Home
Capital Moves: Transport and Logistics
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@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. [See here]
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…’.
Rail-Transport
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
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.
Ports
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.’
Conclusion
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]
