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Market Snapshot

All reports indicate talks to renegotiate the North American Free Trade Agreement will hit a sore spot when the negotiators begin to talk about labor.

It's well-known that Mexico's citizens work at a lower wage than their North American counterparts, and Canada and the U.S. would like that to change — albeit for different reasons. Canada seeks a "progressive" trade deal, wherein labor rights are protected, while the U.S. seeks to ensure its own labor competitiveness.

It would seem as if Mexico is outflanked, except for the fact sourcing is far more complicated than ideals would suggest. The reality is that many businesses with established supply chains take a hit each time wages go up, anywhere in the world. While fair wages are a progressive dream, these business (and economic) pressures often keep political leaders from regulating higher pay. In the U.S., even a 25 cent increase is controversial.

This week, Sourcing Journal put together a useful snapshot for purchasing managers for where, and by how much wages have risen around the world.

In their words, "labor rates in key sourcing countries around the world are going up, either as workers battle for better pay or brands step up and offer it as they work toward paying a living wage." Wages have risen in Cambodia, China, El Salvador, India, Kenya, Lesotho, Myanmar, Taiwan, Turkey and Vietnam according to the Journal. The highest increase happened in India, where monthly wages rose by 100% from 9,000 rupees ($140.59) to 18,000 rupees ($281.19).

Many of the world's goods, particularly in the apparel sector, are sourced from these countries. As outsourced labor costs increase, it would appear the incentives to offshore would decrease. However, wages have not been stagnant in the U.S., either.

Recent data from the Census Bureau suggests medium household income rose for the second consecutive year, rising 3.2% (after inflation) to $59,039 in the U.S. This would suggest stability in a wage recovery, after various years of stagnation after the Great Recession, PYMTS reports.

Rising wages are generally a good sign for the global economy, which must remain healthy to sustain production and consumption of services. However, if the trend of high wage growth persists, sourcing managers may once more be forced to reconsider their supply chain network.

Technically Speaking

2017 may go down in history as the turning point for electric vehicles if a proposal by China goes through. The Chinese government is reportedly considering outlawing the sale of fossil-fuel based vehicles, according to Bloomberg Gadfly.

While popular, the electric vehicle has failed to catch on en masse in the United States because automakers did not have the incentives to produce them. The argument was that consumers had yet to indicate sufficient interest in them, and continued to prefer gas-based vehicles. The limitation, of course, was that consumers did not see electric vehicles as feasible due to the limited charging stations for the transport devices.

But, with this new rule, China would force its more than 1 billion consumers to become ready adopters. In turn, the U.S. auto industry would be forced to invest heavily in the market, or lose out on an estimated $9 billion in annual revenue, according to data compiled by the Council on Foreign Relations.

It's not to say the industry is not already producing or adopting electric vehicles, quite the opposite. In fact, BMW recently announced it sought to "mass produce" electric cars by 2020, Daimler this week delivered the first electric truck to a U.S. customer, and Tesla is looking to unveil its own version of an electric semi in October.

The question, then, is not if, but when, the technology becomes mainstream; only the same question has remained unanswered year after year. 

Breaking Ground

Amazon has big plans for North America. 

This week, the e-commerce giant announced it was looking for a location to a second U.S.-based headquarters, likely sparking an incentives-arms race among various, large cities to bring roughly 50,000 workers and the related business. Reports peg Chicago, Atlanta and Pittsburgh, as potential locations, but the list of interested parties is endless.

We've seen this story before, and not too long ago. When Foxconn Technologies announced it was looking for a location to build a new U.S. manufacturing plant, various states lined up to play host. Once the die was cast and Wisconsin chosen, a chorus of critics spoke up against the vast incentives that would be given to the company. Will Amazon be any different?

Supply chain managers know location is everything, so as Amazon decides on a new location, it will also be making a statement on its intentions.

If it sets up in Washington, D.C., as CNN suggested, political gain is clearly at the center of its mission. However, if it goes to Atlanta, Chicago, or Pittsburgh, the company would appear to prioritize its budding logistics presence. Even Toronto put its hand up as a location, but what would that say about U.S. competitiveness? Regardless, Amazon has much to gain from the race-to-the-bottom in state incentives. 

In other site-selection news, Montana Eggs opened a $9-million, 58,000-square-foot egg grading facility in Great Falls, MT, and Penske Logistics announced it would build a $98.6 million distribution center in Romulus, MI.

Mergers & Analysis

The logistics software world woke up on Monday to a surprise announcement: An Australian logistics software group, WiseTech, had bought out both Netherlands-based Cargoguide and U.S.-based CargoSphere, setting the stage for the rise of a new logistics powerhouse.

The deal was consistent with various recent purchasing trends: acquire a company with a different client base, either through geography or portfolio.

In WiseTech's case, this deal was both. Cargoguide's strength lies in its air freight rate management solutions, and it serves major freight forwarders like DHL, Expeditors, UPS, DSV and Geodis. Meanwhile, CargoSphere is an ocean freight rate management solution provider serving customers like Kuehne + Nagel and Dachser, among others.

Through the acquisitions, the combined three companies will be able to offer a more complete portfolio to a total of roughly 7,000 logistics providers in 125 countries that WiseTech served. To illustrate the scale of the deal, CargoSphere previously served just more than 100 clients.