Supply Chain by the Numbers

- June 1, 2018 -

  Supply Chain by the Numbers for Week of June 1, 2018

DC Workers Increasingly Expensive; Salaries for Procurement Professionals Make Big Jump in 2017; Best Buy Makes Bet in More Inventory; Chinese 3PL Giant Making Huge Logistics Investments



That is the share of distribution center workers that changed jobs in the last year that realized a wage gain of $2.00 per hour or more from the move. That according to Brian Devine of warehouse staffing firm ProLogistix during a presentation at the recent Warehouse Education and Research Council (WERC) conference in Charlotte. In fact, it's a myth that DC workers will commonly leave a job for a 25 cent wage increase – the study found just 3% took new jobs that offered such a low wage bump. After the 27% that achieved a wage gain of $2.00+ per hour, another 34% combined received a pay bump of between $1.25 and $2.00 per hour. Overall, companies should expect it will take at least a $1.00 per hour increase for most workers to leave their current jobs, Devine said. And with very low unemployment, if you are paying around the national average of $14.00 or so for DC jobs, your applicant pool will be from at best fair quality candidates and more likely poor ones.



That was the strong overall increase in compensation for supply management (procurement) professionals in 2017, according to the just released annual study from the Institute for Supply Management. Salaries could rise even faster in the coming year as businesses grapple with inflation and the growing tensions between the US and key trading partners such as China, said Paul Lee, ISM's director of research and publications. Average overall compensation, including bonuses, was $117,425. However, among this good news the study also again found, for whatever reason, a persistent pay gap for women in procurement versus men. Men in the procurement earned on average 29% more than women overall in 2017 the study found, based on responses from some 3000 professionals. The gulf was wider at high-level positions, where there are fewer women generally, and among workers with the most experience. For example, men who had been in supply chain for 15 to 19 years earned 48% more than their female cohorts, ISM found. The real question is why.



That was the rise in inventories in electronic retailer Best Buy's fiscal Q1, the company reported last week. Inventories on a per-square-foot basis - an important measure of supply-chain efficiency for retailers - were up 9% from a year ago. However, the hefty rise in inventories was intentional. Best Buy Chief Financial Officer Corie Barry said the figures show the company is getting its inventories lined up with an "improved customer experience." She added that "We have found it to be very much in our advantage to make sure we have the inventory there for our customers," The strategy appears to be working: Best Buy reported overall sales rose 6.8% to $9.12 billion in the quarter even in the face of the Amazon tsunami. Best Buy is undertaking a "multiyear transformation" of its supply chain, which will include more automation and more distribution centers closer to population centers.



That is approximately what the cost of logistics as a share of GDP in China will be this year, according to estimates from the Chinese Academy of Sciences this week. That's down from 18% or so a few years ago, but well above the 8% cost of logistics in the US, putting China at a disadvantage. That as giant Chinese 3PL GLP announced it was putting $1.6 billion private equity fund that will invest in three areas: multimodal solutions that combine water, rail, road and air transport; cold chain logistics for the food sector; and smart trucking. "What we are investing heavily in now is the multimodal logistics park concept," said Ming Mei, the company's CEO. "Basically we are integrating water, rail, motorways and air, based on a customer's demands." Mei added: "If you need something very urgently, you don't need to ship the entire batch by air. You can ship 15% of it and it will last for a few days. The rest [can go] by rail and by truck, and arrive as it is needed. This approach lowers logistics costs and increases efficiency."