Why Global Supply Chains May Never Be the Same | WSJ Documentary
Summary
TLDRThe video script delves into the global supply chain crisis, highlighting the 2020 shortage of items like kettlebells and PlayStations. It explores the unexpected surge in demand during the pandemic and the strain on supply chains. The script examines the journey of a USB charger from Vietnam to consumers, the challenges of shipping, port congestion, trucking industry issues, warehouse demands, and the impact of E-commerce on delivery expectations. It raises concerns about labor shortages, working conditions, and the potential re-evaluation of offshoring in the face of supply chain vulnerabilities.
Takeaways
- π¦ The global supply chain is experiencing significant delays and shortages, causing widespread frustration among consumers and businesses.
- π΅βπ« The pandemic has exposed the vulnerability and over-reliance on just-in-time inventory systems, leading to a reevaluation of supply chain resilience.
- π The demand for goods surged during the pandemic, contrary to expectations, overwhelming supply chains that had anticipated a drop in demand.
- π’ The journey of goods is complex and involves multiple stages, from manufacturing to shipping, which are all impacted by current supply chain disruptions.
- π οΈ The shift of manufacturing to countries with lower labor costs, like Vietnam, has contributed to the complexity and length of supply chains.
- π Shipping challenges, such as the blockage of the Suez Canal by the Ever Given, have had a ripple effect, causing further delays andεΈζΎing the fragility of key supply chain links.
- π Ports and fulfillment centers are under immense pressure, with the Port of Los Angeles and Long Beach handling a significant portion of US imports and exports, and facing operational challenges.
- π The trucking industry is facing a driver shortage, which is impacting the movement of goods within the country and contributing to supply chain bottlenecks.
- ποΈ There is a trend towards automation and robotics in warehouses to offset labor shortages and increase efficiency, but this can also lead to increased worker burnout.
- π΄ The 'last mile' of delivery is a critical and increasingly complex part of the supply chain, with the rise of e-commerce putting additional strain on delivery services.
- π‘ The supply chain issues have sparked a rethinking of manufacturing locations and the need for more regionalized production to reduce vulnerability to global disruptions.
Q & A
What was the unexpected outcome for businesses when the pandemic hit?
-Businesses anticipated a drop in demand due to the COVID recession, but instead, demand exploded as people started buying things like crazy, causing supply chains to struggle with the record demand.
Why did the global supply chain face challenges during the pandemic?
-The global supply chain faced challenges due to the unexpected surge in demand during the pandemic, which led to shortages and delays, threatening a total paralysis in the system.
Outlines
π‘ Frustration and Delays in 2020 Supply Chains
The paragraph discusses the widespread frustration and delays in the global supply chain due to the pandemic. Businesses expected a drop in demand but faced the opposite. The strain on supply chains is exemplified through delayed deliveries, increased prices, and the complicated journey goods take from manufacturing to consumers.
π³οΈ The Journey of Goods and Maritime Challenges
This section describes the complex journey of goods, focusing on maritime transport. It highlights the role of sailors and the challenges they face, such as long working hours, confinement, and the importance of safe navigation. The bottlenecks in major ports and the impact of incidents like the Ever Given blockage in the Suez Canal are also discussed.
ποΈ Port Congestion and Worker Challenges
The paragraph outlines the severe congestion at ports like Los Angeles and Long Beach, caused by an unprecedented influx of goods. It details the efforts of longshore workers, the struggles with space and productivity, and the contentious nature of port operations involving multiple stakeholders. The impact of these delays on the supply chain is significant.
π The Trucking Industry's Critical Role and Challenges
This section focuses on the trucking industry, emphasizing its importance in the supply chain. It addresses the chronic driver shortage, the tough working conditions, and the retention problem. The historical context of deregulation and its effects on wages and unionization is provided, illustrating the industry's current struggles and the critical role truck drivers play.
π¦ Small Trucking Companies and Industry Fragmentation
The paragraph discusses the fragmentation of the trucking industry and the challenges faced by small trucking companies. It highlights the imbalance of power between these companies and freight brokers/shippers, the struggle to retain drivers, and the impact of regulations. Personal anecdotes from trucking company owners illustrate the pressures and complexities of the industry.
π Warehousing and Fulfillment Center Operations
This section explores the operations within warehouses and fulfillment centers, detailing the physical demands on workers, the integration of technology and robotics to increase efficiency, and the impact of e-commerce growth. It underscores the turnover and retention issues faced by companies and the ongoing efforts to optimize space and processes to meet rising demand.
π€ Automation and Its Impact on Warehouse Workers
The paragraph examines the role of automation in warehouses, highlighting the balance between increasing efficiency and maintaining worker safety. It discusses the use of robots to enhance productivity and the potential for burnout and turnover among workers due to the accelerated pace of work. Insights from warehouse employees provide a firsthand perspective on these challenges.
π’ The Strategic Importance of Fulfillment Centers
This section emphasizes the strategic placement of fulfillment centers along major highways, the competitive job market for warehouse workers, and the impact of high wages and benefits on retention. It includes personal stories from workers who have progressed through various roles in the warehouse, illustrating the pressures and motivations within the industry.
π Last Mile Delivery and the Human Element
The paragraph focuses on last mile delivery, detailing the physically demanding nature of the job and the critical role delivery drivers play. It highlights the training and safety protocols at companies like UPS, the benefits of stable employment, and the emergence of gig economy models like Amazon Flex. Personal experiences from drivers provide insight into the daily realities of last mile delivery.
π¦ Amazon's Last Mile Logistics Network
This section describes Amazon's unique approach to last mile delivery through subcontracted local delivery companies and the challenges faced by drivers. It explains the franchise model of Delivery Service Partners (DSPs), the planning and routing by Amazon, and the high expectations for delivery performance. Personal accounts from drivers illustrate the demanding nature of the job and the potential legal implications for Amazon.
π The Evolution of Global Trade and Supply Chain Resilience
The paragraph highlights the evolution of global trade, the impact of supply chain disruptions due to the pandemic, and the rising costs of transportation and labor. It discusses the shift towards reshoring manufacturing and the challenges associated with this transition. Investments by companies like Samsung and Intel in U.S. manufacturing facilities are mentioned as part of efforts to mitigate future supply chain issues.
Mindmap
Keywords
π‘Supply Chain
π‘E-commerce
π‘Pandemic
π‘Manufacturing
π‘Semiconductor Factory
π‘Container Ship
π‘Port Congestion
π‘Longshore Workers
π‘Trucking Industry
π‘Fulfillment Center
π‘Last Mile Delivery
Highlights
The global supply chain is experiencing widespread frustration due to shortages and delays.
Pandemic-induced demand surge led to unexpected strain on supply chains contrary to initial business predictions.
E-commerce has created an illusion of instant gratification, masking the complex global logistics involved.
The journey of goods involves a significant human and mechanical effort often overlooked by consumers.
The shipping container revolutionized global trade by reducing costs associated with moving manufacturing to regions with lower labor costs.
The Suez Canal blockage by the Evergiven highlighted the vulnerability and fragility of global supply chains.
Port congestion, such as in the Port of Los Angeles and Long Beach, can significantly disrupt the flow of goods.
Labor shortages in warehousing and long-haul trucking are critical challenges facing the supply chain.
Technological advancements like robotics are being implemented in warehouses to increase efficiency and manage labor shortages.
The high turnover rates in Amazon warehouses are attributed to the physically demanding nature of the job and the impact of automation.
The transformation to E-commerce has significantly increased the demand for last-mile delivery services.
Amazon is building its own delivery network, challenging traditional carriers like UPS and FedEx.
The use of contract drivers in last-mile delivery is a growing trend, impacting job quality and worker protections.
The pandemic has exposed the need for supply chain resilience and the potential risks of relying on just-in-time manufacturing.
In response to supply chain disruptions, companies are reconsidering offshoring strategies and looking at nearshoring or re-shoring.
Supply chain challenges have contributed to inflation and have complicated the use of interest rates as a tool to combat it.
The future of supply chains may involve a re-evaluation of globalization, with a focus on regionalization and resilience.
Transcripts
- [Man] Look at this.
Sold out, can you believe this stuff?
- So they were supposed to deliver it in October.
- This is going to be an update
on the kettlebell shortage of 2020.
- I just want my shoe.
Gimme my shoe, please.
- Then it was supposed to be November.
No.
Then December.
- Get me my PlayStation.
Am I wrong for wanting this, bro?
- I mean, everything just sucks lately.
- Take my money.
Take my money, I don't want it.
Gimme my shoe.
- Every time I check my email,
it's stuck on this right here.
I don't even know what that means.
- Tonight, one word sums up the feeling along
every line of the supply chain: frustration.
- Well, the shortages and delays
in the global supply chain threaten
a total paralysis.
- When the pandemic hit,
businesses anticipated that the COVID recession was coming.
They thought that demand was going to drop,
but something funny happened.
The opposite of what all of these businesses
and economists predicted happened.
Demand exploded,
people bought things like crazy,
and now supply chains are choking
on that record demand.
Everyone has had the experience of not being able
to get something
and everyone has had the experience
of paying more for something.
Prior to the pandemic,
most of us just took it for granted that
we could get things ever faster.
E-commerce made it seem like everything was
right at our doorstep.
But that obscures what was a 14,000 mile journey
halfway around the world.
It took months.
And when you add up all the automation,
all the algorithms,
all of the hundreds of people
who had to touch those goods
or transport them in some way,
it's, in total, one of the most complicated endeavors
that human beings ever engage in,
and yet it happens millions of times per day,
and we take it for granted
because all of that has been rolled behind
this ultimate convenience of just
one click E-commerce shopping.
But the pandemic showed us just how unsustainable
and unrealistic that expectation is.
(pensive music)
So consumer electronics,
like USB chargers,
they feel like they are readily available to us, right?
We can get it the same day.
- USB chargers are an interesting product.
They're relatively simple.
The key thing is those chargers don't sell for a lot,
so you have to keep your labor costs down
and you have to really focus on efficiency.
- [Mims] The invention of the shipping container
and ocean-going shipping made it cheap enough
to move manufacturing
wherever labor costs were lowest.
- Global supply chains have really brought us
a cornucopia of products
that we might not otherwise be able
to have as much variety as...
Or as attractive costs that we see.
When you buy a product off of a store shelf or online,
that's actually the tail end of a journey
that might have begun a year ago
in a factory that might be half a world away.
Vietnam has been attractive
because of relatively low cost labor.
- If we take the example of a simple USB charger,
it's assembled in a factory in Vietnam,
and then, usually, it's placed on a shipping container
that travels on a barge
to an ocean-facing port.
There, it's loaded onto a ship for a trip
across the Pacific Ocean.
The trip across the Pacific Ocean can take anywhere
from 20 to 30 days.
Working on a ship can be like living in an office
that you can't ever leave.
It's high stakes,
and it's often mundane and boring.
Because sailors tend to be confined to these ships
and it's almost impossible for outsiders
to get on or off of them,
this is part of the supply chain
that remains invisible to most of us.
- A watch (indistinct) is done visually
and also by radar.
- Fortunately, some of these sailors like
to record their experiences.
- The watch officer is in charge of the navigation
and overall status of the ship.
Safe navigation of the ship is the highest priority.
- [Jeff] The fog is so thick in this area,
we can't really see around us
so we have to use radar.
- [Mims] Each one of these container ships can carry
up to 10,000 containers,
but they can have a crew as few as 20
so it puts enormous pressure each sailor
to do their job
because if anything goes wrong,
the results are gonna be catastrophic
for supply chains.
- [Jeff] The last thing we want is containers falling
into the sea if we ever run into bad weather.
We keep watch on the overall conditions of the ship,
checking the mooring lines
and looking out for suspicious activities,
like stowaways or pirates.
Sea conditions like this can last for days;
the relentless pounding,
the never ending pitch and roll.
I can only describe it as living
under a 24/7 airplane turbulence.
- The biggest container ships are
as big as a skyscraper laid on its side,
and one reason they've gotten so big is that
when you look at all the costs,
crew, fuel, etc,
the bigger your ship,
the more money you can make on every container,
the cheaper it is ultimately to ship these goods.
But the bigger you make these ships
and the more efficient you make these supply chains,
the worse things go when there's a bottleneck
at one of these single points of failure.
- [Newscaster] The 400 Meter long Evergiven got stuck
on Tuesday morning,
running aground in high winds reportedly
after power failure on board.
- More than a dozen ships are waiting
to pass through the Suez Canal.
That's one of the world's busiest trade routes.
- [Newscaster] And each day of backlog,
more than $9 billion worth of goods is stuck,
and that translates to about $400 million an hour.
- More and more shipping containers have been flowing
toward us from Asia,
and, of course, we're not really shipping stuff back.
(upbeat music)
- Now, we see a large number of ships
in San Pedro Bay.
Eventually, that cargo is going to land.
Eventually, it's gonna hit the beaches.
- [Mims] As ports get bigger,
as more and more flows through the biggest ports,
they become single points of failure
in a global supply chain
that used to be more robust.
- The Port of Los Angeles
and neighboring port, Long Beach,
represent 40% of our US imports
and nearly 30% of America's exports,
showing just how critical this gateway is
to the American economy.
We have more than 15,000 international longshore
and warehouse union members that work on the docks.
- My job as a longshore worker is
to help in the operations that move cargo
through the terminals on Long Beach
and Los Angeles ports.
What I typically do is drive a UTR,
that stands for "utility tractor rig."
It's just kind of a compact truck
that's strong enough to haul the tonnage.
So what I do is I take cargo from point A to point B,
to a designated spot out in the yard,
to be stacked for outside truckers to come pick up
to take to the retailer's destination.
- [Gene] We've been averaging 900,000 container units
for 14 consecutive months.
That used to be one really good month
in our peak season.
- [Jaime] We use giant ship-to-shore cranes
to unload containers.
Typically, it takes three to five days,
but with all of the problems we're having right now,
productivity is suffering big time.
It's taking up to two weeks to process a ship
that would typically take three to five days.
- Once a container's on the dock,
a mix of humans, robots, and software is going
to be picking it up
and moving it to stacks of containers
inside the port itself,
where it's gonna be sorted and resorted
so that it's available for trucks or rail
that are gonna move it out of the port.
- [Jaime] There is no room.
We've gone even higher in the piles
for our ground cranes to have to dig through,
and we've also used every square inch available on our ports
in order to put containers.
And it's very, very hard to move of them in a timely manner.
- Ports are, in some ways,
amazingly democratic places,
which means that they're often very contentious places.
You have the longshoremen,
that's an extremely strong union.
You have the terminal operators,
you have the city of Los Angeles or Long Beach,
who actually owns the port,
you have the ships coming in,
and, finally, you have the drivers
who are picking up shipping containers
from the port.
If you wanna make a change, like,
maybe you operate the port 24 hours a day
because you're trying to eliminate a backlog,
nobody owns that entire system
and can just dictate that that happens.
There has to be consensus,
and consensus with these groups
of people is very difficult.
- Congested ports and higher shipping costs have threatened
to derail our nation's economic recovery.
- After weeks of negotiation,
the Port of Los Angeles announced today
that it's gonna be began operating 24 hours a day,
seven days a week.
- It does no good to keep a terminal open 24 hours a day
in the hopes that truckers will come pick up
a load at 3:00 AM.
Because if they do, they have to bring it somewhere.
So not only do you have to get a trucker
who's willing to come at 3:00 AM,
he or she has to bring it to distribution center
and that distribution center has to be willing
to accept the load in the dead of night.
- We're gonna try everything.
We're increasing our gate hours,
number of days that we work,
we're gonna be working overnight where required,
but we're also asking others to step up too,
and trying to find new ways to move cargo out.
- We can't be a one man show
when it comes to 24/7 operations.
We're depending on the terminal operators
to order the work
and the rest of the supply chain
to also open 24/7.
When we get full on the docks,
that means everyone else is not functioning properly either.
And we really can't do anything about it
until the other aspects
of the supply chain start functioning properly.
- [Mims] When there's congestion in a port like this,
it just reverberates,
and the congestion gets worse and worse.
The more that shipping times slip,
the fewer ships there are to take empty containers
back to Asia.
So the entire system, it's like a traffic jam.
What starts as one person gawking at an accident
pretty soon turns into standstill traffic
for two hours, for thousands of cars.
Most goods, like our USB charger,
when they leave the port,
are taken a short distance by truck
to the inland empire region
where they're processed in a warehouse
before they're distributed to the rest of the country.
After our USB charger is unloaded
from a shipping container,
the next leg of its journey is by long haul truck.
- That's okay, right there
Might get lucky and get loaded early.
I'm probably gonna be here about an hour, I hope.
It possibly could be three.
We'll just see how busy they are today
and what's the...
What their schedule's like, how fast they are.
I'm not rolling, so I'm not making money.
So that's part of the problem is
when you sit around and wait all this time,
the wheels aren't turning,
you're not making any money.
I am a professional truck driver.
All told, over 30 years,
I've been driving a truck.
- They're 19 pallets.
Did you want me to floor load it
or do you want me to double stack?
You're not gonna pick up another load, right?
- No, how heavy is it?
I'm an over-the-road driver.
I'm gone, typically, two weeks at a time,
roughly 3,500 to 4,000 miles a week,
hauling all types of freight.
Everything from house wares, to rice,
to water, to beer, to...
Name it, you put it in that truck,
and I haul it.
- The major strain on the long haul trucking industry is
that there aren't enough drivers willing
to do the job in America.
Now, the American Trucking Associations has projected
that, by 2028,
America is gonna be short 160,000 truckers.
You're talking about an $800 billion a year industry.
It moved 70% of the freight in the United States by value,
according to the Department of Transportation.
And without it, we'd have paralysis.
You wouldn't get the things that you're accustomed to
on store shelves,
nor would you get them delivered to your door.
- I began studying the industry 15 years ago.
I was looking at the labor process
and the work that truck drivers do
and what had happened to it since deregulation
of the industry in 1980.
The current driver shortage has been talked about
by the industry since at least 2005.
The issue with the truck driver shortage is not one
of a lack of people who have been interested in this job,
have gone through the trouble
of getting trained for this job.
It's really a shortage of people willing
to do that job long term,
and that's fundamentally a retention problem,
not a driver shortage.
- Well, here we are.
Nice backup.
Appears to be a wreck up here.
This could be a long time.
- Trucking used to be one of the very best blue collar jobs
in the United States.
The industry was almost fully unionized
by the Teamsters Union.
unionized truck drivers were making
up to 20% more than even unionized steel workers
or auto workers.
It was one of the best jobs you could get
and when you got one of those good jobs,
you were likely to stay in it until you retired.
And what happened was the industry was deregulated in 1980.
The union was pushed out of the big segments
of the industry,
and wages and working conditions followed.
- Truck driving is a blue collar job.
There's nothing glamorous about it.
Most of the common person thinks,
"Oh, anybody can drive a truck."
They don't take in consideration
you're gone from your family,
you work long hours.
I typically work a 14 hour day.
My pay structure is
everything is based off of a per-mile basis.
You have to manage your available time to drive,
to be able to make that
and still take your 10 hour break.
How long are you gonna wait to get loaded?
How long does it take you to get loaded?
Your clock is running
and you're losing time that you can drive.
- [Mims] What the big limitation is
for those drivers is that
they can only drive so many hours per day.
There are federal rules,
they have to record the hours that they drive,
and that they work.
Now, it's done electronically.
- This clock has got a lot to do with
when you can make your appointments.
(murmurs) time, you legally can't drive.
If you get caught, you'll get shut down.
- The typical long haul truck at a big company will
only be actually rolling on the highway,
generating revenue,
seven to eight hours a day.
Another seven hours or so of that day,
they'll be waiting,
they'll be performing other kinds of unpaid work.
And then, for 10 hours,
they're required to take a break.
You're not paying the driver
for the vast majority of that time,
you're really only paying them for the time that they drive.
New drivers might end up getting paid somewhere
in the low 30s in cents per mile.
What that means in terms of total income is
that a new driver might earn somewhere
around $40-45,000 today,
and in many cases does not work out to minimum wage.
Better paid drivers in that long haul segment can work
their way up to $60,000 or so.
An experienced driver for better companies can
easily make more than $100,000 a year.
- There are about three and a half million truckers
in America,
there are 10 million people in the United States
who have the kind of commercial driver's license
that would enable them to drive a truck,
so that's a measure of the number of people
who've already churned through this industry.
So one of the peculiar things
about trucks and trucking in America is that where
every other part of the supply chain has consolidated
and the big have gotten bigger,
trucking is still incredibly fragmented.
So small trucking companies,
which, of course, is the majority of the freight
that's moved in the US,
they have a limited amount of leverage, right?
They are selling their services on a market
where the freight brokers and the shippers have
all the advantages in terms of data,
in terms of being able to set rates.
And so, those small trucking companies,
it's very take-it-or-leave-it for them
in terms of loads.
- Name of my company is Avalon National LLC.
We're based in Cassadaga, New York.
We're up to about 11 trucks right now
and struggling like everyone else.
The driver turnover,
ours is getting higher now
because we lost a few good drivers
and we can't replace the good drivers
that we lost.
- We really had to work at making sure
that our loads were paying well enough,
our drivers, that were currently on the road,
were staying moving, staying busy,
completing those loads,
but also taking into account that
they are human and have a family
and everything at home as well.
Hold on, this is a driver.
Hey, Rocky, it's Ashley.
You're all set to pick up that load
a little bit later.
She said, just work your magic
and try to get over there when you can.
They know you're gonna be a little bit late
due to your drop-off time.
Alrighty, drive safe.
We've had trucks sitting for not having drivers,
which is a big downfall for us.
- It's something I shouldn't be doing,
but again, I should because I'm short drivers.
So I'll drive the truck myself,
it's that critical.
I've owned a couple companies
and it's a tough business to be into.
There's times I can't even get back to sleep.
I wish I could, but I can't.
I just got too many worries all the time.
To recruit more drivers,
we've increased our pay to 71 cents a mile.
That's very good pay today, 70 cents a mile.
We're trying to get our benefits
a little bit better.
It's not the great cowboy experience it used to be.
It's more complicated.
- The laws, the regulations,
put you up against the wall to be able
to meet not only your deadline or your appointment
to get your load delivered,
but now you're fighting the clock
in order to have a place to stay safely at night.
There's not enough room to park
all the trucks on the road
for a 10 hour stretch of time.
So if you don't get parked early,
you don't get parked.
Or you can be like some of these guys
that just pull on shoulder road,
which is extremely dangerous to do.
And I'll come fire up something to watch on TV,
and I sleep generally about seven hours a night.
So by the time I eat and watch an hour or so of TV,
I'm done.
Hi, give me a monster biscuit to go.
I'm probably running as hard,
or harder, than I've ever ran
in the whole time I've been driving the truck.
I'm 62 years old
and I'm trying to last until I'm 70.
Lord willing, my health holds up,
I'll make that eight years.
- So the stakes here are incredibly high.
The average truck driver is aging,
they're not being replaced.
If these dire predictions hold true,
within a decade, we'd be looking at something
like paralysis for the trucking industry.
- This is really important right now
because we're at this transformational period.
We're moving from the big box supply store
to increasing E-commerce shipments.
And E-commerce is way more dependent
on transportation than the big box supply chain.
- The ease of shopping these days,
online, Amazon, those kinds of things,
where you get on your phone
and you can, for Christ sakes,
literally buy your groceries,
you're gonna get it one way or another,
how much you gonna pay for it?
How long do you wanna wait for it?
In 2021, people are not real patient for waiting
for what they want because they're so used
to being able to click, click, click,
and have it on their doorstep tomorrow.
But everybody needs to remember that
no matter what you got,
it got there via truck.
- [Mims] So when our USB charger is on a truck,
its next stop is inevitably gonna be
some kind of warehouse.
It's often, if you're talking about E-commerce,
what's known as a fulfillment center.
- Good morning, everyone.
Yesterday, we received in 15,154 units,
eight ASNs and six sellers.
- Come on, right up, left.
One, two, three, four, five, six.
- [Workers] One, two, three, four.
- [Mims] As with trucking,
working in a warehouse is a physically demanding job
and that's one reason that companies have problems
with turnover and retaining workers.
- It gon' go to UPS.
Take that one with you,
so we can (indistinct) the box for it.
You have to be fast, fun, and friendly.
You gotta have your mind to it
and not get distracted.
When you have to lift boxes all day,
it gets very like...
You be going home achy, and you be like,
"Oh, I'm so tired."
Most days, it's tolerable.
Then, some days, it's like, "Ugh."
It's draining.
- Everyone knows how to make a box, right?
Short and simple.
So everyone knows, this is the bottom of the box.
- All of 'em are brand new,
all of 'em are getting officially onboarded
in anticipation of working either tonight
or tomorrow night.
People we probably reached out to yesterday.
So you're literally talking from recruiting to onboard,
being on the floor in three days now.
And if I could go faster, I would.
- [Mims] The shift to E-commerce means
that even before the pandemic,
the fulfillment center industry was struggling
to find the space and workers to keep up.
- The COVID-related spike with E-commerce
and direct-to-consumer's absolutely blown up our business
and our entire industry.
And what's happening is
it's a little bit like a snake eating a deer,
that your supply chain is the snake
and the supply chain, it's got this big bulge
that's going through it as its being processed.
We kind of anticipated the bulge coming our way.
Yeah, I'm nervous, because there's still more constraints.
It's not one deer that the snake is swallowing,
it's a lot of deers, right?
In its simplest form,
a truck will deliver product to us.
We will count that product.
We will verify that product.
We will put that product away
into a storage location,
And then we'll wait for an order.
An order will come.
We'll pick that product.
We'll package that product
and then tender it to the appropriate carrier.
So you have the in and you have out.
If the in is greater than the out,
there's only so much space
that the warehouse can manage.
We've managed space here
by leveraging our optimization tools
and leveraging our technology.
We have a goods-to-person robotics,
and we have person-to-good robotics.
Both of those, we are scaling up here in the facility.
So one of the big advantages
about the new automation is that
it's so flexible.
With the robots here,
we're two weeks before black Friday
and we're literally inducting robots
right now to increase capacity.
So Vert is using technology
really to drive the next generation
of what we're trying to do
from a distribution standpoint.
I'm on the cutting edge of trying
to create technology and enable
alternative networks to Amazon.
Fulfillment's really been defined by Amazon,
so they've opened the doors
and the rest of us are now finding
creative ways to support that.
- So at Amazon, there's this thing known as "the promise."
The promise is "we're gonna get you your goods in two days,"
but, of course, Amazon has been raising the stakes
throughout its entire life as a corporation,
so then the promise became one day,
the promise became same day,
the promise became three hours.
In order to achieve this in a fast and efficient way,
it's gotta be automated as much as possible.
Amazon, of course, has been a leader
in this kind of automation,
but now everyone else is following suit.
- We're a global third party supply chain provider.
The Indianapolis campus, specifically,
we have 12 distribution centers,
roughly about four million square feet
of distribution space.
We utilize robots and technology
in our facilities
because we want to be able to get merchandise
quickly to market.
That Bombay sorter is critical
within the process of what we do.
From the time that we brought
the Bombay sorter online to now,
we are moving merchandise much faster out of that facility
because of that level of technology.
Another piece of technology
that is critical is the robots.
These robots basically allow our teammates
to pick much faster, pick safer,
and be able to walk less within the facility.
If you look at how we used to pick manually,
we were picking about 70 units per hour.
And now, with these robots,
we're picking 140 units an hour.
There's a speed component, obviously,
but we definitely keep those capped at a certain level
because it all comes back to safety.
You don't want a robot being
at a extremely high rate,
which could have eventually caused
some type of safety issue
that's in a facility.
It's to coexist with the employee,
not to overtake the employee
within the facility.
- The introduction of technology can reduce
the amount of walking and heavy lifting workers
and warehouses need to do,
but it can also increase the pace
and the repetitiveness of their work.
So how the tech is being implemented
in each warehouse matters.
Management sets the pace of the robots,
and that determines the pace of which humans have to work
in order to keep up.
The UC Berkeley report found that
the introduction of technology
and the way it speeds up work can lead to
more turnover and burnout.
Turnover at many of Amazon's warehouses has exceeded 100%,
according to a Wall Street Journal analysis
of federal labor data
and Amazon's own site data.
- Well, just finished a nice 12 hour long shift.
So I'm going from work,
Amazon Warehouse MSP1 in Shakopee, Minnesota,
home.
One of the downsides to working till 6:00 AM is
the sun coming up.
At least when you wanna get to sleep.
I was a stower, and then a picker,
for two and a half plus years.
You're stocking inventory,
you are picking things out the inventory.
When COVID hit, I became a learning trainer,
so you train people.
Hey, nice open spot.
Good morning.
Some of the things that I train people on are
how to access real robotics very safely,
how to fix individual pieces of equipment.
I've worked at Amazon for four years now.
When I first started,
my feet hurt, I would get blisters.
Blisters suck.
After a long work week,
you'll quite literally feel hung over
the day after.
Just from long hours,
I feel kind of hungover right now
from all of the just stress and strain
that's put on your body.
So you have to hydrate a ton,
you need to get whatever sleep you can.
What I started working at Amazon,
in the first month, I lost 10 pounds.
So I had to eat a meal before work,
first break, second break, third break,
and after work,
just to keep my current weight.
You have to make different adjustments
like that to your life
to make sure that you can physically make it through.
Well, I'm awake.
At least, today's my last shift,
so tomorrow, I'll be able to bring your mail over.
Love you, grandma.
One of the positives, the golden handcuffs,
that a lot of people like that keeps them there
in spite of the negatives,
that would be things like health insurance,
and the time off, being flexible,
that was also very helpful,
and is still helpful, like nowadays.
So if you have family commitments
or you're trying to go to school,
like I help my grandma all the time,
it's really helpful 'cause you can use some
of that time off to make that work
with your Amazon schedule.
You'll either mature
in how you handle things
to be able to handle different situations more effectively.
Otherwise, you're just gonna burn out.
- These warehouses are located
at strategic points on our nation's highway system
where land is cheap and widely available,
and so, they tend to cluster.
So workers there actually have a lot of leverage
or more leverage than they used to
because they can just go to
wherever is offering the highest wage.
- Okay, so we gonna have to re-palletize those
so they can all sit at...
- (indistinct) - Yes.
Please.
It's a very competitive things
of working in warehouse nowadays,
when you got different jobs
that's offering you $22 an hour
to come work for them.
I started off as a picker,
to a manual picker,
to a packer,
and then I moved to shipping.
'Cause I always said
I wanted to learn everything in the warehouse.
That's my goal,
to challenge myself.
It get very stressful some days.
You have your days, to where it's a good day,
you have your days, to where you just be,
"Right, I'm finna walk out."
It's different days to different things.
- If you think of this in terms
of how we live now,
there's been this grand shift
between going to the store and buying your own stuff,
to paying other people to do it for us.
So it's this fundamental transition
between how we used to shop,
how our consumer culture used to work,
and now how we shop online.
It's not a trivial change at all.
And it's a creator of millions of jobs in the meantime
because somebody has to do all that work for us.
- If labor continues to be a challenge,
we'll continue to optimize through automation and robotics
to offset the labor issue.
But the reality is,
is that the cost of fulfillment will go up
because the cost of labor will go up.
- So the very last leg of the journey
of our USB charger is coming out
of a fulfillment center.
Then it's gonna end up being loaded onto a truck
at what's known as a delivery station,
and that truck is what will carry it
to its ultimate destination;
a business over your house.
So one of the strange things about
the new world that we live in is that
when we order things online,
it's the last mile delivery driver
who might be our only point of human contact
with this entire system.
We might even know our local UPS driver
or our local postal carrier
because they tend to have very consistent routes.
- Doreen likes her stuff inside
'cause, especially if it's gonna rain.
Other carriers sometimes don't leave it in the same spot
and she's like searching the farm.
So I try to be very consistent every day.
I've been with UPS for 32 years,
since 1989.
I've been on this route for about 12 years,
going on like 13 years now.
It's okay, here.
Come here.
Come here, ready?
I know, see?
Everything's all good now.
- [Mims] The primary strain on last mile delivery is
that we'd want so much of it.
Even before the pandemic,
the challenge was how to hire enough workers
to drive all of those delivery vans.
- If you could transport yourself back 10 years
and imagine the packages that you received at home,
they tended to be relatively high value goods.
You might have legal paperwork,
or electronics,
or some highly valued item that you was sent to you
and, most likely, you had to sign for it.
E-commerce requires a much cheaper system.
- So the folks who actually do last mile delivery,
they, just like warehouse workers,
have to work to a very high standard.
They have to work at a very quick pace.
So typically, at a place like UPS,
they're training these drivers
to economize every single action.
You have folks who have to operate
like industrial athletes
because they have to move so quickly
and so efficiently,
while also, of course, navigating the hazards
of America's roads.
- So today, we talked about three things.
We talked about, "keep your eyes moving," right?
Two seconds in the front,
five to eight seconds in the rear.
We talked about counting one, two, three.
Count one, two, three before you put your vehicle in motion
after that vehicle in front of you starts to move.
- [Mims] So last mile delivery is
extremely physically demanding
because people are having to jump on and off
a truck all day long,
they have to carry heavy packages,
and it's really, as in warehousing,
the repetitive motion that can be damaging
to people's bodies,
so of course people have to be trained to do this safely.
It's not just about lifting safely,
it's about lifting safely two or 300 times per day.
- So there's more than 500 methods to deliver one package.
I mean everywhere from
that three points of contact,
that first step, scanning my area.
I'm approaching the stop, I'm scanning that area.
I'm signaling, "Okay, I'm gonna be parking here."
I got my handbrake pulling my mirror.
I'm planning ahead.
"Okay, I know that for this stop,
"I have five big packages.
"I know they're in the back.
"Okay, so I'm gonna pull up to this place,
"put out the hand cart."
I don't even like realize it sometimes, it's just...
I've done it for so many years
that it's just...
It just...
It's like automatic.
I just know what I have to do.
And I know how to get it done,
and be efficient and safe at the same time.
Working for UPS,
I don't have to pay for my own vehicle
or insurance on this vehicle.
My health insurance is incredible.
I get paid pretty well.
We get paid almost 40 bucks an hour.
And after eight hours,
we get paid time-and-a-half.
I know that ups isn't gonna go anywhere
so when I go to retire in another six years,
I'm gonna be okay, and so is my family.
- We can't do the kind of bulk cheap transportation
of goods that Amazon aspires to, for instance,
with the kinds of services
that we had with UPS and FedEx.
at the same price.
UPS drivers, for instance,
very well paid job, good benefits.
And so, what's happening in last mile is
an attempt to create a much cheaper version
of UPS or FedEx.
- [Mims] So the trend in last mile delivery has been
toward contract drivers,
and it's a way to not just limit liability,
but also limit how much any one company has
to be responsible for anybody's working conditions.
- All right, so it's 1:34 PM,
and I have a block schedule from two to 5:00 PM.
- There's been a fascinating story that's developed
in last mile delivery.
It's almost exclusively driven by Amazon,
almost entirely.
Similar to Uber and Lyft,
which Amazon calls Amazon Flex,
where people drive their own personal vehicles.
- I do Amazon Flex delivery.
I also do a lot of side hustle,
like the gig economy apps,
like Uber, DoorDash, Instacart.
Well, actually, I started signing up for the Amazon Flex
during the first lockdown for COVID.
I don't think you can do Amazon Flex full time
because usually you only get about 30 hours of work.
You are responsible for all your own expenses;
Gas, wear-and-tear, oil change and all that.
Basically, it's like Uber but with packages.
- [GPS] You've arrived with the destination on your right.
- Usually, with Amazon Flex,
it start out like at $18 per hour
for a three hour block.
So for a three hour block,
you would get $54.
Sometime, the blocks would surge up to like $23 per hour
or, sometimes, $45 per hour during peak seasons.
It can be lucrative if you are willing
to be patient and leverage all the surge.
Peak season is definitely here.
So this block was three and a half hours
for 157.50, fam.
That's the biggest three and a half hour block pay
I ever seen.
That's like 45 an hour.
Mostly, I get country routes.
From one delivery to the next is about six miles.
I've been putting a lot of miles on my car.
As far as physical work,
a lot of time it's light envelopes
and just a lot of driving.
It's usually the different route every day.
I think it's inefficient
'cause you don't really get to learn your route
or your delivery area.
- In order to keep up with its own demand
for last mile delivery,
Amazon had to create a last mile logistics network,
just like UPS's or FedEx,
but theirs consists of subcontracted
local delivery companies
that actually own and operate
the Amazon branded vans.
- And so, what they've moved to is
a relatively unique approach,
which is a kind of franchise.
And so, now they...
You can buy 40 vans from Amazon,
or lease them, as an entrepreneur,
you can hire up to 100 drivers
in what they call a DSP,
delivery service partner.
And then, Amazon does all of the planning.
So they put all the packages together,
label them, plan the route,
and then your drivers of your franchise will take
a van that you own
with an Amazon logo on it
and drive to the fulfillment center,
load it up,
and then follow the route that Amazon provides
on their phone.
- I've been working with Amazon Flex
for about two years now.
I also used to work with Amazon DSP
for about another 10 months,
driving the blue van was...
I think it is a very physical job.
Sometimes you have like 200 stops
and 300 packages in a eight hour, or 10 hour, shift.
My most ever stops in one day was 240 stops.
It is what it is.
Do your job to make sure you come home in one piece.
You have to be on pace with
the Amazon's expectation of 20 stops per hour.
- So one of the effects of using subcontractors
in order to do your delivery is that
when drivers are pushed to make more
and more stops per day,
if that leads to an accident,
then the parent company is shielded
from any legal liability.
- And I think that'll be the central question
of the next decade or so for Amazon,
if they continue on this model,
is what responsibility does Amazon have
for those workers and what they do out on the roads.
- [Mims] Amazon has already become the primary carrier
of its own packages.
Now it's touting that it expects
to beat UPS and FedEx at their own game.
- We expect it'll be one of the largest carriers
in the world by the end of this year.
I think we'll be probably
the largest package delivery carrier in the US.
- [Mims] Amazon's delivery network is growing
at a rapid pace.
From 2019 to 2020,
its share of US parcels by volume grew
from 13% to 21%, which, at this point,
makes it bigger than FedEx.
- Last mile delivery work,
which has been fairly high quality work until recently,
is facing a similar kind of decline
that long haul trucking experienced
after deregulation.
So the job's being de-skilled,
workers are paid less and less over time,
and it's causing very high levels
of churn within subcontractors for major companies.
We are gonna need to hire hundreds of thousands
of last mile delivery workers
to meet the needs of E-commerce
in the next decade or so,
and we may have a shortage of those kind of workers
in the future.
- When I was working for the Amazon delivery company,
I didn't see any future
or any career advancement,
so I just quit.
I really like the Amazon Flex work
because it gives me a lot of freedom to choose.
- I know there's a blind spot here,
'cause this is my route
and I've been doing it for 12 years.
So I know all the little hidden things
that I need to be aware of.
- So the very last leg of our journey is
a human being picking up a box
and walking it to our front door.
And our entire involvement
with the supply chain up to this point might have been
as minimal as opening a website or an app,
clicking "buy now,"
and then that product arrives the very next day.
- When you think about ordering
a USB charger online
and having it delivered to your door,
that's really a remarkable accomplishment.
It's not a very expensive device
and it came a long ways from the factory.
What that relied on was inexpensive transportation,
inexpensive labor,
and efficiency all along the way.
We've really been benefiting from
a very benign global trade environment
for the last 25 or 30 years.
And what the pandemic has shown us is that maybe
that's not necessarily a good assumption.
What the pandemic really highlights for us is
how vulnerable a lot of those links are to disruption.
- [Mims] Consumers are finding themselves having
to adapt to the frustration
of intermittent shortages,
not being able to get what they want
because one thing or another can't get
through the supply chain.
Beyond shortages, obviously,
one of the biggest impacts
of supply chain issues are increased prices.
- It's difficult it to predict the persistence
and effects of supply constraints,
but it now appears that factors pushing inflation
upward will linger well into next year.
- [Mims] Challenges in supply chains make it difficult
to fight inflation with the usual tools,
which is adjusting interest rates.
The most powerful financial institution
in the world is telling us
that interest rates aren't necessarily enough
to deal with all of this inflation.
As a result of these supply chain challenges,
companies are rethinking where things are manufactured
and how far they have to travel
in order to get to us.
- One of the questions that
a lot of people have asked,
because of the pandemic,
is about all this manufacturing that has moved offshore,
and can we move it back onshore?
That was really driven by the labor cost differential,
which was substantial.
So moving from a high cost country
to a low cost country,
economically, that's pretty straightforward.
Moving from a low cost country,
re-shoring to a high cost country,
that's a whole different question.
We'll see some,
but we shouldn't underestimate the challenge.
- It's a big day for the tech industry in Texas.
Samsung officially announcing it's bringing
a $17 billion semiconductor factory to Taylor.
- Companies like Samsung have pledged 10s of billions
of dollars to build factories
for manufacturing microchips
within the United States.
Intel, specifically, has pledged 20 billion
to build a facility in Ohio.
- This is a major win for Ohio
and it's really a game changer,
a game changer for our economic future.
- [Mims] It shows just how big of a problem
these supply chain issues are
and just how different the present is
from any point in the immediate past.
- I think what we saw during the pandemic was
an inability to rapidly shift
to meet changing patterns in demand.
The question we have to ask is,
"is it likely to happen again?"
(artillery shelling)
(tense music)
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