Global businesses are reassessing their supply chains which if not handled sensibly by the likely losers in the Far East, economically, politically and socially, will lead to destabilising repercussions that could leave the world in turmoil.
Trade is the handmaiden of prosperity but like a woman it can be fickle. Over the last 15 years, for example, China has prospered from its innate dynamism unleashed by a change from collectivism to capitalism. It depended heavily on stetched supply chains based on just-in-time (JIT) deliveries but those supply chains are now being seen as problematic owing partly to their inherent inflexibility which leaves them vulnerable to sudden changes in customers' demands. Other major concerns are soaring soaring Chinese costs, the disruptive power of Nature's fury, like the Japanese tsunami and Thailand's floods which hammered manufacturing in both countries, leading to multi-billion pound losses through lost production around the world. If all that were not enough, countries like China have scored an own goal through its blatant disregard for intellectual property rights and wholesale product counterfeiting. And, as always, changes in exchange rates are another threat and European currencies have weakened, giving them an advantage. There are also serious concerns about product quality.
The result of all this is that in Britain, in particular, manufacturers are stepping up their purchases of parts and materials from domestic suppliers, according to one survey of 362 manufacturers organised by General Electric. The research shows that 27% of those questioned said that in the past year they had raised the amount of purchases made from UK-based producers, compared with 13% who were buying less. For some UK manufactures the change in supply sources is stark. One SME, for example, a Yorkshire-based maker of industrial machinery, now sources 90% of its annual needs of iron castings from UK suppliers, as against 40% three years ago. One of its key reasons was reliability of supply. A problem here is that if something goes wrong from a far-flung supplier it can be very difficult to resolve. A UK-based buyer, however, can usually resolve the problem with a local supplier over a 'phone call or a visit to the supplier.
Another company, Sherwood Electronics, which makes cable assemblies for computers and railway equipment, has raised the proportion of cable-related components its obtains from UK producers from 40% to 55% with a matching fall in purchases from Asia. The company found that rising costs of Asian-sourced items had increased by 30% over the last 17 months compared with single digit rises from UK suppliers.
A demand from UK buyers for smaller batch sizes can also play into local suppliers hands. This pushes buyers to selecting suppliers based in Britain rather than in far-flung offshore suppliers like China. It is, as it were, an ironic development in that JIT deliveries are now being turned against the birthplace of JIT -- Japan.
Missed costs mislead
Western manufacturing companies, according to the Reshoring Initiative, of America, often ignore certain costs when making decisions on where to make products. One of these includes factors such as total cost of ownership, which includes aspects like intellectual property risk, the cost and time of travel to visit distant suppliers and the negative impact of dividing manufacturing from engineering staff back at HQ. By ignoring these costs it could be shown that America was, on average, 108% higher than China but when factored in to allow for the total cost of ownership America averaged only 12% higher and in some cases undercut China by 22%.
Some big US manufacturers like Ford, Caterpillar and General Electric are beginning to move some production back to America, though it is small so far. Apart from lower wages that drove companies overseas, another reason was cheap fuel but oil has risen four fold since 2002 so shipping costs have jumped. China's wages have also averaged rises of 15% a year over that time.
The result of these adverse movements against the Far East, according to supply chain analysts, is that by 2014 it is predicted that the production of 20% of goods now made in Asia and destined for US consumers will shift to the Americas. According to one study by Accenture, 61% of 287 manufacturers surveyed reported that they are thinking of moving operations closer to customers.
If this "secret" shift becomes a tidal wave it will yield an environmental dividend through lower fuel emissions, especially from ships which are not governed by environmental strictures like road transport users. But if the shift is not handled well then the disruptive fall out would be significant. Working against that scenario, however, is the likelihood that China's growing wealth will boost its local production to satisfy soaring local demand. In the process, however, China's huge balance of payments surpluses with its trading partners could begin to dwindle unless it husbands its bulging treasury wisely. Like oil rich Middle-East states, China has invested heavily abroad, particularly in Britain, not only to ensure raw materials and energy supplies but also to
ramp up its overseas investment income.
The military stumbling block
One development that could jeopardise all that, however, is China's military caste's desires to don the mantle of a great military power, exemplified by a big build up in naval strength spearheaded by an aircraft carrier with, allegedly, up to four more planned. China has plenty of internal social problems which will inevitably lead to much higher spending on internal security as it struggles to contain a soaring crime rate and civil disturbances with only 150 police officers to 100,000 people. China also needs every Renminbi it can muster to cope with the inevitable natural calamities to come. High military spending, therefore, is unwise, especially as it has a knock on effect with neighbours like India, who feel obliged to spend billions of pounds beefing up its air force while so many of it people subsist in abject poverty. If China followed the teachings and warnings of its ancient, illustrious sages by avoiding such costly, vainglorious, military spending then it would go down in history as the first powerful nation to do so in recent times. That would be true greatness but history suggests that it will be ignored and so the people will be denied their hard-earned dues.
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Wednesday, 15 February 2012
Tuesday, 24 January 2012
Britain's Ministry of Defence loses billions to theft and incompetence
It would seem that just as mega banks are too big to let fail so, too, huge government departments, like Britain's Ministry of Defence (MoD), are beyond the rules of good governance. For the fifth successive year the MoD's annual accounts for 2010-11 have been qualified and the MoD has no plans to comply with international financial reporting, as laid down by the Treasury, within the foreseeable future, says the Defence Committee, chaired by James Arbuthnot, MP.
Such insouciance is breathtaking, especially at a time when Britons are passing through, perhaps, the worst austerity measures since World War 2. Britain's local authorities are constantly admonished by Government to eliminate waste and cut spending but should the Treasury not look to the mote in its own eye and is it not time for the MoD to clean out its Augean stables?
The Defence Committee is dismayed that the Chancellor of the Exchequer, George Osborne, has not responded to its letter asking what his policy is on Departments who defy Treasury accounting rules. The MoD could also not provide adequate audit evidence for over £5.2 billion worth of certain inventory and capital spares. "These problems are likely to persist until, at the very earliest, 2014-15," says the Defence Committee.
In a staggeringly euphemistic statement, James Arbuthnot said: "The repeated qualification of the MoD accounts reflects badly on the MoD's financial management. The situation is unsatisfactory and the MoD and the Treasury need a clear plan to address the shortcomings in the MoD's accounting systems."
Such gross accounting and logistical incompetence, however, does not only undermine Britain's task of reducing Government debt, now put at over £1 trillion for the first time, or over 70% of gross domestic product. It also poses serious security issues. Two years ago, when I last mentioned this subject under my headline: "MoD's stock mismanagement threatens security," I referred to the Army's relatively new £1.3 billion BOWMAN tactical communications system, which provides integrated, secure radio, intercom and Internet services. Only 89% of these assets then could be accounted for by the end of the year owing to problems with accounting for radios in use on the battlefield. These radios were worth £155 million and it is a reasonable bet that some have fallen into the wrong hands.
It should be made clear that this is not simply an accounting issue gone alarmingly wrong and out of control. Massive fraud and theft are also involved. "The Committee is concerned that the level of theft and fraud in the MoD appear generally to be increasing year on year and that the level of value recovered from theft and fraud is low, " said James Arbuthnot.
Theft and fraud is not new to the MoD, whose financial black hole has reached about £38 billion. Back in 1983 the Army's COD Donnington warehouse went up in flames, and at £174 million the uninsured fire loss was the costliest in the country's history. The fire's cause was never proven but one mooted cause was arson because the Falklands war allegedly occasioned a comprehensive stock audit which, it was claimed, would have exposed serious stock losses, and so tracks had to be covered by a fire. What is certain is that the sprinkler system failed to work and it is very rare for sprinkler heads to fail. According to warehouse fire statistics there was also an even chance that the fire was arson as nearly half of all UK warehouse fires are maliciously caused.
If ever a Government department responsible for spending billions of pounds of hard-pressed taxpayers' money every year needed forensic accountants with top line logistics experience and robust systems in place the MoD must be top of the list. But it must be backed up by ruthless,
committed, and capable security personnel to root out the fraudsters and thieves for condign punishment.
-----------------------------------------------------------------------------------
Such insouciance is breathtaking, especially at a time when Britons are passing through, perhaps, the worst austerity measures since World War 2. Britain's local authorities are constantly admonished by Government to eliminate waste and cut spending but should the Treasury not look to the mote in its own eye and is it not time for the MoD to clean out its Augean stables?
The Defence Committee is dismayed that the Chancellor of the Exchequer, George Osborne, has not responded to its letter asking what his policy is on Departments who defy Treasury accounting rules. The MoD could also not provide adequate audit evidence for over £5.2 billion worth of certain inventory and capital spares. "These problems are likely to persist until, at the very earliest, 2014-15," says the Defence Committee.
In a staggeringly euphemistic statement, James Arbuthnot said: "The repeated qualification of the MoD accounts reflects badly on the MoD's financial management. The situation is unsatisfactory and the MoD and the Treasury need a clear plan to address the shortcomings in the MoD's accounting systems."
Such gross accounting and logistical incompetence, however, does not only undermine Britain's task of reducing Government debt, now put at over £1 trillion for the first time, or over 70% of gross domestic product. It also poses serious security issues. Two years ago, when I last mentioned this subject under my headline: "MoD's stock mismanagement threatens security," I referred to the Army's relatively new £1.3 billion BOWMAN tactical communications system, which provides integrated, secure radio, intercom and Internet services. Only 89% of these assets then could be accounted for by the end of the year owing to problems with accounting for radios in use on the battlefield. These radios were worth £155 million and it is a reasonable bet that some have fallen into the wrong hands.
It should be made clear that this is not simply an accounting issue gone alarmingly wrong and out of control. Massive fraud and theft are also involved. "The Committee is concerned that the level of theft and fraud in the MoD appear generally to be increasing year on year and that the level of value recovered from theft and fraud is low, " said James Arbuthnot.
Theft and fraud is not new to the MoD, whose financial black hole has reached about £38 billion. Back in 1983 the Army's COD Donnington warehouse went up in flames, and at £174 million the uninsured fire loss was the costliest in the country's history. The fire's cause was never proven but one mooted cause was arson because the Falklands war allegedly occasioned a comprehensive stock audit which, it was claimed, would have exposed serious stock losses, and so tracks had to be covered by a fire. What is certain is that the sprinkler system failed to work and it is very rare for sprinkler heads to fail. According to warehouse fire statistics there was also an even chance that the fire was arson as nearly half of all UK warehouse fires are maliciously caused.
If ever a Government department responsible for spending billions of pounds of hard-pressed taxpayers' money every year needed forensic accountants with top line logistics experience and robust systems in place the MoD must be top of the list. But it must be backed up by ruthless,
committed, and capable security personnel to root out the fraudsters and thieves for condign punishment.
-----------------------------------------------------------------------------------
Saturday, 14 January 2012
Costa Concordia's wreck exposes unlearned safety lessons
Yet again a cruise ship tragedy shows that the marine industry is still prepared to sacrifice passenger safety on the altar of profit. The cruise ship, Costa Concordia, reportedly hit submerged rocks around 9 pm, January 13 when only hundreds of metres from a harbour on the small island of Giglio off the Tuscany coast. The 114,500 tonne vessel with over 4,000 people on board suffered a 100-ft gash and quickly began to list to starboard. It is this listing action which exposes the most serious deficiencies in lifeboat capacity common to most cruise ships, despite their legal compliance with safety legislation. Three people are confirmed dead with reports of up to 70 others missing. All 24 Britons on board were reported unharmed.
One line of enquiry into the accident is looking into an electrical fault which could have caused loss of ship control but whatever the cause it is the ability to cope with the aftermath that should concern all potential cruise ship passengers most. The fact is that current SOLAS regulations do not adequately protect all passengers on board cruise ships primarily because lifeboat capacity is typically 25% short when listing precludes use of all lifeboats on the opposite side of the list. But it gets worse.
This writer has been on various big ship cruises and conducted a survey of 10 large cruise vessels' lifeboat/craft capacity. In all but one vessel there was a 25% shortfall in life craft capacity when listing was applied to the equation. The problem is further exacerbated when allowance is made for the heavy use of inflatables, typically holding 25 people each, which is a cost consideration as they are so much cheaper than rigid, covered lifeboats and they help meet safety compliance.
While inflatables can be useful the fact remains that most would not be davit-launched but jettisoned to self inflate on hitting the water. This means that many passengers would be expected to jump up to 50 ft or more into what could be a freezing, raging sea and somehow scramble into them, irrespective of obesity and any infirmities they may have. Alas, that is just what some passengers felt compelled to do on the Concordia in a bid to swim to the shore. One travel broadcaster and writer said that many of the 150-capacity lifeboats were not deployed owing to the list and subsequent rolling over onto her side. If a stricken vessel's list is very rapid then there could also be problems launching lifeboats on the listing side.
This time round the world was spared another marine tragedy of Titanic proportions. Close proximity to the shore, benign weather and the use of five helicopters prevented huge loss of life but in other circumstances it could have been tragically different. More and more cruise ships are now moving in hostile waters of the polar regions, thousands of miles from inhabited land and, sometimes, other ships. Had the Concordia been in these harsh waters and rolled over in similar circumstances the loss of life would have far out rivalled the Titanic 100 years ago, again a ship that met the then current Board of Trade regulations on lifeboat capacity.
So far the cruise ship industry has been lucky, escaping relatively unscathed from serious loss of life. But there are recent tragedies disturbing enough to demand action on lifeboat capacities. In 2006, for example, the Al Salam Boccaccio 98 sank in the Red Sea after quickly listing. Of the 1,400 people on board there were complaints among the 400 survivors that there were insufficient lifeboats. This vessel also had an extra deck installed which would have raised issues of ship stability. To pack in as many passengers as possible, new cruise ship leviathans have ever more decks. Sharp ship turns at high speed have been known to injure passengers who reported a near flipping of their ship.
Could at least some good emerge from the Concordia wreck? If it spurs progress towards more lifeboats on cruise ships to cope with listing problems then yes it would. But the supine response of the marine safety industry so far, depicted by all the lessons unlearned, does not inspire much confidence, to the industry's indelible shame. Passengers and crews deserve and expect better. Must it take another Titanic to prove a point? Evidently, it must.
-----------------------------------------------------------------------------------
One line of enquiry into the accident is looking into an electrical fault which could have caused loss of ship control but whatever the cause it is the ability to cope with the aftermath that should concern all potential cruise ship passengers most. The fact is that current SOLAS regulations do not adequately protect all passengers on board cruise ships primarily because lifeboat capacity is typically 25% short when listing precludes use of all lifeboats on the opposite side of the list. But it gets worse.
This writer has been on various big ship cruises and conducted a survey of 10 large cruise vessels' lifeboat/craft capacity. In all but one vessel there was a 25% shortfall in life craft capacity when listing was applied to the equation. The problem is further exacerbated when allowance is made for the heavy use of inflatables, typically holding 25 people each, which is a cost consideration as they are so much cheaper than rigid, covered lifeboats and they help meet safety compliance.
While inflatables can be useful the fact remains that most would not be davit-launched but jettisoned to self inflate on hitting the water. This means that many passengers would be expected to jump up to 50 ft or more into what could be a freezing, raging sea and somehow scramble into them, irrespective of obesity and any infirmities they may have. Alas, that is just what some passengers felt compelled to do on the Concordia in a bid to swim to the shore. One travel broadcaster and writer said that many of the 150-capacity lifeboats were not deployed owing to the list and subsequent rolling over onto her side. If a stricken vessel's list is very rapid then there could also be problems launching lifeboats on the listing side.
This time round the world was spared another marine tragedy of Titanic proportions. Close proximity to the shore, benign weather and the use of five helicopters prevented huge loss of life but in other circumstances it could have been tragically different. More and more cruise ships are now moving in hostile waters of the polar regions, thousands of miles from inhabited land and, sometimes, other ships. Had the Concordia been in these harsh waters and rolled over in similar circumstances the loss of life would have far out rivalled the Titanic 100 years ago, again a ship that met the then current Board of Trade regulations on lifeboat capacity.
So far the cruise ship industry has been lucky, escaping relatively unscathed from serious loss of life. But there are recent tragedies disturbing enough to demand action on lifeboat capacities. In 2006, for example, the Al Salam Boccaccio 98 sank in the Red Sea after quickly listing. Of the 1,400 people on board there were complaints among the 400 survivors that there were insufficient lifeboats. This vessel also had an extra deck installed which would have raised issues of ship stability. To pack in as many passengers as possible, new cruise ship leviathans have ever more decks. Sharp ship turns at high speed have been known to injure passengers who reported a near flipping of their ship.
Could at least some good emerge from the Concordia wreck? If it spurs progress towards more lifeboats on cruise ships to cope with listing problems then yes it would. But the supine response of the marine safety industry so far, depicted by all the lessons unlearned, does not inspire much confidence, to the industry's indelible shame. Passengers and crews deserve and expect better. Must it take another Titanic to prove a point? Evidently, it must.
-----------------------------------------------------------------------------------
Saturday, 24 December 2011
How logistics can help save the world
If it is true that global warming is the greatest threat facing humanity and that mankind's activity is the sole or major cause, an issue far from proven, then can logistics play a key role in averting catastrophe? Once called materials handling, storage and distribution, logistics is a vast, complex subject exposed to many changeable forces but one theme is clear: the subject has huge potential to cut carbon emissions. In this report we shall look briefly at the impact transport has on environmental issues and what can be done to lessen that impact meaningfully.
Whichever mode of transport is used it carries a pollution tag. Transport may typically cost only 5-6% of total product sales but that does not include the immeasurable social/environmental cost. Shipping, currently not covered by environmental strictures, by one measure is the worst polluter of all transport modes. It's claimed that one very large cargo ship, for example, spews out as much toxins in a year as 50 million cars. Insurance statistics show that people living on shores by busy shipping lanes can expect to live up to 30 months less than inland dwellers owing to air-borne particulates. But there are ways to reduce that impact which will also cut shipping costs.
Ships have two big advantages over other transport modes. They offer the maximum cargo load as a percentage of gross weight and the best cargo density in terms of lbs/ft3. Currently there is also the added financial incentive of cheap freight rates because of the excessive shipping glut caused by new ship builds entering the market. But that boon for cargo consignors is transient, though it may take some years to clear the glut, while in the meantime one may expect to see more spectacular shipping line failures, putting yet more strain on troubled banks.
More importantly in the long run, shipping lines can reduce carbon emissions per ton/mile shipped by building larger vessels, which is happening now with container ships in particular. But there are other materials handling techniques in shipping which could benefit the environment but which remain largely ignored despite being around for at least 40 years and one is the use of slip sheets instead of wooden pallets. Made mainly from plastic, slip sheets cost less than one tenth the cost of timber pallets and take up only a tiny fraction of the space. While it's true that container shipping lines charge by the container, consignors could stuff significantly more goods in palletless containers and so cut the carbon cost per tonne mile shipped. It would also cut the burning of unwanted timber pallets at the cargo destination points. The only extra, marginal cost of adopting slip sheets is the forklift attachments for push-pull platens and, perhaps, pallet inverters.
There is another palletless method particularly applicable to bagged products, which does not involve special forklift attachments. This method uses stretch and shrink wrap to unitise bagged loads which are stacked in a particular pattern to leave two fork voids at the load base.
Shipping technology is also changing by combining new and old technologies. Belfast-based B9 Shipping, for example, are building 3,000 dwt windjammers that also burn methane gas made from municipal waste. Fully automated sail handling will account for 60-70% of motive power while Rolls Royce spark ignition engines will supplement sail power in light or heavy winds to ensure delivery times are met. There are about 10,000 ships of this size plying short sea routes so this proves demand for such vessel sizes. The company, however, is also drawing up plans for 5,000 tonners.
Back on Terra firma, there is much that can still be done to cut transport emissions by reducing miles run per tonne. Three approaches are catching on, even though they have been around for decades. The rise of pallet exchange networks in Britain 20 years ago has done much to improve logistics efficiency and cut emissions and is a concept now being rolled out across Europe. Such networks are based on the hub and spoke principle in which just one, centrally-located hub allows network member hauliers to deliver all their loads for onward sorting and loading to their second and final leg of the journey. Decanted lorries then load up for the return journey. Before the networks, lorries would typically run empty on the return journey. It is a triple win scenario in which the hauliers benefit from this more efficient pallet handling technique, the consignors profit from lower charges on small 1-6 pallet loads and the environment suffers less pollution per load mile. Around 10 million pallet loads now pass through UK pallet exchange networks each year.
A second approach to cutting journey miles is the use of double deck lorries, now being avidly taken on board by big UK retailers, in particular. Such lorries are 40% more productive than single deckers. This principle is also finding favour in the passenger traffic world. In America, for example, the Megabus operation can move a full complement of passengers from Washington to New York at a fuel burn rate of only 2 pints per passenger. Compare that oil burn to each passenger using his own car instead.
Large, fully automated distribution centres can also play a key role in cutting miles travelled. To give but one example, Coca Cola Enterprises in the UK is planning to invest £30 million in a new automated national warehouse at Wakefield which will double storage capacity, allowing it to deliver more products directly to customers rather than via external warehouses. The company hopes to cut 500,000 road miles a year by delivering directly to customers rather than storing product at external warehouses. It would also drastically cut forklift fuel burn at these warehouses.
There is nothing new in using one national distribution centre (NDC) for direct deliveries to customers but care needs to be taken over warehouse capacity and throughput restraints. In the past, large food retailers were embarrassed by taking this approach because too many lorries turned up at the NDC at the same time, causing bottlenecks and chaotic delays. They then had to go back to intermediate warehouses to control the flow of goods to the NDC more intelligently. Warehouse automation, however, has the power to eliminate intermediate layers of warehousing.
While on the subject of warehouses, they are heavy users of energy in ways that are wasteful. According to the United Kingdom Warehousing Association's report, Save Energy, Cut Costs, the UK warehouse sector could cut annual energy costs by £200 million, mainly through improved lighting hardware and techniques, insulation and energy saving doors. But forklifts also have a serious role to play in combating pollution issues. These are the articulated forklifts* that can work in aisles only 1.6 mt wide compared with the 3.5 mt and 2.6 mt needed by conventional counterbalance trucks and reach trucks respectively. These articulated trucks also outperform the other trucks in terms of working height and versatility. Such is their value that in certain circumstances they can allow businesses to close down satellite warehouses and thus save on warehouse energy costs, forklift numbers and mileage. If rented, they have been known to deliver instant truck payback, which goes a long way to explain why so many warehouse operators now design their warehouses around articulated forklifts.
Nature itself is also pointing towards the need for more logistics rethinking. Several times this year Nature's fury in the Far East has humbled global supply chains based on JIT deliveries. There is evidence that manufacturers are abandoning global supply chains for regional ones but it is not Nature alone that is responsible for this shift. Corporations are also concerned about rising costs in the formerly cheap supplier countries, unreliable deliveries, variable quality and even counterfeiting issues. Even so, environmental concerns are likely to take up more board time when companies realise that as much as 70% of a manufacturing company's carbon footprint can come from transport and other costs in its supply chain. If the trend towards smaller regional supply chains closer to their main markets gathers pace then that will favourably impact the environmental scene. What the implications of this shift will be for the prosperity of these emerging countries is difficult to say but it could be a bumpy ride.
----------------------------------------------------------------------------
*The three UK makers of articulated forklifts are: Translift Bendi, Flexi Narrow Aisle and Aisle-Master
Whichever mode of transport is used it carries a pollution tag. Transport may typically cost only 5-6% of total product sales but that does not include the immeasurable social/environmental cost. Shipping, currently not covered by environmental strictures, by one measure is the worst polluter of all transport modes. It's claimed that one very large cargo ship, for example, spews out as much toxins in a year as 50 million cars. Insurance statistics show that people living on shores by busy shipping lanes can expect to live up to 30 months less than inland dwellers owing to air-borne particulates. But there are ways to reduce that impact which will also cut shipping costs.
Ships have two big advantages over other transport modes. They offer the maximum cargo load as a percentage of gross weight and the best cargo density in terms of lbs/ft3. Currently there is also the added financial incentive of cheap freight rates because of the excessive shipping glut caused by new ship builds entering the market. But that boon for cargo consignors is transient, though it may take some years to clear the glut, while in the meantime one may expect to see more spectacular shipping line failures, putting yet more strain on troubled banks.
More importantly in the long run, shipping lines can reduce carbon emissions per ton/mile shipped by building larger vessels, which is happening now with container ships in particular. But there are other materials handling techniques in shipping which could benefit the environment but which remain largely ignored despite being around for at least 40 years and one is the use of slip sheets instead of wooden pallets. Made mainly from plastic, slip sheets cost less than one tenth the cost of timber pallets and take up only a tiny fraction of the space. While it's true that container shipping lines charge by the container, consignors could stuff significantly more goods in palletless containers and so cut the carbon cost per tonne mile shipped. It would also cut the burning of unwanted timber pallets at the cargo destination points. The only extra, marginal cost of adopting slip sheets is the forklift attachments for push-pull platens and, perhaps, pallet inverters.
There is another palletless method particularly applicable to bagged products, which does not involve special forklift attachments. This method uses stretch and shrink wrap to unitise bagged loads which are stacked in a particular pattern to leave two fork voids at the load base.
Shipping technology is also changing by combining new and old technologies. Belfast-based B9 Shipping, for example, are building 3,000 dwt windjammers that also burn methane gas made from municipal waste. Fully automated sail handling will account for 60-70% of motive power while Rolls Royce spark ignition engines will supplement sail power in light or heavy winds to ensure delivery times are met. There are about 10,000 ships of this size plying short sea routes so this proves demand for such vessel sizes. The company, however, is also drawing up plans for 5,000 tonners.
Back on Terra firma, there is much that can still be done to cut transport emissions by reducing miles run per tonne. Three approaches are catching on, even though they have been around for decades. The rise of pallet exchange networks in Britain 20 years ago has done much to improve logistics efficiency and cut emissions and is a concept now being rolled out across Europe. Such networks are based on the hub and spoke principle in which just one, centrally-located hub allows network member hauliers to deliver all their loads for onward sorting and loading to their second and final leg of the journey. Decanted lorries then load up for the return journey. Before the networks, lorries would typically run empty on the return journey. It is a triple win scenario in which the hauliers benefit from this more efficient pallet handling technique, the consignors profit from lower charges on small 1-6 pallet loads and the environment suffers less pollution per load mile. Around 10 million pallet loads now pass through UK pallet exchange networks each year.
A second approach to cutting journey miles is the use of double deck lorries, now being avidly taken on board by big UK retailers, in particular. Such lorries are 40% more productive than single deckers. This principle is also finding favour in the passenger traffic world. In America, for example, the Megabus operation can move a full complement of passengers from Washington to New York at a fuel burn rate of only 2 pints per passenger. Compare that oil burn to each passenger using his own car instead.
Large, fully automated distribution centres can also play a key role in cutting miles travelled. To give but one example, Coca Cola Enterprises in the UK is planning to invest £30 million in a new automated national warehouse at Wakefield which will double storage capacity, allowing it to deliver more products directly to customers rather than via external warehouses. The company hopes to cut 500,000 road miles a year by delivering directly to customers rather than storing product at external warehouses. It would also drastically cut forklift fuel burn at these warehouses.
There is nothing new in using one national distribution centre (NDC) for direct deliveries to customers but care needs to be taken over warehouse capacity and throughput restraints. In the past, large food retailers were embarrassed by taking this approach because too many lorries turned up at the NDC at the same time, causing bottlenecks and chaotic delays. They then had to go back to intermediate warehouses to control the flow of goods to the NDC more intelligently. Warehouse automation, however, has the power to eliminate intermediate layers of warehousing.
While on the subject of warehouses, they are heavy users of energy in ways that are wasteful. According to the United Kingdom Warehousing Association's report, Save Energy, Cut Costs, the UK warehouse sector could cut annual energy costs by £200 million, mainly through improved lighting hardware and techniques, insulation and energy saving doors. But forklifts also have a serious role to play in combating pollution issues. These are the articulated forklifts* that can work in aisles only 1.6 mt wide compared with the 3.5 mt and 2.6 mt needed by conventional counterbalance trucks and reach trucks respectively. These articulated trucks also outperform the other trucks in terms of working height and versatility. Such is their value that in certain circumstances they can allow businesses to close down satellite warehouses and thus save on warehouse energy costs, forklift numbers and mileage. If rented, they have been known to deliver instant truck payback, which goes a long way to explain why so many warehouse operators now design their warehouses around articulated forklifts.
Nature itself is also pointing towards the need for more logistics rethinking. Several times this year Nature's fury in the Far East has humbled global supply chains based on JIT deliveries. There is evidence that manufacturers are abandoning global supply chains for regional ones but it is not Nature alone that is responsible for this shift. Corporations are also concerned about rising costs in the formerly cheap supplier countries, unreliable deliveries, variable quality and even counterfeiting issues. Even so, environmental concerns are likely to take up more board time when companies realise that as much as 70% of a manufacturing company's carbon footprint can come from transport and other costs in its supply chain. If the trend towards smaller regional supply chains closer to their main markets gathers pace then that will favourably impact the environmental scene. What the implications of this shift will be for the prosperity of these emerging countries is difficult to say but it could be a bumpy ride.
----------------------------------------------------------------------------
*The three UK makers of articulated forklifts are: Translift Bendi, Flexi Narrow Aisle and Aisle-Master
Sunday, 6 November 2011
Will Thailand's floods redesign supply chains?
Natural calamities, it seems, are at last forcing global corporations to reassess their stretched supply chains geared to just-in-time (JIT) production but will that reaction die on the vine? In my last report (Supply chain shift and counterfeiting threaten Asia) I mentioned the minor, human forces driving a rethink on JIT global supply chains, including rising costs in the Far East, unreliable deliveries, unpredictable quality and fears over counterfeiting. I also mentioned the more serious risks posed by natural calamities in countries where the concentration of production resources exposed the folly of putting too many JIT supply eggs in one basket.
On April 25, in my report, "Japan's earthquake must force JIT supply changes," I warned of the need to diversify supply sources away from natural, calamity-prone countries where there were choke points for many products like cars and consumer electronics, owing to the high concentration of production resources. Now, only seven months on from the Japanese earthquake and tsunami, the world must contend with another natural calamity, with far-reaching repercussions for global supply chains -- the disastrous floods in Thailand.
The effects of the Japanese earthquake and tsunami on March 11 on the global supply chain are still being felt and production losses around the world will run into many billions of pounds, hitting the auto and consumer electronics industries particularly hard. Thailand's worst flooding in 50 years will have similar seismic effects on the global supply chains supplying the same industries, again because global corporations ignored a cardinal rule of JIT philosophy -- always have a fall back, effective disaster recovery plan.
It must be said, however, that Thailand, south-east Asia's second biggest economy, bears part of the blame that now sees global businesses with eggs on their faces. The country has allowed unrestrained industrialisation and real estate developments that has bequeathed an inadequate drainage infrastructure, not helped by political in-fighting, indecision and rampant corruption. For that folly Thailand will now pay a high price, which could destabilise the country. The deluge has destroyed one quarter of the nation's rice crop and put 700,000 people out of work. Many small businesses and people have lost their uninsured properties. The country's finance minister estimates the economic damage to his country at 1.7% of gross domestic product. That would equate to a loss of £25 billion in Britain.
Such lack of good governance, however, is common elsewhere in Asia where there are supply chain choke points, a case in point being south-east China where, as I predicted on April 25, much of the country was deluged by the worst floods in over 50 years, causing billions of pounds worth of damage. On that occasion the world was saved from serious supply chain disruptions, but it was a close run event.
It would be wrong, however, to be too judgmental of these countries, for the task of defending their industries against nature's fury is herculean. But will these economies now suffer more in the longer term as global businesses come under pressure to rethink the way they produce and distribute?
A rethink is certainly essential but that does not mean countries like Thailand should be abandoned as a cheap source of supplies. Rather, the answer lies in such calamity-prone countries taking measures to afford better protection and warning from flooding, and some diversification of supply sources so that unpredictable shortages in one country can be at least partly offset by supplies from more climatically stable countries. This would prevent plunging developing countries back into penury, a process that would only slow global economic growth and exacerbate political tensions.
Despite the signs that at long last such natural calamities are forcing global corporations to think of redesigning their supply chains, some commentators believe that the lure of cheap production costs in a highly competitive world will overcome such natural shocks and leave JIT supply chains unaltered. Corporations must answer to their shareholders and markets do not reward prudence. Such disregard for the protection of employees is dangerous but that is not a sin confined to corporations. Governments, local and national, are just as culpable over natural calamity warnings.
Nature's warnings are often neglected, with catastrophic consequences. This purblind reaction seems to be unfolding on the small island of El Hierro in the Canaries. Earthquakes cannot be predicted, yet, but volcanic eruptions, often associated with earthquakes, usually give ample warnings. As sure as I can be, I greatly fear that the sea bed volcanic eruptions close to El Hierro will explode violently, accompanied by earthquakes, within a few weeks, causing significant loss of life and property damage. Fortunately, an ash cloud is unlikely to blanket the other islands.
El Hierro's residents should leave now.
--------------------------------------------------------------------------------
On April 25, in my report, "Japan's earthquake must force JIT supply changes," I warned of the need to diversify supply sources away from natural, calamity-prone countries where there were choke points for many products like cars and consumer electronics, owing to the high concentration of production resources. Now, only seven months on from the Japanese earthquake and tsunami, the world must contend with another natural calamity, with far-reaching repercussions for global supply chains -- the disastrous floods in Thailand.
The effects of the Japanese earthquake and tsunami on March 11 on the global supply chain are still being felt and production losses around the world will run into many billions of pounds, hitting the auto and consumer electronics industries particularly hard. Thailand's worst flooding in 50 years will have similar seismic effects on the global supply chains supplying the same industries, again because global corporations ignored a cardinal rule of JIT philosophy -- always have a fall back, effective disaster recovery plan.
It must be said, however, that Thailand, south-east Asia's second biggest economy, bears part of the blame that now sees global businesses with eggs on their faces. The country has allowed unrestrained industrialisation and real estate developments that has bequeathed an inadequate drainage infrastructure, not helped by political in-fighting, indecision and rampant corruption. For that folly Thailand will now pay a high price, which could destabilise the country. The deluge has destroyed one quarter of the nation's rice crop and put 700,000 people out of work. Many small businesses and people have lost their uninsured properties. The country's finance minister estimates the economic damage to his country at 1.7% of gross domestic product. That would equate to a loss of £25 billion in Britain.
Such lack of good governance, however, is common elsewhere in Asia where there are supply chain choke points, a case in point being south-east China where, as I predicted on April 25, much of the country was deluged by the worst floods in over 50 years, causing billions of pounds worth of damage. On that occasion the world was saved from serious supply chain disruptions, but it was a close run event.
It would be wrong, however, to be too judgmental of these countries, for the task of defending their industries against nature's fury is herculean. But will these economies now suffer more in the longer term as global businesses come under pressure to rethink the way they produce and distribute?
A rethink is certainly essential but that does not mean countries like Thailand should be abandoned as a cheap source of supplies. Rather, the answer lies in such calamity-prone countries taking measures to afford better protection and warning from flooding, and some diversification of supply sources so that unpredictable shortages in one country can be at least partly offset by supplies from more climatically stable countries. This would prevent plunging developing countries back into penury, a process that would only slow global economic growth and exacerbate political tensions.
Despite the signs that at long last such natural calamities are forcing global corporations to think of redesigning their supply chains, some commentators believe that the lure of cheap production costs in a highly competitive world will overcome such natural shocks and leave JIT supply chains unaltered. Corporations must answer to their shareholders and markets do not reward prudence. Such disregard for the protection of employees is dangerous but that is not a sin confined to corporations. Governments, local and national, are just as culpable over natural calamity warnings.
Nature's warnings are often neglected, with catastrophic consequences. This purblind reaction seems to be unfolding on the small island of El Hierro in the Canaries. Earthquakes cannot be predicted, yet, but volcanic eruptions, often associated with earthquakes, usually give ample warnings. As sure as I can be, I greatly fear that the sea bed volcanic eruptions close to El Hierro will explode violently, accompanied by earthquakes, within a few weeks, causing significant loss of life and property damage. Fortunately, an ash cloud is unlikely to blanket the other islands.
El Hierro's residents should leave now.
--------------------------------------------------------------------------------
Saturday, 29 October 2011
Supply chain shift and counterfeiting threaten Asia
In the once vibrant fishing port of Lowestoft, England, a small forklift company has changed its procurement model that reflects the start of a logistics trend that could have seismic implications for emerging Far East economies, particularly China. The driving force behind this nascent trend is supply chain fears and unprecedented intellectual property theft.
In a country where nearly all forklift production and sales is foreign owned, Britain was once a leading forklift producer. Today, a handful of niche specialist producers, mainly of articulated forklifts, is almost all that remains. But the Lowestoft company is not yet a specialist producer. Rather, it is selling main stream counterbalanced forklifts and is winning sales overseas. That company, Nexen Lift Truck Technology, took the bold decision to move the production of its X-range of forklifts and its entire R&D programme back from Taiwan to the UK.
The company, says MD, Tim Mason, "had been frustrated by progress at getting its X-range models in production at its Taiwan plant." Curiously, perhaps, it cited one reason as the shortage of a skilled workforce. "To overcome these delays and in response to several component suppliers reluctant to release specialised development items to Taiwan for fear that they may be copied in China we have taken the very big decision to move all our R&D activities to our European head quarters in the UK."
Nexen believes that the move will enable it to expand its forklift range at a significantly faster rate and also meet increased demand from the North American market. But how justified is concern over China's counterfeiting proclivities?
Counterfeiting could hammer China
There is no surprise that an emerging economy like China should avidly take to massive counterfeiting, partly as a quick-fix boost to its burgeoning economy. After all, other countries in their early development days did the same thing, like Japan in the 1950s and subsequently Hong Kong and India. That does not, of course, excuse their behaviour, but the scale of copyright infringement is breathtaking. From only about US$5.5 billion in 1982, the economic value in global counterfeiting had soared to an estimated US$500 billion in 2003. It is the fastest growing criminal enterprise worldwide and China is by far the worst offender.
The theft does not only deprive owners of intellectual property rights of huge revenues. It also means that such perpetrators have a huge advantage in bringing new products to market. Unlike their honest competitors, they can simply copy designs and so avoid huge sums invested in research and development. This subtle "pick off", as the scam is called, is a form of intellectual property theft that occurs at the high end of counterfeit sophistication and so poses a significant risk to established manufacturers. Is it any wonder, then, that copiers are able to offer cars, for example, under another brand name, at a fraction of the cost of the genuine article.
To their credit, the Chinese government has moved to remedy the situation through legislation and destruction of pirated goods but corrupt local officials fail to enforce the new laws. Aggrieved, genuine product producers, therefore, cannot expect any resolution some time soon. Only last year it was claimed that in China 78% of all software sold was pirated, according to the Business Software Alliance's 2011 Global Piracy Report. The global average rate is only 42%.
The extent of counterfeiting is far from confined to the end products, like autos and consumer electronics. There are now hundreds of foreign auto parts suppliers in China, for example, and this movement of the auto supply chain to China means intellectual property piracy is not only a risk facing other OEMs but also the supply base. Nexen's component suppliers to Taiwan, therefore, have every reason to be fearful.
Mini renaissance for UK manufacturers?
The concerns over copyright infringement, however, are now being augmented by bigger concerns over stretched supply chains becoming ever-more costly and unreliable. Labour rates in those Far East countries are rising fast, along with commodity prices. In Britain, a weak pound is adding to cost pressures. Consequently, UK retailers are sourcing more locally in Britain. One of Britain's biggest home shopping companies, N Brown, has more than doubled its base of UK suppliers, which boosted a handful of small textile manufacturers in Leicester and Manchester, though the company still sources less than 5% of its textiles from the UK. But according to a recent survey by the Economist Intelligence Unit, more than half of UK manufacturers expect to increase domestic sourcing over the next few years.
The attraction of overseas sourcing has always been low cost, which outweighed irritants like unreliable delivery, long supply chains and often unpredictable quality. But the recession has highlighted the risks of a complex global supplier network and long lead times. One UK company, for example, had a warehouse full of aluminium castings from an emerging markets supplier, for which the group had no orders. Renegotiating the contract proved impossible.
Businesses are now becoming more aware of the risks and volatility involved in a geographically large supply chain. There are signs that mid-ranged parts supply from the east are now shifting back to the UK supply sources, especially for products where labour accounts for a relatively low proportion of the total costs.
There is one risk, however, that took an earthquake and tsunami to bring home to the world the folly of JIT supply chains originating in natural calamity-prone regions. As a principle, there is nothing wrong with JIT supply and production provided certain ground rules are rigorously obeyed. One of those rules is to avoid putting all one's supply chain eggs in one basket. Japan was and remains a choke point for around 100 products essential the the electronics and auto industries. The destruction wrought by the earthquake and tsunami last March cost the global economy billions of pounds in lost production, and still continues, as JIT components quickly dried up and could not be supplied from elsewhere. Guangdong province in China is another serious choke point for many electronic products, in particular, and rare earths elsewhere. Thailand is yet another example of a hostage to nature. The continuing flooding there, the worst in 50 years, is the latest example of how nature's fury can disrupt a too tightly stretched global supply chain. Computer prices are set to rise because Thailand is home to about a quarter of the global hard drive assembly facilities. But other industries, like cars and cameras, are also seriously disrupted.
These regions will continue to be exposed to the inevitable natural calamities to come so western manufacturers must secure several other supply sources, preferably insulated from natural calamities, even if, initially, that raises procurement costs.
In a country where nearly all forklift production and sales is foreign owned, Britain was once a leading forklift producer. Today, a handful of niche specialist producers, mainly of articulated forklifts, is almost all that remains. But the Lowestoft company is not yet a specialist producer. Rather, it is selling main stream counterbalanced forklifts and is winning sales overseas. That company, Nexen Lift Truck Technology, took the bold decision to move the production of its X-range of forklifts and its entire R&D programme back from Taiwan to the UK.
The company, says MD, Tim Mason, "had been frustrated by progress at getting its X-range models in production at its Taiwan plant." Curiously, perhaps, it cited one reason as the shortage of a skilled workforce. "To overcome these delays and in response to several component suppliers reluctant to release specialised development items to Taiwan for fear that they may be copied in China we have taken the very big decision to move all our R&D activities to our European head quarters in the UK."
Nexen believes that the move will enable it to expand its forklift range at a significantly faster rate and also meet increased demand from the North American market. But how justified is concern over China's counterfeiting proclivities?
Counterfeiting could hammer China
There is no surprise that an emerging economy like China should avidly take to massive counterfeiting, partly as a quick-fix boost to its burgeoning economy. After all, other countries in their early development days did the same thing, like Japan in the 1950s and subsequently Hong Kong and India. That does not, of course, excuse their behaviour, but the scale of copyright infringement is breathtaking. From only about US$5.5 billion in 1982, the economic value in global counterfeiting had soared to an estimated US$500 billion in 2003. It is the fastest growing criminal enterprise worldwide and China is by far the worst offender.
The theft does not only deprive owners of intellectual property rights of huge revenues. It also means that such perpetrators have a huge advantage in bringing new products to market. Unlike their honest competitors, they can simply copy designs and so avoid huge sums invested in research and development. This subtle "pick off", as the scam is called, is a form of intellectual property theft that occurs at the high end of counterfeit sophistication and so poses a significant risk to established manufacturers. Is it any wonder, then, that copiers are able to offer cars, for example, under another brand name, at a fraction of the cost of the genuine article.
To their credit, the Chinese government has moved to remedy the situation through legislation and destruction of pirated goods but corrupt local officials fail to enforce the new laws. Aggrieved, genuine product producers, therefore, cannot expect any resolution some time soon. Only last year it was claimed that in China 78% of all software sold was pirated, according to the Business Software Alliance's 2011 Global Piracy Report. The global average rate is only 42%.
The extent of counterfeiting is far from confined to the end products, like autos and consumer electronics. There are now hundreds of foreign auto parts suppliers in China, for example, and this movement of the auto supply chain to China means intellectual property piracy is not only a risk facing other OEMs but also the supply base. Nexen's component suppliers to Taiwan, therefore, have every reason to be fearful.
Mini renaissance for UK manufacturers?
The concerns over copyright infringement, however, are now being augmented by bigger concerns over stretched supply chains becoming ever-more costly and unreliable. Labour rates in those Far East countries are rising fast, along with commodity prices. In Britain, a weak pound is adding to cost pressures. Consequently, UK retailers are sourcing more locally in Britain. One of Britain's biggest home shopping companies, N Brown, has more than doubled its base of UK suppliers, which boosted a handful of small textile manufacturers in Leicester and Manchester, though the company still sources less than 5% of its textiles from the UK. But according to a recent survey by the Economist Intelligence Unit, more than half of UK manufacturers expect to increase domestic sourcing over the next few years.
The attraction of overseas sourcing has always been low cost, which outweighed irritants like unreliable delivery, long supply chains and often unpredictable quality. But the recession has highlighted the risks of a complex global supplier network and long lead times. One UK company, for example, had a warehouse full of aluminium castings from an emerging markets supplier, for which the group had no orders. Renegotiating the contract proved impossible.
Businesses are now becoming more aware of the risks and volatility involved in a geographically large supply chain. There are signs that mid-ranged parts supply from the east are now shifting back to the UK supply sources, especially for products where labour accounts for a relatively low proportion of the total costs.
There is one risk, however, that took an earthquake and tsunami to bring home to the world the folly of JIT supply chains originating in natural calamity-prone regions. As a principle, there is nothing wrong with JIT supply and production provided certain ground rules are rigorously obeyed. One of those rules is to avoid putting all one's supply chain eggs in one basket. Japan was and remains a choke point for around 100 products essential the the electronics and auto industries. The destruction wrought by the earthquake and tsunami last March cost the global economy billions of pounds in lost production, and still continues, as JIT components quickly dried up and could not be supplied from elsewhere. Guangdong province in China is another serious choke point for many electronic products, in particular, and rare earths elsewhere. Thailand is yet another example of a hostage to nature. The continuing flooding there, the worst in 50 years, is the latest example of how nature's fury can disrupt a too tightly stretched global supply chain. Computer prices are set to rise because Thailand is home to about a quarter of the global hard drive assembly facilities. But other industries, like cars and cameras, are also seriously disrupted.
These regions will continue to be exposed to the inevitable natural calamities to come so western manufacturers must secure several other supply sources, preferably insulated from natural calamities, even if, initially, that raises procurement costs.
Monday, 3 October 2011
ITF launches humanitarian response to piracy
With piracy at sea hitting an all-time high in the first three months of 2011, the ITF Seafarers' Trust charity* and the TK Foundation launched a new initiative on September 29, the Maritime Piracy Humanitarian Response Programme (MPHRH) to help all those seafarers and their families cope with the traumas of piracy. "Until now, there has been little coordinated help for those who are suffering," said Roy Paul of the Seafarers' Trust. All that will now change as the comprehensive programme attempts to build up a network of first responders and get psychological help for affected crews and their loved ones. The programme will be a continuum of care functioning before, during and after piratical attacks.
Given the shameful attitudes of some ship owners towards their traumatised crews, the ITF initiative is desperately needed and the task ahead dauntingly huge and complex. Dr Peter Swift, MPHRP Chair, praised those shipping companies for implementing the industry's best management practices and sound practices to address the humanitarian needs of their crews and their family members but "regrettably many have not," he said. It is reminiscent of those dark early days of World War 2 when captured British merchant seamen were not compensated for their loss of personal possessions or even paid while in captivity, leaving them stressed over how their families would cope at home.
Laudable though this imitative is, it deals only with the symptoms of piracy, growing steadily stronger over the last seven years. Nearly 4,000 seafarers have been taken hostage in the past five years and detained for months in appalling conditions. Tens of thousands of others have been the victims of attacks. Today, nearly 300 seafarers are being held hostage on ships off the Somali coast -- all of them under increasingly violent conditions. Having "crossed the line from savagery into torture," said Dr Swift, often drug-crazed pirates leave crews stripped naked in cold stores for hours, tie crew's genitals with cable ties and subject them to mock executions and even keel hauling.
The annual cost of piracy is now put at $12 billion, but that probably does not include the cost of holding higher stocks as ships take longer to reach their destinations via the Cape of Good Hope. In terms of human costs, Dr Marion Gibson, psychosocial consultant to MPHRH, told this writer that the families of returned hostages felt aggrieved that in many cases pirates were not being punished for their crimes. This is one of the most abject, shameful aspects of the pirate scourge. Some hundreds of Somali pirates were released this year, many of whom were on their third arrest. Some countries are reluctant to try pirates, partly on cost grounds, and countries like Kenya and the Seychelles are already overloaded by pirates.
Anti piracy barriers must be eased
Pirates are doubtless grateful for many other obstacles put in the way of their capture and condign punishment. Some countries have laws against merchant ships entering their countries with arms on board and there are insurance obstacles. ITF itself is opposed to arming seafarers and advocates offering no resistance when attacked. The various navies on station in the Indian Ocean are doing their best with limited resources but as one NATO admiral said: "You could put a World War 2 navy out there and it still would not be enough."
Given the inability of the navies to eradicate the scourge, I asked Rear Admiral Ort, Chief of Staff of NATO's HQ in London, if the international community should not go one step further, once all hijacked crews and their ships had been released, by preventing further hijackings and attacks through the arming of crews or placing armed private contractors and trained, seconded naval personnel on board. After all, one American NATO admiral admitted that merchantmen should be armed.
"First of all," replied Admiral Ort, "I would say it is more complicated because whatever we do at sea is actually only fighting symptoms. The real cause of the problem lies ashore. It is directly related to the fact that Somalia is a failed state without the necessary institutions. So the longer term structural solution involves building Somalia as a nation state to deal with this. Obviously this is longer term but shorter term we are stuck with fighting the symptoms." The admiral also voiced concerns over armed private contractors on board. "Some are really very good but obviously some of them are less so," but he did confirm that trained, armed naval personnel are now being supplied to merchantmen but the problem here was one of capacity owing to the thousands of ships transiting the Gulf of Aden every year.
Logic, therefore, inescapably points to the need to offer some seafarers training in weapons handling and anti-boarding tactics in return for financial inducements. The multitude of barriers to this would have to be eased while the emergency lasts. "We as an international community need to get our act together," said Rear Admiral Ort. Failing that, the piracy scourge will worsen unless, perhaps, a final solution is adopted reminiscent of the bombardment of Algiers in 1816 and 1824. That option, however, would tragically involve many innocents and would outrage international opinion. But it should be remembered that even the restoration of national good governance in Somalia may not be the solution. Other countries, after all, which are not failed states, have been emboldened by the Somali pirates' runaway success and are making life particularly difficult off the west coast of Africa.
-------------------------------------------------------------------------------------
*ITF's ability to offer badly needed help is circumscribed by its limited funds. Donations would be welcomed at: www.mphrp.org
Given the shameful attitudes of some ship owners towards their traumatised crews, the ITF initiative is desperately needed and the task ahead dauntingly huge and complex. Dr Peter Swift, MPHRP Chair, praised those shipping companies for implementing the industry's best management practices and sound practices to address the humanitarian needs of their crews and their family members but "regrettably many have not," he said. It is reminiscent of those dark early days of World War 2 when captured British merchant seamen were not compensated for their loss of personal possessions or even paid while in captivity, leaving them stressed over how their families would cope at home.
Laudable though this imitative is, it deals only with the symptoms of piracy, growing steadily stronger over the last seven years. Nearly 4,000 seafarers have been taken hostage in the past five years and detained for months in appalling conditions. Tens of thousands of others have been the victims of attacks. Today, nearly 300 seafarers are being held hostage on ships off the Somali coast -- all of them under increasingly violent conditions. Having "crossed the line from savagery into torture," said Dr Swift, often drug-crazed pirates leave crews stripped naked in cold stores for hours, tie crew's genitals with cable ties and subject them to mock executions and even keel hauling.
The annual cost of piracy is now put at $12 billion, but that probably does not include the cost of holding higher stocks as ships take longer to reach their destinations via the Cape of Good Hope. In terms of human costs, Dr Marion Gibson, psychosocial consultant to MPHRH, told this writer that the families of returned hostages felt aggrieved that in many cases pirates were not being punished for their crimes. This is one of the most abject, shameful aspects of the pirate scourge. Some hundreds of Somali pirates were released this year, many of whom were on their third arrest. Some countries are reluctant to try pirates, partly on cost grounds, and countries like Kenya and the Seychelles are already overloaded by pirates.
Anti piracy barriers must be eased
Pirates are doubtless grateful for many other obstacles put in the way of their capture and condign punishment. Some countries have laws against merchant ships entering their countries with arms on board and there are insurance obstacles. ITF itself is opposed to arming seafarers and advocates offering no resistance when attacked. The various navies on station in the Indian Ocean are doing their best with limited resources but as one NATO admiral said: "You could put a World War 2 navy out there and it still would not be enough."
Given the inability of the navies to eradicate the scourge, I asked Rear Admiral Ort, Chief of Staff of NATO's HQ in London, if the international community should not go one step further, once all hijacked crews and their ships had been released, by preventing further hijackings and attacks through the arming of crews or placing armed private contractors and trained, seconded naval personnel on board. After all, one American NATO admiral admitted that merchantmen should be armed.
"First of all," replied Admiral Ort, "I would say it is more complicated because whatever we do at sea is actually only fighting symptoms. The real cause of the problem lies ashore. It is directly related to the fact that Somalia is a failed state without the necessary institutions. So the longer term structural solution involves building Somalia as a nation state to deal with this. Obviously this is longer term but shorter term we are stuck with fighting the symptoms." The admiral also voiced concerns over armed private contractors on board. "Some are really very good but obviously some of them are less so," but he did confirm that trained, armed naval personnel are now being supplied to merchantmen but the problem here was one of capacity owing to the thousands of ships transiting the Gulf of Aden every year.
Logic, therefore, inescapably points to the need to offer some seafarers training in weapons handling and anti-boarding tactics in return for financial inducements. The multitude of barriers to this would have to be eased while the emergency lasts. "We as an international community need to get our act together," said Rear Admiral Ort. Failing that, the piracy scourge will worsen unless, perhaps, a final solution is adopted reminiscent of the bombardment of Algiers in 1816 and 1824. That option, however, would tragically involve many innocents and would outrage international opinion. But it should be remembered that even the restoration of national good governance in Somalia may not be the solution. Other countries, after all, which are not failed states, have been emboldened by the Somali pirates' runaway success and are making life particularly difficult off the west coast of Africa.
-------------------------------------------------------------------------------------
*ITF's ability to offer badly needed help is circumscribed by its limited funds. Donations would be welcomed at: www.mphrp.org
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