Supply Chain by the Numbers

- Sept. 5, 2019 -

  Supply Chain by the Numbers for Sept. 5, 2019

US PMI Falls below Key Level in August; Thousands of Trucks Taken off US Highways; New US Distribution Hubs Emerging; Companies Returning to Sourcing from Bangladesh



That was the US Purchasing Managers Index (PMI) for August, according to numbers released Tuesday as usual from the Institute for Supply Management. That is significant, as the PMI now falls below the 50 mark that separates US manufacturing contraction from expansion, after several months of declining levels. It was also the first time the index has gone below 50 in 35 months, back in 2016, just shy of three years ago. "Respondents expressed slightly more concern about U.S.-China trade turbulence, but trade remains the most significant issue, indicated by the strong contraction in new export orders," Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement. In other bad news, the New Orders index also fell below 50, at 47.2, meaning the average order book at US manufacturers is also declining. "Generally, business remains steady. However, we continue to plan for a hard Brexit and a long trade war between the US and China,” one manufacturers taking the PMI survey commented. That sounds about right.



That's how many trucks in the US and Canada were taken out of service as a result of a stepped up inspection event in early June, according to data released just last week by the Commercial Vehicle Safety Alliance's International Roadcheck program. With a little over 67,000 inspections over three days, it means a significant 17.9% of vehicles inspected were removed from highways – though that was down from 21.6% in last year's inspections. What's more, 2,784 drivers were also placed out of service for driver-related violations resulting from the Roadcheck. The most common out-of-service violation on trucks was for braking system related items. The most common violation that placed drivers out of service was related to hours of service, followed by having wrong class license and false logs. Makes you wonder a bit if truck safety advocates don't have a point.



That is how many US metro regions generally looked at as second tier that real estate firm CBRE has called out as seeing high levels of current and future grown in warehouse space. Those 14 metro regions are: Las Vegas, Salt Lake City; Milwaukee; Reno; St. Louis; El Paso; Detroit; Greenville-Spartanburg, South Carolina; Dayton, Ohio ; San Antonio; Savannah; Central Valley, CA; Northeastern Pennsylvania; and Phoenix. We're not sure St. Louis, Phoenix and Northeastern PA – home of the distribution heavy area of Allentown - are really second tier, but it's an interesting list nevertheless. Together, these 14 areas have registered demand for industrial and logistics real estate that has outpaced their supply by a collective 89 million square feet since 2013, CBRE said. In the same span, their industrial rents have increased by an average of 25.2%. CBRE says that "These markets offer the infrastructure, labor availability, connectivity to major ports, and the real estate fundamentals needed to support strong growth going forward." With labor extremely tight in major warehouse hubs such as Atlanta, New Jersey, Chicago, and Los Angeles, it may be time for shippers to look at these secondary markets.



That is the increase in the dollar value of apparel exports from Bangladesh to the US in the first half of 2019. Driving that rise of course are the US tariffs on imports of apparel from China, but the dynamics are interesting. That's because many US retailers and brand companies left Bangladesh in 2012-13 after a fire and the collapse of a building at apparel factories in the country killed more than 1000 people – and uncovered worrisome safety issues there. But safety has been improved, and some Western companies are moving sourcing back to Bangladesh, now accelerated by the China tariffs. I've never received so many emails from US customers," Urmi Group, a garment manufacturer based in Bangladesh, recently told the Wall Street Journal, adding "They want to switch production out of China." In the aftermath of the deadly accidents, large US retailers such Walmart and the Gap formed the Alliance for Bangladesh Worker Safety, a brand-led safety organization responsible for inspecting Bangladeshi factories that produced goods for Alliance brands. The Alliance dissolved at the end of 2018, after it said that more than 90% of the specific factory-safety issues identified in inspections had been resolved for factories that remained in its program.

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