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Supply Chain by the Numbers

- June 3, 2021

  Supply Chain by the Numbers for June 3, 2021

US PMI in May Very Strong Again; Driver Pay Headed Higher; Dealing with Rising Costs through "Shrinkflation"; US Manufacturers Headed to the Sun Belt



That’s how many ounces a can of Royal Canin cat food sold on the web site now contains. The problem: until just recently, each can held 5.9 ounces. But a case of the stuff on Chewy sold for the same $81 for the same number of now smaller cans. What going on? With rising input costs, many consumer goods companies are deciding the smart move is not to raise prices but to reduce the package size, on the hope somehow consumers won’t notice and/or care. We’ve seen this phenomenon before in times of inflation, but now the tacit has a new name for the retail camouflage: “shrinkflation.” And manufacturers are sneaky, keeping packaging the same height or general shape to avoid drawing scrutiny of the actual amount of the product being sold. The Washington Post reported this week that Walmart's Great Value paper towels, for example, went from 168 2-ply sheets per roll to just 120. The price, at $14.97, remained the same for a dozen rolls despite the nearly 30% drop in the total number of sheets.

 55-60 Cents

That is the pay per mile driven for new drivers for trucking firm Maverick Transportation, up four cents per mile, the company announced in early May. That’s not only a wage bump of 6-7%, it takes annual earnings for a new driver to a respectable $80,000 per year, as carriers are again bumping pay to hire and retain drivers after another round of raises earlier in the year, as carriers compete for not enough drivers. The completion for drivers is leading not only to per mile rate increases, but also sign-on bonuses and guaranteed minimum weekly pay. The lack of new drivers entering the market is keeping the number of trucking job almost flat for 2021, despite a great demand for drivers by carriers and private fleets.




That was the level of the US Purchasing Managers Index for May from the Institute for Supply Management, according to its monthly report released this week. That was up a modest 0.5 percentage point from the April reading of 60.7, but is another strong reading, well above the 50 mark that separates US manufacturing expansion from contraction. The May score also indicates expansion in the overall economy for the 12th month in a row after contraction in April 2020. In more good news, The New Orders Index registered robust 67, an increase of 2.7 percentage points from the April reading of 64.3 percent, in a bullish sign for future manufacturing activity. But labor availability and input prices and deliveries are causing angst for many companies. The Prices Index expanded for the 12th consecutive month, indicating continued supplier pricing power and scarcity of supply chain goods.




That’s how many manufacturing jobs were created between the start of 2017 through the start of 2020 in Sun Belt states Arizona, New Mexico, Texas, Oklahoma and Nevada. That represented 30% of US manufacturing job growth and was about roughly triple the national growth rate, according to data from the Bureau of Labor Statistics and analysis by the Wall Street Journal. Manufacturing executives say the region’s growing population makes for plenty of available labor and lots of open land, while the lower cost of living is a draw for new talent. Some growth in the Southwest has come at the expense of California. In 2019, nearly 2,000 manufacturing workers in Texas and more than 1,300 in Arizona came from California, the most in a decade, the most recent Census Bureau data show. More than 2,700 manufacturing workers have come to Nevada from California in 2017 through 2019. “There’s cranes everywhere,” said Robert Hess, a vice chairman of the real estate firm Newmark Group, after a visit to the Southwest with a client this year.

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