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Supply Chain by the Numbers

- Dec. 16, 2021

  Supply Chain by the Numbers for Dec. 16, 2021

 Inflation at the Wholesale Level is Soaring; Kellogg Now Hiring Replacement Workers; Air Cargo Rates are at Record Highs; Almost No Bicycles Made in America



That was the incredible rise in wholesale prices in November versus the same month a year ago, according to the Producer Price Index from the US Labor Department earlier this week. That was the largest monthly jump in the index since it was created in 2010. That after the department reported last week that the Consumer Price Index rose 6.8% in November from a year ago, marking the fastest increase in that measure since June 1982. That November CPI came after an almost equally strong jump in prices in October, when the CPI was up 6.2%, as inflation threatens the overall economy. Price increases in November were widespread: Energy prices jumped 3.5% in November and are up 33.3% year over year. Gasoline is a stunning 58.1% higher than it was a year ago. Food prices have also climbed 6.1% higher over the year, while used car and truck prices – a major component of the inflation increase – are up 31%


That is the approximate cost per kilogram to ship products via air cargo from Shanghai to North America. According to the UK’s Financial Times this week, that rate was up from $8 at the end of August and above the previous record of $12 achieved when the pandemic first hit supply chains in early 2020. The Times adds that
there have been similar rises from Hong Kong to Europe and the US, and on the transatlantic routes between Frankfurt and North America, according to data from the Baltic Exchange Airfreight index and TAC Freight, cargo data providers. What’s going on? Surging demand for air shipping given the chaos delays and soaring costs for ocean freight is the key factor. But at the same time, industry capacity has been reduced. Half of air cargo is normally carried in passenger jets, but many have been grounded during the pandemic. The industry is still 13% down from 2019 capacity levels, while demand has risen 6% over the same time




That is how many striking workers across four breakfast cereal factories of food giant Kellogg are in danger of losing their jobs, as the company announced it will hire permanent replacement workers. That move comes after the union rank and file rejected a deal was reached between Kellogg and the union after two months of negotiating. The strike began October 5. One of the biggest issues for the striking workers is Kellogg's two-tier compensation system, under which workers who were hired before 2015 have their own higher wage scale and better benefits. The union wants to do away with that system, or at least create a way for newer employees to eventually access that better pay. The proposed new contract did offer raises for employees and a pathway to move between pay tiers. But the union workers overwhelmingly voted to reject that deal.




That is the pitiful share of bicycles sold in the United States made domestically, according to economists for the bipartisan think tank Coalition for a Prosperous America. Most of the bike imports are from China, which has an 86.3% share. Those data points were cited in an article on the by Kea Wilson this week that argued that with a recent surge in cycling, the US needs to start making a lot more of its own bikes. Wilson said bikers are waiting months for even the simplest bike components to arrive at shops, let alone fully-built cycles. “Any time we become entirely dependent on one country for any product, we’re putting the future of that industry at risk,” said Jeff Ferry, chief economist for the coalition. Wilson cites issues with carbon emissions, labor conditions and poor quality machines as the true price being paid for all those imported bikes from China. Interestingly, Wilson says European Union has wrested much of its bike market back from Asia since the early 1990s, adding it can be done here as well.

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