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September 1, 2016 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet The Labor (Day) Supply Chain 2016 bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic & by the Numbers for the Week bullet Holste's Blog/Distribution Digest
bullet Cartoon Caption Contest Continues bullet Trivia      bullet Feedback
bullet New Supply Chain by Design and Expert Insight Column bullet New Videocast and On Demand Videocasts
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Supply Chain Graphic of the Week
The Factory Robots Keep Coming


Where have are all the Containers Gone?

China Orders Lower Logistics Costs
Food Prices Continue to Fall
Target Reduces Out-of-Stocks by 50% Through Vendor Management



Innovation in 3PL Capabilities: Perspectives from Shippers and Providers

What Do Shippers Expect from 3PLs in Terms of Innovation? How Are 3PLs Responding?

We would appreciate you taking this brief survey, with separate paths for shippers and 3PLs. In the near future, we will send all respondents a copy of the survey results aggregated across all respondents. We know you will find it valuable.


Week of August 22, 2016 Contest

See The Full-Sized Cartoon and Send In Your Entry Today!

Holste's Blog: Reducing DC Operating Costs thru the Adoption of Automation Technologies

Weekly On-Target Newsletter:
August 30, 2016 Edition

Great New Cartoon, Baseline Modeling, Renewable Diesel, China Logistics and more

You Don't Need the Optimization in Multi-Echelon Inventory Optimization
by Dr. Michael Watson

The "-abilities" of Global Trade Management: The Impact of Playing it Safe and Variability
by Stephanie Miles
Senior Vice President of Commercial Services
Amber Road


Supply Chain Software Trends and Opportunities 2016 Benchmark Report

From the Search for Greater Agility to the Coming Era of Cloud Software, Where are Companies Headed?

Prefer to view the results instead? Watch the on-demand version of the Videocast summarizing the survey results:


What five countries have been in the top 10 of the World Bank’s Logistics Competitive Index for each of the bi-annual studies since 2010?

Answer Found at the
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The Labor (Day) Supply Chain 2016

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.

At one level, the labor movement in the US continues to weaken - though there are other areas of success. The percent of total US workers that were union members was flat in 2015 at 11.1%. Unionization in the private sector was up just a tick to 6.7%. 

But the long-term trend is one of steady decline since the Labor Department started reporting it in 1983, when overall unionization was at 20.1% and 16.8% in the private sector, with those numbers themselves well down from previous decades before it was tracked.


Retailer American Apparel, which has been producing in LA for years, now says with the min wage headed higher there it likely will stay in the US but move production to the Southeast.


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Conversely, public-sector workers had a union membership rate of 35.2%. Together, there were 14.8 million private and public sector employees in a union in 2015, little different from 2014, and 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 2015: South Carolina (2.1%), North Carolina (3.0%), Utah (3.9%), Georgia (4.0%), and Texas (4.5%). Conversely, two states had union membership rates over 20 percent in 2015: New York (24.7%) and Hawaii (20.4%).

The number of US manufacturing workers that are union members fell in 2015 to 9.4% from 9.7% in 2014. 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, which was 10.0% last year and 10.5% in 2014.

Ponder that - less than one in ten US manufacturing workers are unionized today, versus 17.5% in 1994 and, according to 38% of private sector manufacturing workers in 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 about 25%, but that's down from more like 40% in the mid-1990s.

In July, there were about 8.6 million non-supervisory manufacturing workers in the US, down just a bit from 2014. That's up from the bottom of the recession, when we fell to about 8 million shop floor workers, meaning we've added about 600,000 manufacturing jobs since then. But in 2004, there were just over 10 million factory floor workers - we're down 1.4 million positions from that level.

That obviously puts 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 $20.47 in July, up from 19.95 or about 2.6% year over year - not bad. That's also up from the $16.78 or so per hour in July 2006, or a rise of 22% over 10 years. That a cumulative growth rate of 2.%, So wages have risen modestly, about equal with inflation, so not enough to improve a worker's lifestyle, while healthcare costs take more and more of the pay.

Meanwhile, there has been steady growth in warehouse jobs, though they represent just a tiny fraction of manufacturing positions. There are now about 747,000 warehouse workers in the US, up from some 597,000 in 2004, a rise of 25% - but even with that growth they only represent about 8.7% of manufacturing floor jobs. That surprises me, actually, though that percentage continues to slowly tick up. (I'll note many jobs at plant warehouses may be counted as manufacturing jobs.)

In terms of wages, average non-supervisory pay for warehouse workers was $15.80 in June, up 2.2% year over year. That's also about 23% less than average manufacturing rate. Pay for warehouse workers was at $15.09 in 2006, meaning DC wages have risen only 9.5% over the past decade. Wow.

OK, those are some of the key facts. Now let's look at some of the key events and trends relative to labor over the past year. There is a lot to summarize.

The $15 minimum wage movement progressed a bit, with the states of California and New York joining cities such as LA, San Francisco and Seattle in mandating the change over several years, though the New York plan varies by area of the state. Even some observers on the left are recognizing a one-size fits all approach for raising the minimum wages may not make sense and cost jobs. Gov. Chris Christi just vetoed the passage of a $15 minimum wage plan in New Jersey.

Retailer American Apparel, which has been producing in LA for years, now says with the min wage headed higher there it likely will stay in the US but move production to the Southeast.

There were really no signature labor battles as there have been in recent years (such as failed unionization of a VW plant in Tennessee). It appeared there might be a series of contract standoffs between steel makers and the union, as the plants were asking for give backs in the face of plummeting prices for steel.

But strikes were largely avoided, and the union contract with giant ArcelorMittal, as an example, had zero wage increases for three years, but with bonuses baked in if steel prices rise, and largely kept very generous healthcare benefits that Arcelor had first sought to roll back.

There were scattered protests in Q1 by workers protesting the partial closing of a long-time Mondelez International (formerly Nabisco) plant in Southwest Chicago making Oreos and other snacks, with plans to move half the operation to Mexico and kill 600 jobs. The move became part of the political conversation for awhile, but that didn't save the plant, which made its last Oreo on Kedzie Ave. in July.

Carrier Corp. came under much criticism when it announced in March it was going close a manufacturing plant in Indianapolis and move operations to Mexico, costing 1400 jobs. But the negative publicity didn't seem to last very long. About the same time, Ford announced it was going to invest $1.6 billion to construct a new small car assembly plant in Mexico and create 2600 jobs there, also causing some political backlash for awhile - but Ford says it can't make small cars profitably in the US.

The late December 2014 NLRB approval of new rules for so-called "microwave" union elections has had an impact in hurrying union votes, as intended, but not the results. Time to election is now averaging 23 days in the past year, or 34 for contested elections, compared with 38 days in the prior year, or 64 in contested elections. But unions are still winning about two-thirds of the vote, as before the change.

In 2015, the US Labor Department announced new rules relative to overtime pay, increasing the minimum weekly salary threshold under which salaried workers are eligible for overtime when they work more than 40 hours in a week to $47,500 annually, starting this Dec. 1. The current threshold is much less, at $455 per week or about $24,000 per year. The impact on the supply chain is unclear, but certainly this change could affect for example many warehouse or manufacturing supervisors whose pay falls in that range. That means labor costs could go up - or more likely companies will make sure those managers work little overtime.

The on-going battle on how contact employees are classified continued on in many venues. Ride sharing giant Uber settled a lawsuit in 2016 for $100 million with a large group of drivers saying they should have been classified as employees - but now a judge says that wasn't enough. Uber's whole model is in jeopardy. Perhaps more ominously, in late 2015 the NLRB issued a decision requiring Browning-Ferris Industries to negotiate with the Teamsters union representing workers who were actually employed by a contractor operating at a waste disposal facility. Browning-Ferris has appealed the decision, but meanwhile the NLRB has issued additional similar decisions on companies using employees from contract firms, like a 3PL. This could be huge.

Finally, in August the NLRB updated a "clear successor" rule making it easier to impose union contracts on the buyers of companies instead of allowing freshnegotiations.

There's a lot more, but I am well out of space. So, little if any general labor progress, but governmental/court actions are moving in labor's favor. Here come the robots.

Any reaction to our summary of the labor supply chain 2016? Let us know your thoughts at the Feedback button below.

View Web/Printable Version of this Column

New September Videocast:

Reducing Order Picking Costs in the DC without Automation

New Solutions to Generate Significant Reductions in Order Picking Costs Whatever the Current Environment, With Little or No Disruption to Current Operations

In this outstanding Videocast, we will detail the wide portfolio of technologies that can be applied today to get your order picking costs headed back in the right direction. The broadcast will include real world cases studies.

Featuring  Dan Gilmore and Ron Kubera, Executive Vice President and Chief Marketing Officer at Lucas Systems

Tuesday, September 20, 2016

On Demand Videocast:

Supply Chain Software Trends and Opportunities 2016 Benchmark Report

Results from SCDigest's New Benchmark Study, Including a Special Focus on Cloud-Based Solutions

In this outstanding Videocast, we'll summarize important trends and developments on both the user and technology provider fronts, based in part on results from a new SCDigest survey on trends, opportunities, and practices in supply chain software.

Featuring  Dan GilmoreJohn Murphy, Senior Director, SCM Applications Product Marketing, Oracle and Jim Heatherington, Vice President, AVATA.

Now Available On Demand

On-Demand Videocast:

Supply Chain Design as a Continuous Business Process - The Whirlpool Story

From Project to Process: Here's How to Get It Done

In this outstanding Videocast, we'll explore the changes needed to make supply chain design a continuous process, emerging new best practices in supply chain design, and how consumer products leader Whirlpool has successfully embraced this 360-degree approach.

Featuring Dan Gilmore, Editor, SCDigest, and Toby Brzoznowski, Executive Vice President, LLamasoft and Brian Streu, Manager, Supply Chain Design, Whirlpool

Available On Demand


This week, just a few quick feedbacks from our first column last week on inventory performance 2016. That includes a question asking for more detail about calculating the inventory-to-sales ratio.

Feedback on Inventory Performance 2016


In your next column, can you clarify the calculation of the “Total Business Inventory/Sales Ratio”. I understand the DIO which is fairly intuitive.

I do wonder why the year-end inventory is used which is more capable of being gamed by someone incented to do so. Seems like an annual average would be more representative, especially for businesses which sell down their inventory over the Christmas peak season.

Eric Dagle
Senior Operations Planner
Dematic North America

Editor’s Note:

The inventory-to-sales compiled by the US Commerce Dept. is define as inventory levels being held by US companies in aggregate divided by one month’s worth of sales.

The Commerce Dept. collects this data from a series of surveys sent each month to manufacturers, retailers, and wholesalers.

So, for example, in May 2016, overall sales for the month across all businesses were $1.291 trillion. Inventories across those same companies were $1.810 trillion. So, $1.810 divided by $1.291 results in an inventory-to-sales ratio of 1.39.

I agree it would be better to use quarterly inventory data and take an average for the year, but the REL data we use as a base takes the year end snapshot, so we have to just run with that. I have looked at this before, and found that while the average inventories across quarters does tend to be a bit higher than the year end number, it is not meaningfully so.

Dan Gilmore


Good once again to see you looking beneath the headlines and trying to gain more meaningful information.

As to reasons for the increase in inventories it might just be due to companies deciding to stock more of what they really need, rather than run the risk of stockouts on popular lines, thus ensuring higher levels of service - using availability as a competitive weapon. Perhaps it is also due to an informal acknowledgment of the need for "slack" that I posed a few weeks ago.

If it is not on the shelf then it matters little how responsive your transport system is you cannot get it into the hands of the customer. It is also a reflection that it can take a huge amount of time to reduce redundant/slow-moving inventories and brand creep is still with us.

I look forward to reading about the answers from your side of the Atlantic.

David MacLeod
Learn Logistics Limited


Outstanding analysis as always from SCDigest. No one else out there, including the analysts, does what you do, and you do it week after week.

Great stuff - keep up the good work,

I agree that the rising US inventory levels have not been well covered or explained.


Thomas Detmann
Spokane, OR



Q: What five countries have been in the top 10 of the World Bank's Logistics Competitive Index for each of the bi-annual studies since 2010?

A: Germany, Netherlands, Belgium, United Kingdom, and Singapore.

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