cals, and in academic journals. He is a member of the
National Association for Business Economics, the Council
of Supply Chain Management Professionals (CSCMP), and
the advisory board of the Center for Advanced
Infrastructure and Transportation at Rutgers University.
Kemmsies received his doctorate in economics from
Texas A&M University, and his master’s and bachelor’s
degrees in economics from Florida Atlantic University.
In a recent conversation with DC VELOCITY Group
Editorial Director Mitch Mac Donald, he discussed the economic outlook for the United States, its implications for
supply chains, and the critical need for
a national infrastructure policy.
QThe U.S. economy is very dependent on retail sales. What is
your outlook for U.S. consumer spending, and how will it affect retail supply
chains in the years ahead?
AWe have a situation where a very large number of people are turning 65 every year. The first baby
boomers turned 65 last year, and the
number of people turning 65 will
increase every year until about 2025. As
people age, they spend increasingly
more of their budget on services than
they do on goods, so I expect to see
slower growth than we’ve had in the last
30 years.
A lot of these retiring baby boomers were affected by the
collapse of Wall Street back in 2008. Their financial wealth
is less than it was four years ago. Their homes are worth less,
and some are underwater. Many people weren’t really on
track to be able to retire at age 65 four or five years ago, and
after the events on Wall Street, fewer are able to retire. The
baby boomers who are retired already have to build their
savings. So we can’t expect very high growth in retail sales.
I believe that the retail sector became overinvested. There
are too many outlets in too many places. … As a result, I
believe that in the retail sector, we are going to see consolidation, where we will have a smaller number of players and a
smaller number of locations. Market power will increase and
will be in the hands of those companies, but because of the
low retail sales growth that we expect over the medium to
long term, the emphasis on cost savings will be greater than
it has been even in the last four or five years. … Anybody who
supports retailers will have a smaller list of companies to go
after. Those companies have to keep their costs down, so it
will really be tough on the import side for retail.
QThere seems to be more manufacturing coming back to the Western Hemisphere. What are the implications for supply chains that people are overseeing in the
United States?
AThere are two main ones. The first is that Mexico is itting close to the crossroads of the East-West trade.
It is a good place for [Asian manufacturers] to send components to be assembled into finished goods that can be
sent by rail or truck into the United States, or put on ships
in, say, Veracruz or Lázaro Cárdenas and sent to places like
Colombia, Brazil, Argentina, Chile, and Peru. In fact, that is
what is happening.
Mexico is close to us, so we can send
raw materials very cheaply there; use the
Mexican labor, which is roughly the
same cost as in China but less than U.S.
labor; and then have the goods shipped
back to the United States. The total contribution of transportation costs to the
price of the product is much lower that
way.
The second is that, independent of
whether [goods and raw materials]
move to Mexico or not, the United
States has some comparative advantages
in things like energy, agriculture, and
high-end capital goods. What those
things have in common is that they use
very little labor and they use a lot of capital. U.S. labor expense is high, and our
interest rates are very low. So automation and [highly automated manufacturing processes like 3-D printing] come
back to the United States, which is good for a company but
is not necessarily good for creating jobs.
QDo you see virtue in establishing a cohesive national transportation policy, and how might such a policy
support freight and help strengthen our economy overall?
AThe real wealth of the nation is nourished by its infra- structure. It is something that we learned, and then
everybody learned from us—but we seem to have forgotten
what we knew. Why did we grow so strongly in the ’60s up
until 10 years ago? We built the interstate system. We put
the Internet in place. We built modern ports. We managed
the Mississippi waterway.
Since then, we have neglected this kind of thing. Quite
frankly, without infrastructure, you can’t have an economy.
If you have infrastructure that’s not very good, then you
have an economy but you are poor. That is Brazil. If you
have really good infrastructure—first-rate, like Japan does
