March 18, 2016

Every penny counts: How the minimum wage impacts the supply chain

  • Across the U.S., minimum wages are on the rise. Many states and municipalities are proposing and passing legislation that pushes their minimum hourly wages above the federally mandated $7.25 to as much as $15.
  • Labor accounts for approximately 20% of total supply chain costs, so rising wages have a significant impact on the bottom line. For a fulfillment operation of 500 employees, a $1 per hour wage increase can raise labor costs by approximately $1 million per year.
  • A $1 million increase in costs in a 500,000 sq. ft. facility equates to a rent increase of $2.08 per sq. ft. - a substantial 37% over the $5.65 per sq. ft. average warehouse lease rate.
  • Rising wages may encourage distribution users to seek new locations in neighboring municipalities or states with lower wage scales, or even to pursue automation alternatives in an attempt to control labor costs.