Supply Chain by the Numbers

- Oct. 3, 2019 -

  Supply Chain by the Numbers for Oct. 3, 2019

The GM Strike and Electric Cars; Labor Share of US Income Continues to Fall; US Manufacturing Index Falls to Lowerst Level in a Decade; DHL Plans Big Technology Spend



That is how much fewer labor hours that are needed to assemble an electric motor and battery than a traditional internal-combustion engine and transmission. That according to recent analysis from the consultants at Alix Partners, as cited in an article on Bloomberg this week on the on-going GM labor strike involving some 35,000 UAW workers. The impact on jobs from what is expected to be a rapidly growing share of sales of electric cars by GM and other manufacturers is a key issue in the negotiations. "There's a potential for our jobs to be gone - they don't need us anymore," said Tim Walbolt, president of the UAW local representing workers at a Fiat Chrysler transmission components plant near Toledo, Ohio. "It scares us." Jennifer Kelly, the union's research director, said during a collective-bargaining conference in Detroit earlier this year that "Electric, to me, is where the real risk is to our membership." It's almost certain to carry over from the UAW's talks with GM to negotiations with Detroit's other automakers. Ford has estimated electric cars will require 30% fewer hours of labor per vehicle and 50% less factory floor space.



That is so-called "labor's" share of current national income - down from 63% in 2000. That according to a new study by economists at the Federal Reserve Bank of San Francisco. Labor, by the way, includes both white and blue collar workers. And the headline news: automation has contributed substantially" to the declining share of income that goes to US workers over the past two decades, the study found. The share of income going to workers is falling despite record low unemployment. The increased use of robots and other technology has been an important driving factor in the decline in labor's share, the economists Sylvain Leduc and Zheng Liu wrote in the report published on Monday. The upshot is that workers become more reluctant to ask for significant pay hikes out of fear that their employer will turn to automation to replace them, the economists said. Their model suggests that without automation, the labor share of income would have stayed around 59.5% at the end of 2018. To which SCDigest says automation and robots are not going away.



That was the level of the September Purchasing Managers Index from the Institute for Supply Management – more than two points below the 50 mark that separates US manufacturing expansion from contraction, and below 50 for the second consecutive month. It was also the lowest mark since June 2009 – the very bottom of the great recession. The indices for New Orders, Production, Employees and more were also below the key 50 mark. So that's all bad news for the economy – but maybe it's just a slowdown, not a recession. In its regular economic forecast, the Federal Reserve Bank of Atlanta last week downgraded its forecast for Q3 US real GDP growth to 1.9% - not very strong, but far away from the actual economic contraction that characterizes recessions. But the number was down from its previous forecast of 2.1% growth.


$2.2 Billion

That's how 3PL giant DHL plans to spend on technology though 2025, the company announced this week. Of course, DHL sees much of that investment going to provide additional capabilities for ecommerce fulfillment. Investment areas will include more warehouse automation and robotics, applying data analytics to optimize delivery routes, and improving volume forecasting, the company said. Of course, DHL is hardly the only logistics company betting big on technology. C.H. Robinson Worldwide, the large freight broker, said last month it plans to spend $1 billion over the next five years to bulk up its technology. And XPO Logistics recently said it has increased its capital spending from $504 million in 2017 to a planned $650 million this year, with much of it going toward technology.

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