An analysis of the global transport and distribution industry, particularly with respect to the advent of "just-in-time" delivery and the implications for the working class.
We edited a long article written by a comrade from the UK about the transport sector. The author concludes: “The complexity and geographical spread of supply chains combined with JIT and low inventories makes capital vulnerable to attack. The continuing growth in world trade and the developing labour shortages in the logistics industry should put the working class in a strong position to mount such an attack, but it is still on the back foot. In my opinion the particular composition of the class that is starting to become visible within the world of logistics is a harbinger of troubles to come.” If you want to get hold of the whole text or if you have comments and questions, you can write the author (t.ashton at merseymail.com). Here is a link to the truckers strike in Canada, which after five weeks was still on at the end of July. In the course of the conflict scabbing trucks were gun-shot, others were vandalised. [ Link now dead]
A couple of people asked me about the logistics industry; this is an attempt to answer their questions. The last ten years or so has seen a tremendous growth in the size of the logistics industry and the emergence of giant logistical companies. Logistics is, according to the Council of Logistics Management, ‘the process of planning implementing, and controlling the efficient, effective flow and storage of raw materials, process inventory, finished goods, services and related information from the point of extraction/production to the point of consumption.’ Logistics is a vital element of the supply chain.
One of the biggest companies in the world with more than 340,000 employees UPS describes its strategy thus: ‘…Moving forward, UPS will be able to offer customers a single point of accountability. For example, a customer will be able to manufacture products anywhere in the world and through UPS move those goods by any mode of transport across any border.’
Just-in-time production (the method of supplying what is needed, when it is needed and in the quantity required) has increased the need for tight control of the logistical process. When you buy something at WalMart or Tesco and the bar code is scanned the information is transmitted to all those along the supply chain and the process is put in motion. Of course, millions of pieces of such info are flowing through the supply chain computer system at any one time. The bar code is currently being supplemented by a system using radio frequency identification tags (RFID). Some people believe that the tag will replace the bar code system while others hold that eventually both will find their niche in the global tracking systems of capital. The tag consists of a transmitter/receiver and a microchip. These are labour saving devices that do away with the need to physically scan products; they can be attached to a product, a pallet load of components or a container load of goods. Put simply, the system works by transmitting information from the microchip attached to the minute radio transmitter/ receiver. At the moment the cost of an individual RFID is about 40 cents, so in terms of low cost items, like a tin of beans, the tag would be attached to the pallet load rather than the individual tin, but with the cost forecasted to fall to three cents per tag just about any commodity could be tagged. Those who see a continuing job for bar codes believe that the tags will not be used on low cost individual items. The demand for this system is driven by WalMart, with other major retailers joining the push. Computer company Dell is also committed to RFID. The system was developed by the Massachusetts Institute of Technology in conjunction with Cambridge University and Adelaide University at the Auto-ID Centre in Massachusetts. The Centre works closely with some one hundred companies. Allied to satellite communication systems RFID will enable companies to track their products in real time wherever they are. The implications for workers along the supply chain have not yet been identified but will certainly involve tighter control of their work.
Example of Road-Transport in Car Supplier Industry
A look at the logistical needs of a company might prove useful at this point. This is an extract from a document entitled ‘Transport Policies for the Euro-Mediterranean Region – An Agenda for Multimodal Transport Reform in the Southern Mediterranean’. It was published in 2002.
As the subsidiary of a large German car part supplier, Leoni Tunisie S.A. produces cable and electronic components for Daimler Chrysler and other European car manufacturers. It was established 25 years ago, employs 2400 employees (including 170 in research and development), and invests about 3.5 million euros a year in facilities and training each year. The just-in-time supply chains put extremely high demands on logistics systems. Leoni has outsourced all logistics needs to an international forwarder, which has a local subsidiary in Tunisia. As an example of the long-term relationship with its logistics provider, Leoni has developed a tailor-made stacking system that is specifically fitted to the trucks of the forwarder and permits for a capacity utilization of between 95 and 98 percent.
A full production and logistics cycle lasts about nine days and looks as follows…Raw materials and intermediate products are sourced from across Europe, Asia and the United States. They are consolidated at Leoni’s headquarters in Germany and shipped to about a dozen different factory locations in various countries. Seven trucks leave Germany for Tunisia each week. The trailers are cleared and sealed by German customs on the firm’s premises, where they are picked up by the logistics provider who then drives the trailers to Genoa or Marseilles (2-2.5 days for this land leg), places them without driver on a roll on roll off ferry (20-24 hours for the sea leg), picks them up at Rades port, and delivers them to the factory in Sousse (2-3 hours for this leg). The next day the finished components have been assembled and are cleared by Tunisian customs on the premises before they are sent on their return journey. Eight trucks with 320-350 tons of finished products leave Tunisia each week. The company considers the chain both efficient and reliable. As a major exporter, Leoni has offshore status in terms of tariffs and customs, and receives favourable treatment in Tunisia’s ports.
Nonetheless, the JIT demands of the industry are so high that they are now posing a threat to Tunisia as a production base. Instead of the current cycle of nine days, clients increasingly demand cycles of six days. Internal production processes have been streamlined so far (incoming orders are produced within 24 hours) that any additional time savings must come from logistics. Leoni Tunise recently lost a company-internal competition for a completely new factory with 1,700 jobs and 12 million euros worth of investment to Leoni’s Romanian subsidiary. The reasons were not wages or the investment environment – where companies regard Tunisia as very competitive – but primarily Eastern Europe’s logistics advantage. The land journey between Romania and Germany takes one day less in each direction, saving 1000 euros per trailer load. According to the CEO of Leoni Tunisie, who sits on the board of the Tunisian-German Chamber of Commerce (TGCC), Tunisia will need cheaper and better air cargo connections or high-speed ferries to Europe if it wants to remain competitive in time-sensitive industries…’.
The Trans-Siberian Railway (TSR), which provides an overland freight corridor between Asia and Europe, has seen major investments in track and IT technologies. Today, the TSR is a high capacity freight corridor, double tracked and electrified throughout. It has benefited from the latest advances in automation and IT technologies, including the most up-to-date optic fibre communications network. The process of crossing borders has been speeded up; the waiting time at customs stations has been cut from 3 or 4 days to just a few hours. The speed up of freight movements is reliant on the optic fibre technology, this covers 45 000 kilometres of track. Wagons are monitored automatically using programmes known as DISPARK and DISKON that pinpoint the location of every container in real time. To speed up the flow of traffic express trains running to special timetables have been introduced. These have reduced the quoted delivery times for Europe-bound single containers to just 15 days, which is significantly faster than the trans-oceanic shipping route. In fact, average journey time for goods from Asia to Europe by sea is 45 days. The major objective in the next few years is to create a direct link between the TSR and the ports of South Korea. This would offer a much shorter sea crossing to southern Japan. A major benefit will be that freight will be able to travel more than 12000 km covered by a single set of transport regulations. The cost of this expansion east will run to $ 5 or 6 billion. A proposal to set up an international consortium to rebuild and run the Trans-Korean Railway is also being considered. This would involve North Korea, and it is, perhaps, that countries ability to block the flow of trade rather than its nuclear developments that is upsetting capitalism. Allied to the changes and developments outlined here there are major developments taking place across Russia to speed up the transit of raw materials and commodities, these include a project to link up northern Europe with India through Russia and Iran. This would link the Baltic coast with the Indian Ocean. All of the developments mentioned involve state organisations, private companies and employers coordinating bodies such as the International Co-ordinating Council for the Trans-Siberian Railway. (ICCTSR) This particular body includes representatives from railways in other countries, shipping companies, port operators and forwarding companies. In 2003 the ICCTSR agreed through tariffs for foreign trade moving in containers between the Asia-Pacific region and Western Europe via European border stations and Russian ports on the Baltic. The rail developments taking place in Russia will put pressure on the European Union to speed up the liberalization of its railways. And the sheer cost of modernising the railways of the new member states of the EU will be a major financial burden for years to come; while being kept in reasonably good condition during the Soviet era they have been allowed to deteriorate since. The journey from Berlin to Tallinn takes about sixty hours due to the condition of the rolling stock and the tracks. But change will come, although not without conflict with the workers.
Air cargo is another section of the logistics industry that is seeing radical change being brought about by the JIT demands of capitalism. Airfreight is used to move high value and time sensitive commodities. The amount and value of goods being moved by air is growing, Boeing predicts that cargo volumes will grow at an average of 6.4 per cent per year for the next twenty years. That would make air freight the fastest growing sector in the logistical field. In terms of the value of goods JFK airport moves more than the Port of Los Angeles.
The driving forces behind changes in the air cargo industry are the major passenger airlines and the logistical giants like UPS, DHL, TNT and Federal Express (FedEx). The big airlines are forming alliances amongst themselves to expand their cargo business at the same time as developing cooperation agreements with logistics integrators like UPS and DHL. In a relatively short time the integrators have become very large airlines. FedEx owns 640 planes and UPS runs 622. By 2019 it is estimated the integrators will control 44% of the airfreight business. In anticipation of this trend Airbus has started to develop a new super air freighter, the A380F, to enter service in 2008.
Airports in many countries are being privatised and some of them are looking to become regional cargo hubs. This means that they are investing in warehousing and logistics facilities in order to become intermodal centres. That is a place where a container can be swapped from one transport mode to another quickly. Amsterdam’s Schiphol airport aims to become a ‘mainport’ juncture of European air, road and rail freight traffic. Montreal aims to become ‘the logistics centre for both maritime and air cargo logistics.’ Huge investments in cargo and logistics facilities are being made at almost every international airport in the world.
The growth in air cargo combined with increasing reliance on air transport by global manufacturers has led to the development of special logistics airports: Liege and Ostend in Belgium, Lyon and Chateauroux in France and Nashville in Tennessee. Ex military air bases are also being converted into specialist freight airports. These airports have encouraged logistics companies to set up their hubs at their sites. When TNT Express Worldwide chose Liege as its European hub cargo traffic at the airport shot up from 35,000 tonnes to 280,000 in three years. In the USA the Southern California Logistics Airport ( SCLA) is one of the new airports exclusively geared to logistics. It is a 5,000 acre multi-modal complex which integrates manufacturing and office uses with a dedicated international air cargo airport, a rail service and a trucking hub. This model is being followed elsewhere. The Beijing Airport Logistics Zone was opened in 2002.
SCLA has become a major hub for SwissGlobal Cargo, which is a joint venture between Panalpina, a container shipping line, and SairLogistics, the cargo subsidiary of Sair Group. This company flies in tonnes of electronic goods and garments from China for redistribution to global manufacturing corporations in North America and Europe.
Before looking at technological and organisational changes in the ports industry I will outline the political pressures for port reform. Such reforms are often a requirement of the Structural Adjustment Programmes demanded by the International Monetary Fund (IMF) and the World Bank when they lend money to developing countries. By 1997 the World Bank had imposed reform on 230 ports in 24 developing and Eastern European countries. And the World Trade Organisation (WTO) is under pressure from global companies such as Hutchison Whampoa and APM Terminals, who between them have a 22.8 percent market share in the worlds ports industry, to eliminate restrictions on foreign ownership and management in ports. And the US Federal Maritime Commission has been applying pressure on the Japanese and Brazilian governments to change working practises on their waterfronts. And in the European Union (EU) in recent years there have been moves to open up ports to market access, this has been strongly resisted by dockers across the EU. The matter will not go away though and port workers must be ready for further attacks by the state, be that as the EU or the WTO. I will look at this particular struggle later in the document.
As I said above one of the drivers for changes in the ports industry is Hutchison Whampoa, which is a Chinese company. A brief description of their business will give some idea of the spread of the global terminal operators. They have a 13.3 percent share of the market and move some 36.7 million containers a year. They have 175 berths in 31 ports in 15 countries: Argentine, Bahamas, Britain, Burma, China (Hong Kong), Indonesia, Korea, Malaysia, Mexico, The Netherlands, Pakistan, Panama, Saudi Arabia, Tanzania and Thailand. It is estimated that by 2008 the top four companies, of which Hutchison Whampoa is the biggest, will control over one third of the world’s container port capacity. The big four are already active in over 90 ports in 37 countries. The gap between them and the rest is widening.
The key used by the state to allow private companies access to the ports industry is privatisation. On the docks the four main port models are:
Public Service: The government continues to own the infrastructure (berths, wharfs, waterways, channels and roads) and the superstructure (cranes, warehouses, cargo handling equipment, office buildings and communications network) and to employ the port labour.
Tool Port: All the port administration, infrastructure, buildings and equipment remain in public hands. Some services, especially cargo handling, are concessioned to the private sector to run and employ the necessary labour.
Landlord Port: The government, through the Port Authority, owns the land and other infrastructure and runs the port administration. The superstructure with the employment of labour is taken over by the private sector. At least 88 of the world’s top container terminals follow this model.
Fully Privatised Port: The government sells all assets including land, berths and basins to the private sector and retains no controlling interest. This form of privatisation is rare, only occurring at some ports in Britain, Greece and New Zealand. Liverpool is an example.
Container ships are measured in TEUs (twenty foot equivalent unit). This means that a 6000 TEU ship can carry the equivalent of 6000 twenty-foot containers, although its actual load may be made up of containers of various sizes. The size of container ships can have an impact on the business of ports. In 1998, Maersk-SeaLand, one of the largest container shipping consortia in the world, revealed its intention to consolidate its East Coast of North America trade in one hub. It invited a number of ports to bid for this business, a traffic in excess of 700,000 TEUs per year, more than the total container shipments of all but a few of the largest ports in the world. This prize was dangled before the port administrations of Baltimore, Boston, Hampton Roads, Halifax, New York-New Jersey, Philadelphia, and Quonset Point (RI). Maersk-SeaLand expected the bidders to meet certain conditions that if met would require unprecedented concessions from the port authorities just to remain in contention. Of the three ports short-listed by Maersk-SeaLand in December 1998, two made significant efforts to win the business, Baltimore and Halifax. Halifax lined up several hundred million dollars in capital to help defray the costs of providing Maersk with dedicated berth and rail access. Baltimore got the state of Maryland to dredge the access channel to the port as well as offering the company 335 acres of the 550 acre Dundalk container terminal. The Maersk bidding approach resulted in most of the competing ports making significant concessions. Other shipping consortia have applied similar pressures on port authorities. The port of Seattle has recently invested some $72 million on a dedicated terminal for a Chinese shipping company, this investment will guarantee that the company continues to use the port for the next ten years. Seattle, by the way, is the main port for Chinese imports. And it sometimes works the other way around; the Chinese shipping company Cosco is considering investing $664.3 million in developing a container terminal in Hamburg, which handles more cargo from China than any other European port. This would follow on from a major investment in the port of Antwerp, Belgium by the shipping company.
Container ships are getting bigger, 8000 TEU vessels are in production, and there is talk of 10,000 and 12,000 TEU constructions. These giant ships are effecting changes in the ports industry, producing hub and spoke systems. Due to the size of these ships (a recent design for an 8000 TEU ship measured 338 metres in length and had a breath of more than 46 metres) only certain ports can accommodate them. For example, Rotterdam would be a hub port and other European ports would be spoke ports, which means that when a 8000 TEU ship arrives at Rotterdam smaller ships will come from other ports bringing containers to be loaded on it and, if necessary, take containers from it back to the smaller ports. The hub and spoke system demands a high level of synchronization between the ports and the various vessels. In Europe Bremerhaven and Hamburg have installed giant cranes with the reach to unload ships with a breath of 46 metres so they can become hub ports. This sort of investment does not guarantee that ports will win such business, though. The giant logistics companies and shipping consortiums will not be tied to old loyalties, just because a shipping line has always traded between Liverpool and New York it doesn’t mean it will continue to do so. If a logistics company controlling a supply chain can save money and/or time by shipping from Bristol instead of Liverpool it will do so. Its only loyalty is to its shareholders.
Impact of Information Technology
The impact of Information Technology (IT) upon logistics and supply chains is immense and I will now try to outline how it works. The most successful companies use IT systems that allow all the participants in a supply chain to access the information needed to keep flows moving along the supply chain. An example is the information hub model, this instantly processes and forwards all relevant information to all appropriate parties. The hub is a node in the data network where multiple organizations interact in pursuit of supply chain integration. It has the capabilities of data storage, information processing and push/pull publishing. The overall network forms a hub and spoke system with the participants internal information systems being the spokes. An analogue to the information hub in the physical logistics world is ‘cross docking’, a process in which products from multiple supply sources arriving at a logistics hub are sorted in accordance to the needs of destination points. They are then delivered to the destination points without being stored at the hub. In a similar fashion, the information hub allows critical supply and demand data to be ‘cross-docked’ and seamlessly forwarded to the right partners at the right time. These global companies to control their costs and revenues have developed in-house banking systems and payment factories. According to a report by Killen and Associates, a company with $1 billion in revenues can waste as much as $32 million annually through inefficient working capital and processing functions. It is not surprising therefore, that businesses are increasingly focusing on reducing idle cash and rationalising processes. These financial set-ups operate like a hub and spoke system as I understand it, but I don’t understand them well enough to go into detail. I’m still trying to get my head around it.
Cross docking is a warehouse management technique that can significantly reduce storage and handling costs; a study of the food service supply industry in 2000 estimated that cross docking could save the industry $830 million. In cross docking, incoming goods are identified at receiving and immediately routed for outbound shipping, without being placed into warehouse storage. Cross docking does not work if materials can’t be identified quickly and accurately, making bar code and RFID use essential for the operation. Mobile bar code label printers are especially valuable for the process. Shipping and receiving workers equipped with mobile computers, bar code scanners and label printers can receive inbound shipments, log them into the host warehouse or inventory control system with the mobile computer, then immediately generate a bar code shipping label with the required cross dock information using the mobile printer, which may be mounted to a forklift truck or worn on a belt or shoulder strap. Some mobile printers can also connect directly to wireless LANs to manage communication between the host system and the warehouse worker.
RFID can also facilitate efficient cross docking, incoming pallets or cartons with smart labels can be automatically routed for cross docking or delivery directly to the manufacturing line because the fast reading capabilities enable instant identification of the shipping container plus all the of the individual items inside. For shipping on, RFID readers can help packers quickly locate and aggregate all the items needed to complete the load. Cross docking combines receiving, putaway and shipping operations to minimize product handling. Each of these traditional steps can also benefit by identifying materials with bar code or RFID. For traditional receiving applications, a bar code label on incoming shipments can be scanned to record the item’s arrival. Manifest data or information from an Advance Ship Notice (ASN) electronic data interchange message can be included on the label in a 2-D barcode or smart label to provide more detailed shipping information. Shipment identification information can be forwarded to the warehouse management system, typically over a wireless LAN, which records the arrival, updates inventory records and provides putaway instructions to the receiving worker. In this way all materials are tracked automatically and accurately. And so are the workers. UPS has just announced the introduction of a new generation of driver hand held computers to ‘aid efficiency and fuel consumption.’
To conclude; the complexity and geographical spread of supply chains combined with JIT and low inventories makes capital vulnerable to attack. The continuing growth in world trade and the developing labour shortages in the logistics industry should put the working class in a strong position to mount such an attack, but it is still on the back foot. In my opinion the particular composition of the class that is starting to become visible within the world of logistics is a harbinger of troubles to come. In the past the distinction between blue collar and white collar workers in the industry was clear, but today that is changing as the discipline of the production line is imposed throughout the supply chain and IT allows workers to carry out functions that were previously the business of the office staff. And it is IT that can be the vehicle for organising throughout the industry. The open ended communication systems being developed to coordinate supply chain integration offer opportunities to workers for cross company and cross border dialogue. And studies indicate that workers are not slow to take the opportunity. A study by UCLA found that 60.7% of employees visit the web for personal use and one by International Data Corporation estimated that 30% to 40% of employee internet use is not work related. And it is estimated that 60% of hacking attacks against a company originate within the organisation. Furthermore, a survey of 15,000 workplace computers found that 20% had file-sharing software installed illicitly. Just as the mass worker of the Fordist production system learned to use the factory’s technology against the imposition of work the logistics worker will, I believe, do the same. But what will be the response to the struggles that spring forth? When I worked at Fords in the seventies groups like Big Flame leafleted regularly, in fact, when there was a struggle going on they would be there daily. Their leaflets were a source of information to counteract the company’s propaganda. In a factory of 14,000 workers operating three different shift systems they helped us to find out what was going on. Now I know it is a little bit difficult to leaflet trucks as they hurtle down highways and the same goes for air and rail freight too, but, in my opinion, we do need to engage with the world of supply chains. That is why I feel there is a need for a workers inquiry, a need for those of us within the movement to engage with workers in the largest industry in the world.
[prol-position news #3, 8/2005] www.prol-position.net