Author Archives: webbevansclippings

Two recent trend stories about hiring and retaining Gen Z employees.

From What Gen-Z graduates want from their employers (TheEconomist):

In Microsoft’s latest Work Trend Index, which polled more than 30,000 workers in 31 countries in January and February, more than half of Gen-z hybrid workers said they were relocating thanks to remote work, compared with 38% of people overall. The option to work remotely is increasingly non-negotiable. Workers aged 18 to 34 are nearly 60% more willing to quit than their older peers if the choice is taken away, according to research by McKinsey, a consultancy. They are also more likely to engage with job listings that mention flexibility.

This has big implications. Industries with jobs that cannot be done from home are falling out of favour with recent graduates. A study by ManpowerGroup, a recruitment company, suggests an inverse relationship between talent shortages and flexible working policies. The sectors which are either less able to offer remote work or have been slower to embrace it—including construction, finance, hospitality and manufacturing—have faced some of the biggest skills gaps for all types of job. The same is almost certainly true for their university-educated workers.

The best thing firms can do to attract young talent is to cough up more money. According to Universum, some earlier Gen-z hobby horses such as an employer’s commitment to diversity and inclusion or corporate social responsibility have edged down the list of American graduates’ priorities. A competitive base salary and high future earnings have edged up.

https://www.economist.com/business/2022/07/21/what-gen-z-graduates-want-from-their-employers

From Gen Z Knows What It Wants From Employers. And Employers Want Them (New York Times):

A national hospitality company has begun to experiment with a four-day workweek. The health care company GoodRx is permitting employees to work not just from home but from anywhere in the country, enlisting an outside company to provide ad hoc offices upon request. Other companies are carefully laying out career paths for their employees, and offering extensive mental health benefits and financial advice.

Other companies are trying to tap into younger workers’ desire to grow in their careers. In a LinkedIn survey this year, 40 percent of young workers said they were willing to accept a 5 percent pay cut to work in a position that offered career growth opportunities.

That’s why Blank Street Coffee, a chain of 40 coffee shops in the United States and England, makes career growth a part of its recruiting pitch, said Issam Freiha, the chief executive. Employees who want to advance in the company are shown a clear trajectory they can follow.

https://www.nytimes.com/2022/07/31/business/gen-z-jobs.html

From “IRS provides guidance for how excise taxes will impact resin pricing” (Plastics News)

The IRS has provided data on federal Superfund excise taxes, which started hitting hit resin buyers’ invoices July 1.

The net result for many plastics processors likely will be higher prices — close to half a cent per pound on some resins — since resin makers and suppliers are likely to pass the cost of the taxes on to their customers.

Resins on the taxable list include polyethylene, polypropylene, homopolymer polystyrene, PVC, polybutadiene, synthetic rubber, phenolics and melamine.

The Infrastructure Investment & Jobs Act, which was passed in November, reinstated those taxes effective July 1. They had expired in 1995.

In addition to the reinstatement of the taxes, the bill doubled the prior tax rate on 42 listed chemicals. This effectively doubled the tax rate of the imported taxable substances as well.

The tax directly applies to feedstocks. Common plastics feedstocks ethylene and propylene are taxed at $9.74 per ton, or 0.487 cents per pound (less than a half cent). The tax rate for related substances is dependent on individual chemical composition. For example, a PP resin, if made of 50 percent propylene, would be taxed at half that rate, or 0.22 cents per pound.

https://www.plasticsnews.com/news/how-will-excise-taxes-impact-resin-pricing-irs-provides-guidance

From How to run a business at a time of stagflation (The Economist):

In the current climate, though, hard-headed (and hard-hearted) cost control won’t be enough to maintain profitability. The remaining cost inflation must be pushed through to customers. Many businesses are about to learn the difficulty of raising prices without crimping demand. The companies that wield this superpower often share a few attributes: weak competition, customers’ inability to delay or avoid the purchase, or inflation-linked revenue streams. A strong brand also helps. Starbucks boasted on an earnings call in May that, despite caffeinated price rises for its beverages, it has struggled to keep up with “relentless demand”. 

Recent data hint at softer consumer sentiment, however. This makes it riskier for firms to roll out frequent price increases. Amber lights are blinking, from McDonald’s, which has speculated about “increased value sensitivity” among burger-munchers, to Verizon, which detected customer “slowness” in the most recent quarter. The ability to push through price increases as customers tighten their belts requires careful management. In contrast to the last high-inflation era, managers can use real-time algorithmic price setting, constantly experimenting and adjusting as consumers respond. Nonetheless, all firms will still have to take a longer-term view on how long high prices will last and on the limits of what their customers will tolerate. That is finger-in-the-wind stuff. 

Even if they keep revenues and costs under control, ceos are discovering what their predecessors knew all too well: inflation plays havoc with the balance-sheet. That requires even tighter control of working capital (the value of inventories and what is owed by customers minus what is owed to suppliers). Many firms have misjudged demand for their products. Walmart lost almost a fifth of its market value, or around $80bn, in mid-May, after it reported a cashflow squeeze caused by an excess build-up of inventories, which rose by a third year on year. On June 7th its smaller retailing rival, Target, issued a warning that its operating margin will fall from 5.3% last quarter to 2% in the current one, as it discounts goods to clear its excess inventories. Payment cycles—ie, when a firm pays suppliers and is paid by customers—become more important, too, as the purchasing power of cash delivered tomorrow withers in inflation’s heat.

https://www.economist.com/business/2022/06/08/how-to-run-a-business-at-a-time-of-stagflation

From “Supply Snarls in the US Are Easing With Tight Trucking Seeing Relief” (Bloomberg):

A gauge of supply-chain pressure in the U.S. economy fell to the lowest level since December 2020, as activity such as trucking cools from elevated levels with few signs yet of a worrying collapse.

The Logistics Managers Index dropped to 67.1 in May, the second straight decline from a record of 76.2 reached in March. Faster gains in warehouse and inventory costs offset slower moves in transport prices. […]

With more trucking capacity came transportation costs that slumped to the lowest level since June 2020 while staying well within expansion mode, indicating that while prices are still increasing, “the intensity is much lower and is now approaching levels last seen two years ago.”

Meanwhile, large US retailers and manufacturers say they’ve padded inventories and some see consumer demand waning.

Warehousing and inventories “continue to grow at a similar pace to the one we have observed over the last 18 months, with inventory levels that are “unseasonably high, packing warehouses to the gills and driving costs up for both inventory and warehousing.”

From “New research spells out the benefits of diverse supply chains” (The Economist):
In most countries, the vast majority of components used to make goods tend to be sourced domestically. About 69% of parts in Europe and more than 80% in the western hemisphere are produced at home, for example. If a firm were to choose to import a critical component instead, it would face a more diverse choice: the market share of the average exporting country in the average industry is a little under a third. Re shoring would therefore tend to reduce the diversification of a supply chain rather than increase it, by making production even more dependent on a single country: the home economy. That could prove costly. The fund estimates that in the face of a big disruption (one that causes a 25% drop in labour supply in a single large producer of critical inputs), the average economy could be expected to suffer a fall in gdp of about 1%. Greater diversification stands to reduce the damage by about half.

https://www.economist.com/finance-and-economics/2022/04/23/new-research-spells-out-the-benefits-of-diverse-supply-chains

From “With Warehouses Packed, Canada’s Logistics Industry Is Straining” (Bloomberg):

Canada is projected to have the strongest growth in the Group of Seven this year, and a large majority of businesses already say they would struggle to cope with any unexpected increase in demand. One visible manifestation can be found in the huge industrial buildings that line the highways of the suburbs around Toronto and Vancouver.

For-lease signs are vanishing and “everybody’s warehouse is packed,” says trucking executive Murray Mullen, who runs Mullen Group, one of Canada’s largest logistics firms.

Across the nation, the availability rate for industrial real estate in major markets has shrunk to 2.2%, from almost 3% a year ago, according to Altus Group. In Toronto and Vancouver, it’s around 1%.
In some municipalities near the Port of Vancouver, there is not a single square foot of vacant industrial space, according to Colliers International.

Delays and disruptions in the global supply chain have prompted a reversal of the lean-inventory model that broke down in the early months of the pandemic.
Companies are “buying stock not three weeks, not three months, but six months ahead of time and storing it somewhere,” says Martin Imbleau, chief executive officer at the Montreal Port Authority, which has pitched itself as a less-busy alternative to clogged eastern ports.

The squeeze means that, in addition to paying more to ship goods, companies also have to pay ever-higher premiums to store them.
The total cost of leasing industrial space in Vancouver has risen 40% in three years, according to Altus. 

https://www.bloomberg.com/news/newsletters/2022-04-25/supply-chain-latest-canada-s-warehouses-are-full-straining-logistics?cmpid=BBD042522_TRADE&utm_medium=email&utm_source=newsletter&utm_term=220425&utm_campaign=trade

From “Storm of Supply-Chain Disorder Worsens for U.S. Manufacturers” (Bloomberg):

The Institute for Supply Management on Monday reports it’s taking an average 100 days to receive production materials, the longest in records dating back to 1987. For capital expenditures, the average commitment time rose to a whopping 173 days, matching the highest on record.

In addition to transportation and shipping delays, the inability to hire is complicating matters for producers. Some 34% of the ISM survey’s respondents who are hiring indicated difficulty filling vacancies, up from 28% a month earlier.

Turnover rates remain elevated as well, illustrating severe tightness in the job market. The share of purchasing managers who said employment actually declined in April was the highest in seven months. 

https://www.bloomberg.com/news/newsletters/2022-05-03/supply-chain-latest-labor-long-lead-times-a-one-two-punch-for-u-s-factories?cmpid=BBD050322_TRADE&utm_medium=email&utm_source=newsletter&utm_term=220503&utm_campaign=trade

From “Goldman Sachs Sees More Overstocking Than Reshoring by U.S. Firms” Bloomberg:

Two years of supply shocks have made efforts to strengthen supply chain resilience top-of-mind for manufacturers and retailers. Economists at Goldman Sachs see three main solutions for those in the U.S.: reshoring foreign production, diversifying supplier networks and overstocking inventories.

Overstocking, or targeting a permanently higher level of inventories, is the strategy that’s most clearly underway, especially in durable goods, the economists said in a recent report. Companies analyzed by Goldman Sachs are aiming for inventory-to-sales ratios roughly 5% higher than before the pandemic on average, according to the report.

Reshoring, on the other hand, appears limited so far. That’s partly because construction of new domestic manufacturing facilities “has mostly gone sideways,” the economists wrote. At the same time, imports of foreign parts and final goods have grown faster than domestic manufacturing output, they said, suggesting that many supply chains still depend on foreign sources for production materials.

In “A new type of 3D printing may bring it into the mainstream“, The Economist highlights “Area Printing.”

This got Mr DeMuth and a group of colleagues thinking about how to speed things up without compromising quality. After some work, they started using a device called an optically addressed light valve, which had been developed at llnl. This permits a pulsed infrared laser, with its beam shaped to have a square cross-section, to be patterned with a high-resolution image. Working a bit like a photographic negative, the image can block or pass light, creating millions of tiny laser spots, much like the pixels that make up a digital image.

When projected onto a bed of powder, this patterned laser light can weld a complete area in one go. Mr DeMuth likens the process to producing documents with a printing press instead of writing them out individually with a pen.

In 2015 Mr DeMuth co-founded Seurat Technologies, to commercialise the technology. This Massachusetts-based firm is named after Georges Seurat, a post-impressionist French artist who pioneered a painting style called pointillism that builds pictures up from dots. Several companies, including GM and Volkswagen, a pair of carmakers, Siemens Energy, a division of a large German group, and Denso, a big Japanese components firm, have partnered with Seurat to explore the use of its first prototype area-printing machine.

This prototype produces a series of small, patternable squares on the powder bed. Their size depends on the material. Aluminium requires 15mm squares. Titanium requires 13mm. Steel requires 10mm. Individually, these squares might seem small. But 40 of them can be printed adjacent to each other every second, so a large area can be covered quickly. The prototype was designed to work at this scale to keep the size of the laser and the amount of energy it consumes to a practical level.

https://www.economist.com/science-and-technology/2022/03/19/a-new-type-of-3d-printing-may-bring-it-into-the-mainstream

“From Coast to Coast, Supply Chains Get Off to a Rough Start to 2022″ (Bloomberg):