Supply Chain by the Numbers

- June 29, 2017 -

  Supply Chain by the Numbers for Week of June 29, 2017

A Week of Supply Chain Cyber Attacks; New Study Seattle Minimum Wage Hike Reducing Total Worker Pay; Fracking Driving Petrochemical Factory Boom in US; Tax on Freight Bills to Fund Infrastructure?



That is how many container handling facilities that the APM Terminals division of Maersk Group operates at ports around the globe - many of which have now been closed or significantly slowed this week as a result of a coordinated cyber attack that has the entire industry on notice of this new risk to the supply chain. While APM says it has been able to operate with its core systems down in manual mode (using spreadsheets and hand written information) and through use of a third-party booking platform, data provided by shipping software provider CargoSmart, however, shows that many of APM Terminals' 78 facilities across the globe did not receive a vessel call over a 48 hour period. In addition, while vessels at its Maersk Line unit, the world's largest container carrier, are maneuverable, able to communicate and its crews are safe, the Copenhagen-based company wasn't able to accept bookings from clients as of Wednesday, Bloomberg reported. And it wasn't only Maersk that was hit in the supply chain this week. French construction giant Saint Gobain said an attacked shut down some of its factory equipment. FedEx said the worldwide operations and communications systems of its TNT Express unit in Europe have been "significantly" affected by a cyberattack, causing delays in deliveries. This is scary stuff, and only going to get worse.



That's how much workers in Seattle - primarily in the restaurant sector - have on average lost in monthly compensation since the second phase of the city's law ultimately mandating a $15 minimum wage was put into effect. That according to the second study on the matter by the University of Washington, in research that is certain to make some waves. Why did worker pay decline? Because they were given fewer work hours when the second phase of the law increased the minimum from $11 per hour to $13. In fact, the new research found that for every 1% increase in their hourly pay, low-wage workers saw a 3% reduction in the number of hours worked. This after an earlier study from the university found mostly positive results from the first round of increase, from $9.47 to $11, which increased average pay by $72 per month. It seems the employers could easily absorb this first hike, but not the second - which resulted in a total increase of 37% since the law was passed, and with another 20% still to go. Marginal costs and revenues still matter, whatever the Seattle city council does. This in the end affects the supply chain as well, with big changes in the minimum eventually say pushing DC worker pay higher.


$185 Billion

Incredibly, that is the amount of spending on US petrochemical factories under construction or being planned currently, as the fracking boom in oil and natural gas - feedstocks for plastics, chemicals, and other products - has driven down prices for these critical commodities. Dow Chemical is spending $8 billion alone in new and expanded production facilities along the Gulf Coast. "It is a tectonic shift in the hemispherical balance of who makes what to essentially feeding the manufacturing sector," says a Dow executive, relative to the growing dominance of US oil and gas producers. In all, there are some 310 petrochemical factory construction or expansion projects going on in the US right now, according to data from the Chemistry Council, a trade group. The result of those should be that the US becomes a major exporter of plastics, such a pellets use to make finished products. All this changes a trend of chemical companies pulling back from the US in the first decade of the 2000s, in favor of production facilities closer to feedstock supplies in the Middle East. But fracking has changed all that, with US output of oil and gas up 57% in a decade - and sold for low prices to manufacturers. Made in USA indeed.



That is the level of tax that would be levied on US freight bills to generate revenue for infrastructure improvements, according to bipartisan legislation introduced in the US House on June 22 that would create a Freight Transportation Infrastructure Trust Fund from the revenues. The fund would be used to launch two freight-specific grant programs: a formula grant in which each state would receive funds each year based on the amount of existing infrastructure within the state, and a competitive grant program what would be open to all local, regional, and state governments. How much would money such a tax on waybills generate? Only about $8 billion per year, according to one of the so-sponsors, Rep. Alan Lowenthal of California. That seemed low to SCDigest, but it actually appears to likely be quite accurate: The State of Logistics Report released just last week from CSCMP estimated US 2016 expenditures on freight transportation of all sorts at about $918 billion. 1% of that would be around $9 billion, and probably not all of the freight transportation costs cited by CSCMP would be subject to the tax. Unfortunately, that $8 billion the plan would raise is just a drop in the bucket of the hundreds of billions needed on infrastructure spend.