Capitalism is being restructured.  The way goods are produced and distributed has been undergoing a major shift over the last 30 years.  An important part of this restructuring involves a revolution in logistics, or the way goods are transported and warehoused.  Much of the discussion of restructuring has focused on production, especially the emergence of sweatshops, both here and abroad.  Looking at distribution shows that many of the same results have emerged for logistics workers.  The logistics sector occupies a position of great strategic importance to global capital.  Workers organizing in this sector have the potential to cause serious disruption to the flow of goods, and to demand important reforms for workers all over the world.  The labor movement needs to consider taking advantage of this strategic opening.

The logistics revolution is part of a larger paradigm shift, known as supply chain management (SCM).  SCM can be understood as having grown out of the contradiction between supply and demand that is endemic to capitalism.  Capitalism is prone to crises of overproduction, in part because of a relentless pressure to cut labor costs.  The system faces an inability to sell all the commodities that are produced so efficiently.  Various efforts are made to escape from this conundrum, including expanding overseas trade, developing branding to sell lifestyles and encourage product loyalty, lowering interest rates, and fostering consumer credit, but none of these addresses the fundamental contradictions of the system.  SCM is yet another attempt to find a way out.

In brief, SCM tries to link supply to demand.  The goal is to produce only those goods that consumers are actually buying.  Using information technology, the sellers of goods (especially retailers) collect point-of-sale (POS) information, using bar codes, and relay it electronically through the supply chain to initiate replenishment orders almost instantaneously.  By this method retailers try to avoid the dual problems of stock-outs and mark-downs when they have the wrong product mix in their stores.  The idea is to customize store offerings to what consumers want, and avoid the accumulation of unsold inventory.  The industry calls this a shift from “push” to “pull” production and distribution.

The development of SCM is linked to the end of Fordism and the emergence of flexible specialization.  Products are being customized for a variety of specific markets, resulting in tremendous product proliferation—another attempt to increase consumer demand.  Of course, many of these new products are small variations on the same old thing, and can be described as “mass customization.”  Old Fordist factories were poor at producing this type of variety.  Flexibility is gained by contracting out for the production of smaller lots of constantly changing products. Retailers as well as manufacturers are pursuing flexible production relations, as they develop their own private label and buying schemes. 

Flexibility for the primary producer or retailer means contingency for the suppliers and their employees.  Contractors have no guarantees of getting stable work.  They must compete with each other and against firms all over the world.  To deal with this, they sometimes create “flexible” employee relations, such as piece rate, independent contracting, and part time and temporary status for their workers.  Indeed, one can argue that the major reason for extensive contracting out is to lower labor costs, as is evident in  contracting with offshore factories in poor countries with few protections for workers.  It is out of these developments that global sweatshops and the “race to the bottom” have emerged. 

The far-flung production empires of flexible specialization require the complex coordination of transportation and warehousing.  Moreover, “pull” production requires speed, predictability and accuracy in the delivery of goods, since available inventory has been cut back.  Constant and unpredictable changes in sales patterns must be met by just-in-time (JIT) delivery systems.  Logistics is the “science” of getting this to happen in the most efficient and cost-effective way.

International logistics involves the efficient movement of offshore-produced goods to their ultimate markets.  Some of this movement occurs via air-freight, especially high-value, low-bulk items.  But the great mass of movement occurs by ocean transportation.  An important technological innovation, the container, contributed to the feasibility of offshore production.  Prior to containerization, break-bulk was the major system of ocean transportation.  Packages had to be individually stowed in the hulls of ships, a process that could take weeks. 

Containers are essentially truck trailers with the wheels removed.  Removing the wheels enables the boxes to be piled on top of each other.  This is useful both for stacking them by the thousands on to ships, and for double-stacking them on railroad cars.  Wheels with chassis can be attached on the bottom to convert them into trucks.  The container allows for intermodal transportation—the movement of goods from one mode to another without the necessity of unloading and reloading.  A sealed container leaves a factory in Asia and is delivered to a U.S. warehouse without ever being opened.

Steamship companies facilitated the implementation of intermodalism by shifting from break-bulk to container vessels.  These companies are liners, meaning that they offer regularly scheduled voyages, similar to the airlines.  The steamship lines sell their services to shippers (the industry term for importers and exporters, including producers and retailers), frequently providing them with door-to-door service.  In other words, railroad and port trucking services are often hired by the steamship companies. 

Virtually no U.S. steamship companies remain in operation.  Two processes have contributed to their flight.  First is the use of “flags of convenience” (FOCs) by the liners, under which ships are registered in countries where standards are lowest, like Liberia and Panama.  Second, Asian and European companies have come to dominate the business, and have absorbed most of the remaining U.S. firms.  The largest container shipping company is Maersk-Sealand, a Danish company that bought U.S.-based Sealand.  Other industry leaders are Evergreen (Taiwan), American President Line or APL (acquired by Singapore), Hanjin (South Korea), Cosco (China), OOCL (Hong Kong), and “K” Line (Japan).  One of the reasons for this shift is higher U.S. labor costs.

In the United States, intermodalism was hastened by the deregulation of transportation, part of a larger movement towards deregulation and privatization.  Trucking and the railroads (as well as the airlines) used to be heavily regulated by the government.  The goal was to provide standardized service to everyone.  Starting in the late 1970s, and picking up speed in the 1980s, trucking and rail transportation were deregulated, meaning that they were turned over to market forces.  The transportation business became much more competitive both within and between modes, and prices fell.  The result was a massive consolidation, based on mergers and bankruptcies.  As part of deregulation, the 1984 Shipping Act permitted ocean carriers to offer a single door-to-door rate.

More deregulation of shipping occurred later, reaching its peak with the passage of the Ocean Shipping and Reform Act (OSRA) in 1998.  Prior to OSRA, the liners formed cartel-like conferences that set rates for specific routes and were granted antitrust immunity to do so.  The new law allowed for the negotiation of secret service contracts between shippers and carriers, thereby privatizing the rate-setting process, although OSRA did not completely eliminate antitrust immunity for the steamship lines, and conferences can still suggest rates.  The ocean shipping business suffers from overcapacity, especially in the trans-Pacific routes, which has driven down rates.  Consolidation and bankruptcies have begun to emerge among ocean carriers, and the industry anticipates a major shakeout. 

Another aspect of the revolution in logistics concerns the growth of intermediary firms that specialize in logistics, such as BAX, Exel, and Pacer Global Logistics.  Sometimes termed third-party logistics firms (3PLs), they vary from providing specific services like warehousing, freight consolidation, or small package delivery, to planning and implementing the entire supply chain operation as an outsourced service to manufacturers and retailers.  Some of them are global giants, with tentacles in every country of the world.  The major steamship lines have developed their own logistics subsidiaries, as well.  The mission of 3PLs is to get logistics systems to move swiftly, efficiently, and cheaply.

Warehousing has also been revolutionized.  The old warehouse stored quantities of inventory and orders were placed as needed.  The modern warehouse, or distribution center (DC), aims to have goods move in and out, rather than sit around.  The ideal is cross-docking i.e. the lining up of delivery trucks on one side of the building, where they are emptied, the goods sorted electronically by destination, and put on conveyor belts for loading into trucks on the other side of the building.  Ocean containers can be handled in this way by breaking out their contents at a warehouse, and shipping the goods to their final destination by truck, rail, truck to rail, or rail to truck.  DCs can also play an important role in providing value-added services for shippers, such as repackaging, adding tags, and customizing final goods.  They are sometimes operated by 3PLs. 

            The development of SCM and logistics has put power into the hands of giant retailers, although not invariably.  In some industries, such as auto, manufacturers maintain control over their own distributors.  In others, manufacturers produce directly for consumers, by-passing retailers altogether.  Dell Computer is the model of such an approach.  It custom-produces its PCs only after consumers have ordered them, and yet can deliver them with speed.  Of course, this miracle is achieved by pushing back the holding of inventory on to their contractors and integrating them into their ordering system.  However, for the majority of consumer products, such as apparel, shoes, toys, furniture, home furnishings, electronics products, and so forth, distribution occurs through retailers.

Retailers have generally gained power over manufacturers with the restructuring of SCM and logistics.  Under the “push” model, manufacturers had more control over their own production.  Now, as the end point of the supply chain, and the direct interface with consumers, retailers are playing an increasingly important role in determining what will be produced, when and where it will be delivered, and all the details of bar-coding and packaging.  Manufacturers have had to purchase electronic equipment and software to the retailers’ specifications in order to receive the POS information and orders they are constantly sent.  Meanwhile, retailers have expanded their private label programs, thereby competing with and undercutting their suppliers. 

Retailers have become some of the biggest importers.  For example, of the top 100 importers in 2001, based on number of TEUs (20 foot equivalent units, a standard measure for number of containers), 32 were retailers, according to the Journal of Commerce.  Six of the top 10 were retailers.  Wal-Mart alone imported 260,000 TEUs, almost twice as many as the next largest importer.  Other important retailer-importers are Kmart, Target, Home Depot, Toys R Us, Payless Shoesource, Costco, and Ikea.

The logistics ideal of minimizing the stock-piling of inventory, and achieving the constant flow of goods on a JIT basis, is far from accomplished.  Despite their best efforts to avoid collecting inventory, retailers suffered from a poor Christmas season in 2002, and had to sell off goods at massively discounted prices.  The supply and demand contradiction is still far from solved, and never can be under capitalism.

Logistics and Labor

There is no doubt that logistics costs have fallen as a result of the “logistics revolution.”  The cost of maintaining inventory has dropped, as has the cost of transportation and warehousing.  The question is:  Have these costs fallen strictly because of efficiency gains, or is some of the drop attributable to lowered labor costs and weakened unions?  Let us look at what is happening to various groups of logistics workers and their unions.

Steamship lines are manned by seafaring crews.  U.S. seafaring unions used to be powerful, but they have been decimated by the “runaway ship.”  Now crews are recruited from among the poorest countries in the world and are paid a fraction of what U.S. merchant seamen were paid.  They also suffer from longer trips, limited access to shore leave, poorer food, and longer hours of work.

Longshore workers load and unload ocean carriers.  On the West Coast the ILWU remains a powerful union.  However, as the recent lockout and invocation of Taft-Hartley shows, the union is under attack.  Many shippers would like to see the ILWU’s control over the docks weakened, if not completely demolished.  The formation of the West Coast Waterfront Coalition (WCWC), headed by Wal-Mart among others, which attempted to apply public relations and political pressure on behalf of the Pacific Maritime Association (PMA), the longshore workers’ employer, demonstrates the determination of these forces to gain control over all elements of the supply chain and logistics.

Truckers, especially in the TL (truckload) sector, have suffered from de-unionization and deteriorating pay and conditions as a result of deregulation.  Port truckers have been especially hard-hit.  These drivers haul containers between the ports and their local point of origin or destination.  The port truckers used to be organized by the Teamsters (IBT).  The union was virtually broken in this sector, as non-union trucking companies emerged and undercut the union firms.  Most port trucker employees have been converted into independent contractors (called owner-operators), as a form of flexible, contingent labor.  In Los Angeles they are mainly immigrants from Mexico and Central America.  They get paid by the load, leading to not getting paid for waiting in line, sometimes for hours, at the ports.  Moreover, as independent contractors, they are not allowed to act in concert, as a union, under antitrust law—a supreme irony in the face of the fact that the giant steamship companies are granted limited antitrust immunity.  Of all the global-trade-related logistics workers, port truckers are the most oppressed.

Railroad unions still exist, but the railroad workforce has been decimated.  Deregulation, railroad consolidation, and the Railway Labor Act have taken their toll.   The number of workers per train has declined, and they suffer from inhumane work schedules leading to dangerous fatigue.  The latest threat to railroad workers is the introduction of remote control technology, enabling trains to be run without engineers.

Warehouse work has also been altered.  In Southern California, an outpost of DCs operating for some of the biggest transnational corporations (TNCs) in the world has been established to the east of Los Angeles, in the Inland Empire (San Bernardino and Riverside Counties) around the city of Ontario.  Largely unorganized, the workers in this sector are typically young people of color.  The use of temp agencies and employee leasing has grown enormously in this sector.  While the explicit purpose of such arrangements may be to provide the DCs with flexibility in the face of unsteady work, in practice it is used to “outsource” workers’ comp responsibilities.  And there is an added benefit that unionization is made more difficult by putting another layer between employer and employee.

In sum, with the possible exception of the ILWU, wages, working conditions, and unionization have all suffered from degradation on the local front of global logistics.  And the last bastion of labor strength, the ILWU, faces serious challenges.

The Possibility

The development of outsourcing, flexible production, SCM, and global logistics has strengthened the hand of capital and weakened labor.  But, from a dialectical point of view, every strength has its weakness and every weakness its strength.  In this case, the far-flung production empires of the TNCs open up new vulnerabilities.  In particular, ports, such as the ports of Los Angeles and Long Beach, the largest container ports in the United States, and third largest in the world, are vital nodes in the system of production/distribution, a system that depends on JIT deliveries and the cutting back of inventory.  If the logistics systems surrounding the ports are shut down, the result can be chaotic for capital.  The recent lock-out on the West Coast demonstrated this vulnerability.  Not only retailers, but also manufacturers dependent on imported inputs, were severely impacted.  The ports and their surrounding logistics systems are choke-points in the global flow of commodities.

The focus of the lock-out was the docks themselves, but other aspects of the logistics system could also serve as choke-points.  If port truckers were organized and engaged in a work-stoppage, if railroad workers were to do the same, if the Ontario DCs were faced with a sectoral strike, similar chaos would ensue.  If all of these groups of workers were able to work together in a coordinated manner, real power would accrue to the workers.  Of course, to be truly effective, such efforts would have to be duplicated at all the container ports.  On the hopeful side, we should note that the IBT, ILWU and ILA (on the east coast) are engaged in dialogue to coordinate better, and the IBT and Brotherhood of Locomotive Engineers (BLE) are moving ahead on a merger, though these processes are just beginning.  Moreover, the International Transport Federation (ITF) is one of the few international labor federations that has shown a capability of coordinating international campaigns, and it provided support for the ILWU in the recent contract dispute.

Local logistics workers are, of course, only a part of the larger system of global production and distribution.  They are the local face of global production—the part that cannot be moved offshore.  Workers in Asia and Latin America, both in production and logistics, are participants in the same system.  It might be possible to engage in coordinated organizing along the entire supply chain, linking production workers in Asia, for example, with logistics workers in the United States.  Such coordination would increase working class power tremendously.  It would enable the working class to insist on fundamental changes in global capitalism.  Workers could insist on global labor and environmental standards, and on ensuring that the world’s riches be used to benefit all countries and all peoples.

What would it take to develop coordinated efforts both within the logistics sector and along the supply chains?  First, the signs of coming together among such unions as the IBT, ILWA, ILA and BLE are all moves in the right direction. In order to accelerate and broaden this process a summit should be called among all the North American unions that are engaged in international logistics, with an invitation to the ITF, to consider their collective potential strategic power.  Perhaps it could be convened by the Transportation Trades Department of the AFL-CIO.  Of course, such a summit would have to raise questions about the standard operations of some of these unions.  Hot shop organizing and quick NLRB elections, would have to be abandoned for a much more comprehensive, sectoral, and long-term approach, perhaps following the Justice for Janitors model.  The prevalence of non-standard workers in this sector, including independent contracting among the port truckers and temp workers in the warehouses and DCs, would have to be addressed.  Labor law reform will likely be required to overcome the misclassification of these workers in order to deprive them of their rights to union representation.  A coordinating committee, with representatives from each union, would have to be given the authority and resources to develop a comprehensive plan of attack.  The best strategists of the labor movement should be invited to help.

In terms of following supply chains, one would need to develop good connections with unions in developing countries.  A first phase might entail connecting with workers and unions already engaged in organizing drives and considering ways in which U.S. logistics workers could link our struggles with theirs.  U.S. workers could refuse to move certain cargo, for example, in solidarity with an organizing drive in Indonesia.  Ironically, we may be aided by new security laws that may make it easier to identify companies of origin.  The concept of Company Councils (like that of GM’s or Ford’s international production empires) could be extended to Supply Chain Councils, in which, for example, a major retailer’s vendors and logistics workers (as well as its sales staff) would all join together in the task of organizing every aspect of the company’s supply system.  Because of its interface with the consuming public, such a retailer could face the wrath of consumers, community groups, religious groups, etc. as an exploiter and enemy of labor.

This kind of vision depends on a very different form of leadership from the AFL-CIO.  It requires a class perspective with respect to organizing in this country, including a shift from accommodation to the Democratic Party, which, despite its greater liberalism, is profoundly committed to corporate-dominated global capitalism.  It also requires an internationalist vision of working class solidarity across the entire world, including China.  We cannot afford to hold on to what remains of old Cold War and racist ideologies.  Finally, our unions need to bargain for more than their own self-interest.  The strategic power of the ILWU could have been used to broker gains for the port truckers, for example.  We need to recognize that the global logistics system offers new strategic openings for labor, where real working class power can be exercised.  Is the U.S. labor movement up to this challenge?

I want to thank Stephanie Arrellano, Carolina Bank-Munoz, Jill Esbenshade, Paula Finn, Peter Hall, Peter Olney, Gary Smith, Goetz Wolff and David Young for their careful reading and insightful comments on an earlier draft.  This paper reflects their contributions.