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  First Thoughts

    Dan Gilmore

    Editor

    Supply Chain Digest



 
Aug, 31, 2017

The Labor (Day) Supply Chain 2017


Not a Good Year for US Labor, but a Couple of Bright Spots in Landscape Unfavorable to Labor and Unions

 

Monday of course marks the annual Labor Day holiday both here and in Canada. Starting in 2011, I decided to do a column on the state of the labor supply chain in conjunction with this event. It was popular enough that I have continued on each year since. It's a lot of work, but well worth it.

It's clear the labor movement in the US continues to weaken. The percent of total US workers that were union members was down in 2016 to 10.7% from 11.1% in 2015, according to the US Bureau of Labor Statistics. Unionization in the private sector was also down, to just 6.4% in 2016, from 6.7% in 2015.

Conversely, union membership in the public sector was 34.4% last year, although for reasons not clear that was also down from a rate of 35.2% in 2015.

Gilmore Says....

In early 2017, Missouri voted to become the 28th right-to-work state, joining Kentucky earlier in the year and Michigan, Wisconsin and Indiana in prior years.

What do you say?

Click here to send us your comments
 

All this of course continues the powerful long-term trend of a steady decline since the Labor Department started reporting on it in 1983, when overall unionization was at 20.1% and at 16.8% in the private sector. Those numbers themselves were well down from previous decades before this metric was tracked by the government.

I will note part of that decline in private sector unionization rates is due to the loss of some 7 million US manufacturing jobs since 1983, as manufacturing is clearly more organized than the service sector, but that is far from the only factor. Unions have clearly lost appeal to many, especially in the South, where many new manufacturing factories have been headed for some two decades.

Together, there were 14.5 million private and public sector employees in a union in 2016, down from 14.8 million 2015, and well down from 17.7 million in 1983 when the total US labor force was much smaller.

There are also huge differences between states. Five states had union membership rates below 5% in 2016: South Carolina (1.6%), North Carolina (3.0%), Arkansas (3.9%) Georgia (3.9%), and Texas (4.0%). Conversely, just one state had union membership rates over 20 percent in 2016: New York at 23.6%. Other high union states are Hawaii (19.9%), Alaska (18.5%), Connecticut (17.5%) and Washington (17.4%).

All told, union membership rates decreased over the year in 31 states and the District of Columbia, increased in 16 states, and were unchanged in 3 states.

The number of US manufacturing workers that are union members fell in 2016 to just 8.8% from 9.4% in 2015 - that is quite a drop. Those numbers are a bit lower than the percent of workers covered by union contracts, such as those that opt out in right-to-work states, with coverage of 9.6% last year and 10.0% in 2015.

Ponder that - less than one in 11 US manufacturing workers are unionized today, versus 17.5% in 1994. According to unionstats.com, 38% of private sector manufacturing workers were in unions as recently as 1973.

Don't think this downward union trend is only a US phenomenon. Unionization rates in labor-loving Sweden, for example, have fallen from about 90% in the mid-1990s to around 70% today. Many other countries mirror US unionization rates more closely. Unionization in France - generally considered very supportive of labor - almost exactly follow the US patterns, and are actually just below the US in the percent of all workers unionized. Union membership is higher in the UK, at 23.5%, but that's down from more like 40% in the mid-1990s. The drop in the UK's total number of union members in 2016 was 4.3%, the largest annual drop recorded since the measure began in 1995.

In July, there were about 8.72 million non-supervisory manufacturing workers in the US, up solidly from 8.6 million a year ago. That is also up from the bottom of the recession, when we fell to about 8 million shop floor workers, meaning we've added about 720,000 manufacturing jobs since then. But in 2004, there were just over 10 million factory floor workers - we're down almost 1.3 million positions from that level, and much more from the 1990s.

That obviously puts general downward pressure on wages, as the demand for workers is simply much lower than the supply, though the lack of wage growth isn't nearly as bad as I would have guessed, based on all the media reports.

According to the BLS, the average hourly wage (I believe including benefits) for shop floor manufacturing workers was about $20.94 in July, up from $20.47 in 2016, or about 2.2% growth year over year - not too bad.

That's also up from the $17.29 or so per hour in July 2007, or a rise of 23% over 10 years. That's a cumulative growth rate of 1.93%. So wages have risen modestly, about equal with inflation, and thus not enough to improve a worker's lifestyle, especially while healthcare costs take more and more of the paycheck.

Meanwhile, there has been very steady growth in non-supervisory warehouse jobs, though they represent just a tiny fraction of manufacturing positions. There are now about 837,000 warehouse workers in the US, up sharply from some 792,000 in July 2016, an increase of 5.6%. The number is substantially higher than the 574,000 warehouse in 2007, a rise of 38% over 10 years - but even with that growth they only represent about 9.6% of manufacturing floor jobs. That surprises me, actually, though that percentage continues to slowly tick up. (I'll note some jobs at plant warehouses may be counted as manufacturing positions.)

In terms of wages, average non-supervisory pay for warehouse workers was $16.95 in June, up an incredibly sharp 11.2% year over year. That's also about 19% less than average manufacturing rate - but the gap is shrinking. It was 23% last year. Pay for warehouse workers was at $15.23 in June 2007, meaning DC wages have risen only 11.2% over the past decade. Given the growth in jobs, that is surprising, though the recent trend is obviously for faster wage growth as distributors strain to fill positions. We've heard of $18+ per hour in some tight markets.

And that before Amazon's move to hire an amazing 50,000 fulfillment center workers by year's end.

OK, those are some of the key data points.

Now let's look at some of the important events and trends relative to labor over the past year.

Once again, unions lost in the two most high profile unionization efforts - both in the South.
The first was at the Boeing factory built in 2014 with some controversy (for moving the production of a new aircraft from Seattle). This was an interesting situation, as then governor Nicky Haley basically said "Unions leave South Carolina, we don't want you hear," in a sentiment that for example would likely not be offered in New Jersey.

 

But the union came any way, and eventually organized a vote for representation in February. It wasn't even close. Out of the approximately 3,000 workers eligible to vote, 2,097 said no to joining the International Association of Machinists. That was an amazing 74% of the 2,828 votes cast. You have to wonder why the union pressed ahead for the vote.

More recently, the United Auto Workers continued its quixotic quest to unionize even just one of the foreign auto assembly plants in the South, after failing several times before, most notably at a Volkswagen plant in Tennessee in 2014, when the union went down in flames despite management seeming to actually support unionization.

This year it was a Nissan plant in Mississippi, which again soundly defeated the unionization proposal, with more than 63% of Nissan plant workers saying No.

"It certainly is a huge setback. It's a challenge. It shows how incredibly hard it is to organize both in the South and at international firms," Kristin Dziczek, director of the labor and industry group at the Center for Automotive Research in Ann Arbor, said at the time.

Also a setback for labor was another increase this year in the number of so-called right-to-work states, in which employees can't be compelled to join unions. Once mostly found only in Southern and some Western states, recently states in the Midwest have jumped on the bandwagon despite furious opposition from labor.

In early 2017, Missouri voted to become the 28th right-to-work state, joining Kentucky earlier in the year and Michigan, Wisconsin and Indiana in prior years. There is also right-to-work activity in the Ohio and New Hampshire legislatures.

The $15 minimum wage movement went mostly nowhere in the past year, including one negative analysis of the impact of Seattle's mandate on jobs.

 

So it wasn't a good year for labor, but there we a couple of bright spots.

The UAW can be said to have mostly won with its new contract after a bitter 32-day strike at a Kohler factory in Wisconsin in December. The union didn't get everything it wanted, but did achieve a boost in wages, minimized the employee impact of rising health care costs, and improved pension benefits -better than many contracts outside the Longshoremen these days.

There were some wins here and there in the never ending debate on whether contract drivers really should be classified as employees, including a Federal court judge in North Carolina granting permission in July to a group of Uber drivers challenging the company's classification structure to band together in a nationwide legal action. Watch out trucking firms.

After a powerful article in USA Today this summer highlighting what can accurately be termed abuse of some contract drivers by trucking companies, especially for drayage service in California, some major shippers (e.g., Costco) are looking at ending relationships with some of these carriers.


There's a lot more, but I am well out of space. The issue for labor is not yet "here come the robots," but will b
e soon.

Any reaction to our summary of the labor supply chain 2017? Let us know your thoughts at the Feedback section below.


Your Comments/Feedback

Srihari

Senior Consultant, Infosys
Posted on: May, 22 2016
Great article. I am a little suprised not to see BNSF in the mix while I understand their financial mode/operation is a little different. 

That would only give a complete perspective with all the players in the pool.

Mike O'Brien

Senior editor, Access Intelligence
Posted on: May, 26 2016
Surprised to see Home Depot fall off the list; thought they were winning with Sync?

Julie Leonard

Marketing Director, Inovity
Posted on: Jun, 27 2016
Using the right tool for the right job has always been a best practice and one of the reasons, we feel, that RFID has never taken off in the DC as exponentially as pundits have been forecasting since 2006. While these results may seem surprising to those solely focused on barcode scanning, the adoption of multi-modal technologies in the DC makes perfect sense for greater worker efficiency and productivity.

Carsten Baumann

Strategic Alliance Manager, Schneider Electric
Posted on: Aug, 19 2016

The IoT Platform in this year's (2016) Hype Cycle is on the ascending side, entering the "Peak of Inflated Expectation" area. How does this compare to the IoT positions of the previous years, which have already peaked in 2015? Isn't this contradicting in itself?

Editor's Note: 

You are right, Internet of Things (IoT) was at the top of the Garter new technology hype curve not long ago. As you noted, however, this time the placement was for “IoT Platforms,” a category of software tools from a good number of vendors to manage connectivity, data communications and more with IoT-enabled devices in the field.

So, this is different fro IoT generally, though a company deploying connected things obviously needs some kind of platform – hoe grown or acquired – to manage those functions.

Why IoT generically is not on the curve this year I wondered myself.

 

 

Jo Ann Tudtud-Navalta

Materials Management Manager, Chong Hua Hospital, Cebu City, Philippines
Posted on: Aug, 21 2016

I agree totally with Mr. Schneider.

I have always lived by "put it in writing" all my work life.  I am a firm believer of the many benefits of putting everything in writing and I try to teach it to as many people as I can.

This "putting in writing" can also be used for almost anything else.  Here are some general benefits (only some) of "putting in writing":

1. Everything is better understood between parties involved.  There are lots of people types who need something visual to improve their understanding.
2. Everyone can read to review and correct anything misunderstood.  This will ensure that all parties concerned confirm the details of the agreements as correct.  This is further enhanced by having all parties involved sign off on a hard copy or confirm via reply email.
3. Everything has a proof.  Not to belittle the element of trust among parties involved, it is always safest to have tangible proof of what was agreed on.
4. There will be a document to refer to at any time by any one who needs clarification.
5. The documentation can be useful historical data for any future endeavor.  It provides inputs for better decisions on related situations in the future.
6. This can also be compiled and used to teach future new team members.  "Learn from the past" it is said.

There are many more benefits.  Mr. Schneider is very correct about his call to "put it in writing".





Sandy Montalbano

Consultant, Reshoring Initiative
Posted on: Aug, 24 2016
U.S. companies are reshoring and foreign companies are investing in U.S. locations to be in close proximity to the U.S. market for customer responsiveness, flexibility, quality control, and for the positive branding of "Made in USA".

Reshoring including FDI balanced offshoring in 2015 as it did in 2014. In comparison, in 2000-2007 the U.S. lost net about 200,000 manufacturing jobs per year to offshoring. That is huge progress to celebrate!

The Reshoring Initiative Can Help. In order to help companies decide objectively to reshore manufacturing back to the U.S. or offshore, the nonprofit Reshoring Initiative's free Total Cost of Ownership Estimator can help corporations calculate the real P&L impact of reshoring or offshoring. http://www.reshorenow.org/TCO_Estimator.cfm

Robert

Transportation Manager, N/A
Posted on: Aug, 30 2016
 Good article!  I am sending this to my colleagues who work with me.  We have to keep this in mind.  Thanks!

Ian Jansen

Mr, NHLS
Posted on: Sep, 14 2016
SCM is all about getting the order delivered to the Customer on date/ time requested because happy Customers = Revenue. Using the right tools to do the right job is important and SCM is heavily dependent on sophisticated ERP systems to get right real data info ASP.

I've worked in a DC with more than 400,000 line items and measured the Productivity of Pickers by how many "picks" per day.

I've learned that one doesn't have to remind Germany about your EDI orders.

Don Benson

Partner, Warehouse Coach
Posted on: Sep, 15 2016
Challenge - to build and sustain effective relationships at the level of the organizations that are responsible for effectively coordinating and colaborating in an otherwise highly competitive environment 

Jade

Admin, Fulfillment Logistics UK Ltd
Posted on: Oct, 02 2016
Of course we all need to up our game. We need to move with the times, and always be one step ahead of what the future will bring.

Mike Dargis

President of asset-based carrier based in the Midwest, Zip Xpress Inc. (at ZipXpress.net)
Posted on: Oct, 03 2016
Thanks for the article, but I know there's a lot more to this issue than just the pay rates. Please check out my blogs on the subject at www.zipxpress.net.

Blaine

Inventory Specialist, Syncron
Posted on: Nov, 16 2016
Lora, great article! I agree that companies choose the 'safe' solution more often than not. My solution is a bolt-on for legacy ERP's and we even face challeneges of customer adoption. Most like to play it safe and choose an ERP upgrade, which is more costly, time consuming, and has lower ROI across the board. Would love to learn more about your company, we are always looking for partnerships.

Blaine
blaine.schultz@syncron.com

Bob McIntyre

National Account Executive, DBK Concepts LLC
Posted on: Nov, 21 2016
This is a game changer in GE's production and prototyping.  It also has huge implications across the GE global supply chain with regard to the management of their support and spare parts network. 

Kai Furmans

Professor, KIT
Posted on: May, 22 2017
I am referencing to the comment that leasing of warehousing equipment (beyond forklift trucks) is a vision for 2030.
Just recently in Europe, such a business model has started, see here: https://next-intralogistics.de/

I am following with a lot of interest, how the business develops.

Stuart Rosenberg

Supply Chain Consultant, First Choice Supply Chain
Posted on: Jun, 05 2017
If we limit the standard on judging or determining the best supply chain to just three calculations it does not tell the entire picture.  Financial performance metrics are valuable as they capture the economic consequences of business decisions.  But supply chain managers make decsions and use organizational resources that impact a company's financial well being.  Where is a firm's earnings over a period of time determined by sales less product costs and general/adminsitrative costs?  Where is the metric for determining the sources and uses of cash from three perspectives - operational, investment and financial?  Where are these supply chain metrics: on-time delivery, lead time, response time to customers, product returns, procurement costs, network distance, inventory carrying costs, forecasting accuracy, sourcing time, etc,.  Without knowing the results of all these supply chain calculations the there must be a question as to the accuracy of the 25 top supply chains.

Dustin Calitz

Project Commercialization Manager, Mondelez
Posted on: Jun, 06 2017
I feel this ranking misses the mark in SC. It does not seem to consider a key indicator in days inventory on hand, which is key to determining a SC company's ability to forecast, manage inventory costs and reduce aged stock. In additiion I realize it's difficult to understand what goes into the customer survey, but would I assume specific metrics are being asked. For examples customer's opinion on service level differentiation and the ability to deliver the right product on time, which should then be allocated a bigger weighting than 10%. It would also be interesting to take a view of the above list's SKU portfolio complexity, seasonality and launches/promotions. I would again assume some companies on the list above have a far more complex SC to manage and lead, ultimately requiring a lot more innovation within a SC to stay ahead of competitors, and ultimately satisfy their customers demands.  I understand above metrics are difficult to measure, as mentioned in the article, but they somehow need to be considered to give a true reflection. 

Michael Hurd

Lean Consultant, Unemployed
Posted on: Jun, 10 2017

A Very Good Article...

While some feel that lean is a scam that pushes for more out of the personnel and out of the companies through reduction of waste and adding value for the customer, there are several things to remember:

1) Lean methodologies are designed and implemented to reduce time wasting, so this may seem that you are working harder as an employee.

2) Lean methdoligies only work when everyone from the janitor to the owner of the company get involved and back the program.

3) Lean methods are there to make you work smarter not harder, although it may feel you are working harder.

4) YES... Sometimes lean methodologies fail! This is due to project overun or taking on too large a problem and trying to fix it all in one go and not taking the smaller problems that are associated with the large problem and fixing them first. Sometimes fixing the small problems leads to resolution of the larger problem.

Akhil

Director Supply Chain , skuchain
Posted on: Jul, 31 2017
The Supply Chain technology is not considered a problem because traditionally supply chains are thought to be cost centres unlike sales functions. The tendency, in general, to limit expenses and cost cutting on upgrades for technology and for talent have been hindering progress for the businesses. Supply chains lack real time visbility and above all trust across the value chain (not that the participants are dishonest) rather it's about the cascading effects referred to as the bull-whip effect which causes higher magnitudes of disruptions. 

Supply chain real time information should top the list .

Another problem is that of multi homing as so much data is available across several feeds of IOT/Email/Internet /Mobility/ERP that organisations tend to have issues around finding a single platform to collate them for meaning analysis. 

Blockchain (if deployed appropriately) can be a great solution for solving the issues around the supply chain.

Mike Ledyard

Vested Program Faculty, Vested Way / University ofTennessee
Posted on: Aug, 04 2017
Excellent article.  It very much points to the need for Shared Risk / Shared Reward as we teach at Vested.  Suppliers will respond when they are made part of the team, and they have a lot to bring to the game.  The service provider is the subject matter expert in the services provided, and in an excellent position to enhance the capabilities and services offered by the shipper.

Andrew Downard

Managing Director, AD Supply Chain Group Pty Ltd
Posted on: Aug, 05 2017
As the article points out it is not a lack of technology that is holding back performance but rather a failure to form the right sort of relationships.  As well as the length of such relatiohships, practitioners should consider employing arrangements that incentivise both parties to innovate and deliver levels of performance and profit that neither thought possible.  By far the best model I have come across to achieve this is the Vested Outsourcing model developed by researchers from the University of Tennessee.  See www.vestedway.com for information on the model and case studies that show how others have benefited from creating a Vested deal.

Najma

logistics, threelineshipping
Posted on: Aug, 23 2017
Very informational article. The major focus of logistics is on e-commerce. There is a need to optimize every component of logistics by following the latest trends and technologies. Thanks for uploading this article.
 
 
 
 

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