Supply Chain Shenanigans
Malcom McLean, the iconoclastic entrepreneur who developed the modern shipping container.
Supply chain problems have been a pervasive and recurrent theme in 2021. By now the world is running short on just about everything, from microchips to workers to raw materials. The pandemic is partly to blame for these disturbances. While shipping delays, a shortage of truckers, and COVID-related plant closures in Asia constrained the supply of goods, consumers in America and elsewhere went on a historic buying spree, fueled by trillions in stimulus funds and the way that businesses have honed the online shopping experience in the last decade. This has resulted in an epic whiplash effect that will continue to disrupt supply-and-demand patterns well into 2022.
But blaming the supply chain mess on COVID is only part of the story. Even before the pandemic, supply chains were becoming fragile as they adapted to meet the pressures of trade wars, rising consumer demand, and a delivery system in urgent need of overhaul. Unfortunately, much of the current media coverage obfuscates the furious, tech-driven dance of people and robots manufacturing and transporting goods from one place to another. Personal experience is no better guide. When we order something on Amazon, we get to glimpse only the proverbial “last mile” of a journey that is much longer and complex than we realize. It’s no accident that we fail to appreciate these everyday miracles. The whole system underpinning the one-click economy is designed to shield the consumer from the stomping beat of the supply chain orchestra.
Unpacking the largely invisible, multi-layered journey from factory to front door is the focus of a timely new book, Arriving Today, by WSJ technology columnist Christopher Mims. For a topic that may seem rather dry and inaccessible, it’s a surprisingly absorbing read and quite the page-turner. Mims succeeds in describing an intricate, world-spanning system with an economy of prose that is remarkable. To grasp the scale and complexity of the global logistics network, he details the two-month long, 14,000 mile (22,530 km) journey of a hypothetical USB charger from its factory in Vietnam to a buyer’s home in the US. This clever narrative device allows him to provide a high-level view of the supply chain and its actors, from global container shipping to long-haul trucking and last-mile fulfillment, while always drilling down to the smallest details of what’s at stake. Along the way, he weaves in reflections on scientific management theory and the future of automation. His findings are at once inspiring and deeply troubling.
Let’s begin with the inspiring. By the time you finish the book, it’s hard to feel anything but awe for the far-flung networks of suppliers, factories, and logistics providers that pull resources from across the globe at incredible efficiency. Mims is right to call logistics one of the most sophisticated fields of human endeavor, despite its sorry state of digitalization (in some links of the chain, data is still exchanged in paper or unstructured emails). The numbers alone are astonishing: More than 800 million units of container shipping are moved through the world’s ports every year, producing immense economies of scale (for reference, it costs about $2 to ship a TV from China to the US). On top of that, the biggest consumer economies shipped over 130 billion parcels in 2020––a volume that is expected to more than double in the next five years. This growth trajectory leads Mims to suggest that the world is increasingly becoming a single, well-integrated factory: “When any one of us orders something online and has it delivered to our door, we are making ourselves the end point of a conveyance system.”
But there is a darker side to the story that economic statistics fail to capture. A constant theme of the book is that automation in logistics still requires a great deal of human involvement to handle functions machines can’t. For example, only 3% of the world’s port container terminals are automated; the other 97% rely on dockworkers to work around the clock to operate the ship-to-shore cranes and land vehicles. Long-haul trucking remains a very labor-intensive industry as well, despite its enthusiastic embrace of technology. Even Amazon is a long way from running its warehouses autonomously: as of early 2019, only 15% of the company’s 175 fulfillment centers included robots. Most of the picking, packing, and shipping is still done by humans, which explains the explosive growth of Amazon’s workforce.
The problem with this kind of semi-automation is the disempowering and demeaning effect it has on workers in the supply chain. Sailors, longshoremen, truck drivers, warehouse workers, and parcel carriers all have to achieve a machine-like efficiency to keep pace with the automation they work alongside. The issue here is not technology per se but the perverse incentives that result from pitting humans against machines. It is pretty appalling to read about workers who feel trapped in an “equilibrium of misery,” and treated like “throwaway” people. This is particularly true for trucking, which suffers from a burnout and retention problem so massive that the typical trucking fleet in America must replace 100% of its drivers every year. It is also true for warehouse work, as Emily Guendelsberger points out: “These are jobs where you’re held accountable to robotic standards of efficiency and productivity and you’re expected to quash all your human failings. Being a human is regarded as a failing when you’re in competition with machines and algorithms for your actual job.”
Throughout the book, Mims examines every cog in the supply chain machinery, contextualizing it with perspectives such as Guendelsberger’s. The great strength of his reporting is that it humanizes the supply chain while also pointing the blame at those most responsible: all of us consumers. That doesn’t mean he leaves e-commerce and logistics companies off the hook. He even coins a new term, Bezosism, for the way Amazon uses technology to squeeze performance out of warehouse workers. But at the end of the day, the market delivers what consumers want, and their demand for cheaper goods delivered faster has a direct impact on workers. Through this and other realizations, Arriving Today helped me understand the mind-boggling complexity of the system and learn about the human cost of the incentive structures that shape its current incarnation. That alone makes the book worth it.
Thanks to Ricardo for reading the final draft of this piece.