a global economic perspective, but may still not translate into much higher rates for carriers. The global fleet is predicted to expand by 5.8% in 2018, a percentage point above forecasted container growth of 4.8%. "Carriers will need to keep an eye on 2018, as the influx of new containerships will continue to put pressure on freight rates next year," Alphaliner notes.