Friday, 17 December 2010

Britain's MoD shambles plays into Talebans' hands

A potential £36 billion shortfall of spending against funding over the next decade would be impossible in any commercial enterprise but for Britain's Ministry of Defence (MoD) it seems de rigueur. In Parliament's 10th Public Accounts Committee (PAC) 2010-2011 report the Committee's chair person, Margaret Hodge, MP, complains: "It is astonishing that the MoD has hitherto failed to develop a proper, long-term financial strategy linking its funding to its core priorities and providing a clear basis for making cuts. Instead, it has managed to stay in budget each year by making short-term and ad hoc, in-year decisions to cut programmes and defer the acquisition of kit. These have led to inefficiency and even greater costs in the longer term." In the case of the two delayed aircraft carriers such delay has cost over £1 billion.

Mrs Hodge should not have been so entirely astonished as the MoD has been out of financial control for many years, while its logistics record is lamentable. As mentioned on this blog site last April, the Defence Select Committee excoriated the MoD for its "Failures in the administration of service personnel and sensitive equipment." This led the National Audit Office to qualify the department's resource accounts for the third consecutive year.

The MoD's financial debacle could become even more onerous on long-suffering taxpayers. The size of the budget shortfall, admittedly, is highly susceptible to assumptions regarding future spending review settlements but further cuts in funding without cuts in outputs will cause the deficit to rise.

The PAC calls for an immediate change to the situation and welcomes the MoD's appointment of a professionally qualified financial director, the erstwhile absence of which beggars belief in an organization spending over £42 billion a year. But without much help from a cadre of similarly qualified staff he is unlikely to restore sanity to the MoD's finances any time soon. He will also be stymied by a civil service mentality that breeds a culture of timidity. Senior officials, for example, failed to challenge unaffordable decisions about equipment procurement by referring matters to ministers.

Finance is only one lamentable issue with the MoD. The department would also profit from highly experienced logisticians. This would reduce the likelihood of repeating past embarrassments, like the Army's relatively new £1.3 billion BOWMAN project. This tactical communications system which provides integrated, secure radio, intercom and internet services left a black hole of another kind which could even compromise national security, namely the apparent disappearance of £155 million of battlefield radios. "Having an effective audit trail is the only way to ensure that all equipment is accounted for," remarked the defence committee chairman, James Arbuthnot, MP, earlier this year.

It would also be helpful if cabinet politicians took a few lessons in logistics, for when war beckons sound logistics advice will be drowned by jingoistic politics. The war in Afghanistan is a good example. This country not only poses nightmarish logistical problems, it also has an ideal guerrilla warfare terrain favouring the Taleban, whose logistics costs per capita are less than one tenth of the coalition's forces.

Britain is not only bleeding on the human front but is moving closer to financial ruin as the war in Afghanistan reportedly hits $2 billion a week. The war is also of a nature that cannot endear local people to the occupying forces. During World War 1, 10% of all casualties were civilian. In World War 2 that percentage rate soared to 50%. By the time of the Iraq and Afghanistan wars a tragic 90% of all casualties were civilian, reportedly leaving 750,000 women widowed, hardly a strategy designed to win over the hearts and minds of local populations, without which there can be no durable peace in that much vexed land. Rather, it will bequeath a long, festering hatred of the West translated into tragic, violent outbursts on Western soils, the cost of which will not be cheap.

Tuesday, 7 December 2010

Container payload scams end in sight?

Mandatory container payload weighing may be one step nearer following the recent urging of the International Maritime Organization (IMO) to make weighing of all export container cargoes legally binding at all ports. Following the Dutch research institute MARIN's research project, "Lashing at Sea," the World Shipping Council (WSC) and the International Chamber of Shipping (ICS) have urged the IMO to establish an international legal requirement for all loaded containers to be weighed before loading a vessel.

MARIN's research project found that the shipping industry's guidelines have had little discernable effect on minimising the occurrences of incorrect weight declaration. MARIN says that there have been severe cases where the total cargo weight of a ship was 10% higher than declared. Accident investigations by the UK's Marine Accident Investigation Branch (MAIB), however, suggest that the problem could be far worse.

When investigating the beaching of the container ship, MSC Napoli, in 2007, MAIB found that 20% of all on deck containers were over three tonnes heavier than their declared weights, i.e. more than 10%, and in one case it was 20 tonnes. Such discrepancy, said the MAIB report, "is widespread within the container ship industry and is due to many packers and shippers not having the facilities to weigh containers at their premises. It is also due to shippers deliberately under declaring containers' weights in order to minimise import taxes calculated on cargo weight, allow the overloading of containers, and to keep declared weights within limits imposed by road and rail transportation.

The temptations to falsify cargo declarations are high because not only do the exporters and/or container packers save money on import duties but they also swindle the container shipping lines, who lay down specific payload limits in different-sized boxes. No figures, of course, exist on this global scam but the 141 million TEUs transported by sea in 2007, or 1,272 million tonnes, suggests the scams cost billions of pounds every year. Just as serious, however, is the risk to seamen's lives, their ships and the environment. Without correct container payload declarations, port crane operators cannot stow containers correctly and so risk destabilising a ship in rough weather as well as place intolerable stresses on ships' hulls.

The risks of losses are not confined to sea, but can affect inland businesses geared to Just-in-Time deliveries. When a container crane in Southampton collapsed on a ship in 2007 it brought the Honda car plant at Swindon to a halt because car parts on board ship were delayed. Some 19 months on, the Health & Safety Executive (HSE) report into that accident had still not been issued when a second container crane of the same make and design, on the same berth and subsequently altered by the same company also collapsed, with near fatal consequences. On both occasions the weather was benign, and overloaded containers were considered a possibility. Container ships have also been known to list while berthed during unloading, tipping their containers into harbours.

Clearly, the word of container packers and consignors on payload declarations which has been taken on trust for so long can no longer be trusted. Weighing must be the answer but how pervasive should that be? Kalmar, a leading port handling equipment supplier, believes that the best place for weighing to be done is where the lorries and trains have their containers transferred to a stacking area by reach stackers, RTGs and straddle carriers. Weighbridges at port entry would only cause bottlenecks and ship-to-shore cranes should be ruled out as this would be too late in the process.

Nearly all of the straddle carriers and RTGs delivered in the last seven years by Kalmar can be retrofitted with optional modules. It would then only remain to include the weighing information in the data exchange between the machine and the terminal operating software and for the TOS to compare the declared weight with the actual weight that has been recorded by the port handling equipment.

It makes sense, however, to extend the weighing function to container packers by having them fit their own forklifts or pallet trucks with weighers. A container packer being told by a port operator that his containers' payload declarations are erroneous and must be resolved by him before shipment will not endear him to his principals if his container shipment misses the boat. Such forklift and pallet-mounted scales start at £2,000 and £800 respectively in the UK.

Container packers, however, who do not wish to invest in forklift-mounted scales have an alternative in companies like Containerlift whose container-lifting vehicles can be fitted with weighers, thus avoiding the need to visit weighbridges and risking a roadside spot check.

On August 20, 2008 this writer warned in of the need to install weighers at ports and at container packing premises to combat fraud and make the seas safer. It reflects badly on the IMO that little has been done since then to eradicate this odious, callous fraud that treats seamen's lives so contemptuously. Ignoring that old Royal Navy expression, "Get your fingers out," is no longer an option, and could be equally applied to the HSE over its tardy accident investigations.
UK suppliers of forklift/pallet truck-mounted scales include: Avery Weigh-tronix, Novaweigh, Ravas UK, RDS Technology, Timotex, Weightron UK.

Wednesday, 1 December 2010

Articulated Forklifts Could Save Cold Stores Millions

As the public's food buying patterns change, articulated forklifts could become the economic saviour of cold store operators. Compared with ambient stores, cold stores are far more costly to build and run. In environments where operating temperatures are typically minus 25 C, energy costs average between 20% and 30% of total warehouse running costs, but it can be far worse. One study by Bristol University, for example, found that initially efficient freezing plant can become very inefficient over a few years, consuming more than eight times the energy of the most efficient cold stores. As if that were not bad enough, owing to the high use of electricity or fossil fuels cold stores get pilloried by environmentalists, an unwarranted criticism that will be touched on later.

There are many factors influencing cold store energy costs, particularly warehouse size, and some are cheap and easy to improve, like dealing with energy losses at unsuitable doors which lead to ice build up on floors, slipping accidents and more frequent, costly defrosts. A fast payback solution here would be rapid roll PVC doors with crash-out facilities. But even in the best run cold stores, the cost of energy influences the choice of racking in which the overriding consideration is to maximise storage density.

Currently, the most popular forms of cold store pallet racking are drive-in, mobile and live (flow) storage. They all have the advantage of high storage density but all will be compromised by the public's changing food buying patterns if those patterns continue to grow.

One clear trend in the UK over the last five years has been the increase in frozen food sales, thought to be worth about £7.5 billion today. Whatever the reasons for this, like changing public health perceptions that show frozen food in a more favourable light than fresh and chilled food, it is clear that existing pallet racking configurations will not cope as efficiently as before. This is because cold stores need to be able to adopt the storage and picking methods of the chilled and dry grocery product sector, says John Maguire, sales director of Flexi Narrow Aisle, who have been providing articulated, cab-equipped forklifts to the cold store sector for five years. That means much faster access to all pallet loads.

Drive-in racking offers instant selectivity of a poor average of only 30%, based on first in last out. It is also notorious for high damage levels owing to tight tolerances in which forklifts must work. Mobile racking offers 100% selectivity but is ponderously slow as drivers must wait until the appropriate aisle has been opened and only pallets in that aisle can be accessed at any one time. Mobile racking is also three times more costly per pallet stored than conventional, fixed pallet racking (APR). Flow storage is likewise relatively costly and lacks 100% instant pallet access.

Given that frozen food storers now face growing demand for greater and faster pallet selectivity, additional pick face replenishment activity and customer case quantity order assembly, the racking most suitable for that activity is very narrow aisle racking (VNA), which offers 100% instant pallet accessibility. In the light of high energy costs, the most cost-effective choice of forklift must be the articulated truck.

Currently, reach trucks with heated cabs dominate the truck of choice for cold store whole pallet load work, followed by dedicated, man-down VNA machines. Reach trucks, however, need at least 2.5 mt wide aisles in which to work compared with just 1.6 mt for articulated trucks. That means the articulated truck can typically store 33% more pallets in any given cube and 50% more than conventional counterbalanced trucks, which need minimum aisle widths of 3.5 mt. There is also not much price difference between a heated, cab-equipped articulated truck and reach truck, claims Translift Bendi, who have just launched their first heated cab model, the Arctic, for cold stores. Such a truck will cost about £40,000 compared with a reach truck's £35,000 to £40,000. VNA man-down trucks, however, start at around £60,000, plus the cost of rail or wire guidance. They are also slow and inflexible.

The big advantage of heated cabs is that drivers can work a full eight hour shift. Otherwise, accepted practice means drivers should take a 15-minute break in every hour. Cabs are also likely to reduce time lost through driver illness.

In ambient storage, such has been the impact of articulated forklifts that many warehouse operators design their racking arrangements around them. For cold stores now faced with changing food buying patterns, it would be foolish to rely always on previously selected cold store trucks and racking methods.

Environmentalists and food retailers could also take comfort if the trend to more frozen food buying continues. It would mean, for example, less waste than other choices because at present much chilled food fails to sell by its 'best before' or 'sell by' date. Unsold produce, if not drastically cut in price on the sell by date, goes to landfill sites and its disposal costs the food industry millions of pounds every year. Organic foodies may also feel kindlier towards frozen foods as they contain fewer chemicals and preservatives than chilled food because freezing in itself is a preservative.

In the British Isles there are only three manufacturers of articulated forklifts: Translift Bendi, Flexi Narrow Aisle and Aisle Master. In America there is a version of the Bendi produced by Landoll, of Kansas.

Thursday, 21 October 2010

UK defence cuts will skew Royal Navy

Pirates, drug runners and terrorists may be toasting the UK defence cuts as an early Christmas present, for the cuts will skew and emasculate the Royal Navy's defence capability. The strategic defence and security review will cut spending on the armed forces by 8% in real terms over the next four years, a cut much less than the Treasury wanted.

Much more worrying, however, is that Britain has confirmed it will complete the two new large aircraft carriers, at nearly £6 bn, even though some military chiefs reportedly urged the Prime Minister, David Cameron, to scrap at least one of the carriers. The outgoing chief of defence staff, Sir Jock Stirrup, argued that pressing ahead with the two carriers would skew Britain's defences because of the huge expense, which over 10 years, with running costs and aircraft, would reach about £35 bn, close to matching the black hole already in the incompetent Ministry of Defence's (MoD) budget.

The justification seems to be that it would cost more to cancel the carriers than build them owing to contractual obligations but there is a specious ring to this. Hard-strapped taxpayers might well fume at such crass and onerous contract conditions yet it still would have been cheaper to cancel the carriers owing to the overall, much higher lifetime running cost of the two ships. The likelihood is that one of the carriers will be immediately mothballed, while the other is altered to fit an electromagnetic launching system to take the conventional JSF jets, but the scrapping of the harrier jump jets will mean the carriers will go to sea without any UK planes for the next 10 years. But if one of the carriers can be quickly sold at a sensible price then the waste will not have been so huge.

Horse-necked admirals?

The carrier programme is worrying most of all because of its impact on the rest of the Royal Navy, which could see the number of its surface ships fall from 23 to 19. These types of vessels do splendid work in the Caribbean, seizing drugs, and in the Indian Ocean and Persian Gulf protecting oil installations and fighting piracy. "Almost everybody in the navy sees the calamity of this," said an MoD official, "except the people in the top half of the service." Another senior military figure added: "We should never have bought them in the first place. We've got better ways of spending our money. We could have had more frigates, more money for cyber, more special forces. It's £5 bn of lost opportunities."

But what about the need to project power globally as only carriers can and ably did so in the Falklands' campaign? The problem with this argument is that the world's security issues are changing and will stem from intangible threats, such as cyber warfare, international terrorism and pandemics. Carriers are only for state on state warfare that is well down the government's risk assessments. Moreover, carriers are useless for work like anti-piracy, drugs running and terrorism. The navy's argument that it would not be able to defend the Falklands without the carriers is breathtakingly fatuous. A permanently stationed, adequate air force and troops, to be paid out of any future oil revenues, would deter subsequent invasions.

Perhaps their lordships of the Admiralty still believe in the carriers because they could defend St Helena, Tristan da Cunha or that hotbed of tax evasion, the Cayman Islands. Arguably, the carriers can only be justified for use in a world war but are they not going the way of the battleship? A strong, belligerent power could sink these costly, highly vulnerable leviathans at the press of a few buttons. It took only 12 bombs to sink the four Japanese carriers at Midway, a battle that turned the tide of war in the Pacific.

It would be charitable to think that the admirals' lucubrations were inspired by over indulgence in horse's neck cocktails and pink gins. The reality is, alas, that the military mind is rarely original, often lacking in a comprehensive view and tinged with vanity.

Alas, vanity also afflicts politicians, not least at the top. It should worry observers when they hear a British Prime Minister remark: "Britain has traditionally punched above its weight in the world and we should have no less an ambition for our country in the decades to come." A more sober response came from a senior Whitehall official: "We will punch above our weight? Well, we will punch our weight." Long suffering taxpayers will hope so but David Cameron has promised that defence spending will increase in real terms in the years after 2015 if he is re-elected, much to the relief of defence chiefs but to the potential dismay of voters who thought the coalition government would be fiscally responsible, unlike the profligate labour government it replaced.

The Royal Navy will also be pleased in some quarters that the Trident submarine replacements will go ahead, albeit delayed by up to five years to save money. It seems that they are to have fewer launch tubes and that the Defence Secretary, Liam Fox, has won his battle with the Treasury to have the Trident renewal programme ring-fenced from the MoD's core budget. Yet this programme is far more costly than the two aircraft carriers, with lifetime costs of £100 bn, and possibly very much more if America cuts back on the number of its nuclear-armed submarines to be ordered.

In economic terms the scrapping of Britain's submarine-based nuclear deterrent makes sense, though that does not mean it would be wise to drop the deterrent entirely, at least for the present. There are much cheaper alternatives, like land, sea and air-launched cruise missiles, the velocities and ranges of which can reach over 3,000 mph and 2,500 miles respectively, which would put all cities in belligerent nations within reach.

Ultimately, however, it may be a far off, land-locked country which knocks economic sense into UK politicians and military chiefs. It seems that the UK will not be able to undertake a military deployment of the kind seen in Iraq and Afghanistan for some time owing to defence cuts that will see some 42,000 job cuts by 2020. That far off land is Afghanistan, where logistics, economics and an ideal guerrilla warfare terrain all work together in the Taliban's favour. That war has already cost Britain well over £11 bn, with nothing to show for it, and as explained in my earlier blog headed "Logistics will be Britain's Afghanistan Calvary" the resolution of that struggle can only leave the coalition forces exiting the country less than fulfilled.

Tuesday, 28 September 2010

Somali piracy may cripple global logistics

Rarely, if ever, in the annals of piracy have so few cost global logistics so much as the 1,000 or so Kalashnikov-toting Somali pirates. And rarely has the international response been so supine and dismissive that, in earlier times, would have appalled and shamed less spineless generations in dealing with an age-old crime.

At the IMO London offices' handover of a piracy petition on World Maritime Day, September 23, David Cockroft, general secretary of the ITF (International Transport Workers Federation), chastised the majority of those who make most from shipping for "doing little or nothing." But are the ship owners themselves contributing to the crisis, helped by the insurers, because they have adopted the 'calculated risk' approach which arguably is much cheaper than a final solution to the problem?

The anti-piracy petition, bearing nearly one million signatures, is the centrepiece of a campaign to persuade all governments to commit the resources necessary to end the increasing problem of Somalia-based piracy. It calls for:
1) Dedication of significant resources and work to find real solutions to the growing piracy problem,
2) Immediate steps to secure the release and safe return of kidnapped seafarers,
3) Work within the international community to secure a stable and peaceful future for Somalia.

The stakes are high and will simply get higher without effective action. In ransom monies alone an estimated $150 million have been paid to pirates and extra insurance premiums cost at least $400 million more annually. Then there are the increased crew costs while they are transiting the pirate zones plus the warships on patrol. All that, however, pales into insignificance against damage to the global supply chain, which may even cripple just-in-time (JIT) practices. On top of all this is the cost in human misery. Some 1,500 crew members have been taken hostage and kept in squalid conditions since 2008, at least 36 have been murdered, and currently 354 seafarers remain detained along with 16 ships.

Many ships, particularly oil tankers, are being re-routed via the Cape of Good Hope. An idea of just how costly re-routing a super tanker is on a liner trade for the Europe-Far East route can be gauged by the fact that it would raise costs by $89 million per year. Multiply that many times by the number of tankers bypassing the Suez Canal and the cost would soon reach billions for shippers. Yet this solution, if it could be called that, is apparently favoured by the International Federation of Shipmasters' Associations (IFSMA).

In an exclusive interview with Captain Bjorn Haave, vice-president of IFSMA, this writer was told that the whole area should be closed to shipping except to ships that have to go into ports in the area, escorted one by one. Such an approach, however, would have appalling cost implications, particularly for Europe, whose economies are geared to JIT deliveries. There would also be incalculable damage to Egypt's economy through the loss of billions of dollars in canal transit fees, which could destabilise the whole country. For a country which has so much at risk, Egypt has, to its shame, shown strikingly little action in deploying its 12 frigates to patrol the infested areas.

Captain Haave is only defending his patch when he says: "I represent the seafarers and masters and I don't think seafarers should be put at risk in the way they are today. They have to keep the area closed until the political situation in Somalia is solved."

Defeating the wisdom of Solomon

The political state of Somalia is the crux of the problem. A failed state torn by conflict for decades, desperately poor and governed by petty war lords in waters muddied by Islamist insurgent groups like Al-Shebab, a peaceful resolution to this problem would defeat even the wisdom of Solomon. Pouring in aid would simply not work without a prior desire by all Somalis to work for the common good. So what other proposed solutions does that leave?

There can be no doubt that shipping lines and their affiliated bodies have a genuine desire to see a prompt end to Somali piracy and the suffering of the 354 seafarers currently held in squalid conditions. Ship owners are also concerned that the impact of piracy will exacerbate the current shortage of skilled seafarers. But all of the proposals that the maritime industry have suggested seem doomed to failure. The piracy petition, for example, called for the the dedication of significant resources but Admiral Mark Fitzgerald, commander of NATO' Allied Joint Task Force Command, Naples, has said: "We could put a World War 2 fleet of ships out there and we still would not be able to cover the whole ocean." It is also questionable about how long the presence of a large naval force could be sustained, given the huge costs at a time when most states face increasing pressures to cut budgets, including the military kind. Instead, he advocates the arming of civilian ships in the Horn of Africa. Convoying has been suggested as a solution but this would be unattractive to shippers because it would be uneconomic and impractical.

The arming of merchant vessels has also been mooted and could be undertaken in different ways. One option would be to put armed security teams on board vessels. This has already been done, particularly on ships considered at high risk, but it has been said that, given the low risk of hijack, stationing security teams on all vessels would not be cost effective; all part of the 'calculated risk' scenario. A second and more controversial option is to arm the merchant crews but this has largely been rejected by shipping lines and port authorities because of the added security risks, costs and legal liabilities, all deemed to be too high.

There is, however, a third option, the secondment of weapons-trained naval personnel posing as civilians for use in the pirate zones. This would give some comfort to untrained civilian crews and would be like a return to Q-ships, which had significant success against U-boats in World War 1. At most, such naval guards would require no more than heavy machine guns and light firearms and they would have a huge advantage over pirates clambering over gunwales, where they would be extremely vulnerable.

However much ship owners may eschew the arming of their ships, more and more lines are seriously considering the option unless more is done to protect vessels. The world's second largest container ship line, MSC, is considering the option and working closely with Maersk Lines and CMA CGN. But what more can be done that has any chance of permanent success?

Insurance companies hold the key?

In this writer's view all the mooted suggestions so far can only be temporary at best. Shipping lines have clearly shown that their supine response is governed by the profit motive as enshrined in the 'calculated risk' approach. After all, it is insurance companies who ultimately pay the ransom money but they, too, are doing very nicely out of the piracy because their jacked-up premiums since 2002 far exceed the ransom monies paid. In any event, all these raised costs are ultimately passed on to hapless consumers. On account of this, when told that the insurance companies seemed under no pressure to bring their undoubted influence to bear, Captain Haave, of IFSMA, said: "I agree with you." His contention is that if insurance companies stopped insuring voyages through the pirate-infested waters most ship owners would re-route via the Cape of Good Hope, which would make voyages much safer. That said, however, they could then be attacked by Wast African pirates.

The current arming of merchant ships, preferably by trained naval personnel, deserves to gain ground. Shamefully, however, when pirates are caught they are often released without charge, sometimes within hours of capture, to resume their depredations. This clearly must stop. With a growing sense of immunity, Somali pirates will only be emboldened to raise the stakes, risking a human and environmental catastrophe at sea, not to mention staggering global economic damage. Alas, therefore, logic inescapably points to a military solution in the known pirate ports.

The current wave of piracy is primarily motivated by the desire for financial gains and exacerbated by lack of good governance and high poverty levels. Illegal fishing by foreign countries and dumping of toxins in Somali waters, for which Somalis themselves must share some of the blame through their own bad governance, may have played some role in turning to piracy during the early days but the current level of piracy cannot be explained by such activity. Rather, piracy has become a lucrative business, generating huge incomes, which Somalis are unlikely to give up unless military action no longer makes the game worth the candle.

There is, of course, a problem with such a response -- the safety of the 354 crew members still held hostage. These numbers will decline to zero provided that the ransoms are paid but it is essential that no further ships are hijacked and that is where the armed merchant vessels must play a role. An alternative might be well-planned Entebbe style rescues. When it comes, as is likely, any attacks on pirate ports should be aimed primarily at the fishing vessels large enough to act as mother ships. The tragedy of this, of course, is that innocent fishermen's vessels could suffer along with the guilty, as there are no more than an estimated 600 to 1,000 Somali pirates. But would it not be a far greater tragedy still if Egypt and other countries were destabilised by adopting an indefinite exclusion zone around the Horn of Africa?

The reason no military action has yet been undertaken on shore stems from political rather than legal constraints. The UN Security Council resolution 1851, in fact, authorises military action against piracy on Somali territory. If the piracy problem persists or, more likely, worsens, such escalatory steps would look increasingly more plausible and pressing. There are historical precedents which show that the application of superior force against piracy, the only language that all pirates respect, can work well. In 1816 and in 1824 the bombardment of Algiers by British and Dutch fleets forced the release of 1,000 Christian slaves unharmed and broke the hold of the Barbary pirates permanently.
This story first appeared in Bob Couttie's Maritime Accident Casebook, for whom this writer is the UK correspondent, under the headline: Piracy: Is closing Africa the Answer?

Tuesday, 14 September 2010

Ireland's shameful role in migrant fishermen exposed

A complaint to Ireland's Broadcasting Commission over an Irish television series called "Skippers" has exposed deeply-ingrained abuse and illegalities in the country's trawler fishing industry that would have brought shame even in the pre-industrial era. The complainant is the International Transport Federation who believe that RTE, Ireland's national television and radio broadcaster, showed an indulgence to the Irish fishing industry in stark contrast to what is happening in Britain. It goes further by saying: "We believe that the block on cleaning up this appalling situation is at the political level and reflects the power of the fishing industry in Ireland, as indeed does the sycophantic documentary broadcast by RTE."

But how bad are the infringements, is RTE being unfairly pilloried and who is ultimately to blame for the exploitation of non EU nationals, many of whom are working illegally? In its defence, RTE claimed that it was 'an observational documentary series' and that it could not be expected to cover every aspect of the conditions on the trawlers in a few episodes. It would also be naive for viewers to expect hard-searching questions from RTE on issues of badly-treated illegal migrants as the skippers would clam up and prevent any more trips by cameramen. There has also been a similar television series in Britain called "Trawlermen", and it seems no such awkward questions were asked on that series, despite the fact that Scottish trawlers are also up to their necks in migrant abuse and illegalities. A whiff of double standards, perhaps?

Examples of shabby abuse claimed by ITF are many and serious. Ken Fleming, ITF's inspector for Ireland, says that in his experience helping fishermen, particularly non EU nationals working illegally and who form a high proportion of the workforce, "the industry is rife with exploitation." Illegal crew members have been dumped on quays without any pay to make their own way home, he says. Others have been seriously injured, spending months in hospital, while many were grossly underpaid. They live in cramped conditions on land in caravans or sleep on board because they cannot afford to pay the rent, says Mr Fleming. There have even been cases where foreign migrant workers expecting to work on deep-sea cargo ships on three or six-month contracts have been shanghaied onto Irish fishing vessels even though they have had no training on trawlers, and so pose a risk to themselves and other crew members. "When we met the fishing industry owners," said Mr Fleming, "they actually refused to contemplate paying the national minimum wage. It appears that they enjoy immunity from the laws that apply to the rest of the community. Fishermen, many of them non-EU nationals working here illegally, are picking up the tab by working in hazardous and harsh conditions on our behalf."

Pusillanimous Government?

There seems to be some justification for the claim that the Irish Government is foot dragging because it does not want to offend a powerful industry. As ITF explained, back in 2008 the then Department of Enterprise, Trade and Employment drew up regulations to govern the Irish fishing industry. ITF received the impression that these regulations would be introduced shortly to ensure workers were treated in a fair and humane way. Nothing was done.

There is no doubt that the Irish fishing industry is a powerful one, employing 11,000 workers at sea, which has been stable since 1997. If UK fishing figures are any guide then the 11,000 fishermen support 10 times that number of land jobs. Their fishing fleet has actually grown to almost 2,000 vessels, up from 1,800 in 1997, while at the same time the overall EU fishing fleet has fallen by about 20%. Between 1954 and 2004 the total volume of fish caught in Irish waters rose from 160,000 tonnes to 530,000 tonnes. Irish boats now catch about 25% of fish caught in Irish waters, up from an average of 16% in the 1970s, and currently Irish fish exports are worth about Euro360 million.

These figures are in stark contrast to what has been happening in Britain, where currently only 12,700 fishermen support about 10 times that number of land-based jobs. Between 1973 and 2006 the UK catch fell by 45% and in 2007 its vessels landed 610,000 tonnes of fish, including shellfish, worth about £645 million. These figures show the much greater, relative importance of fishing to Ireland's economy and suggests that conditions are not such that Irish trawler owners are hard pressed by declining incomes and therefore have no excuse to underpay illegal migrant workers who are too frightened by their status to raise objections.

Ireland has done relatively well out of the Common Fisheries Policy (CFP) since joining the EU but that policy has been an indisputable catastrophe for Britain's fishing industry and the economy. According to a comprehensive investigation by the Taxpayers Alliance, the total annual cost to the UK of the CFP is £2.8 billion. It could also be argued that the CFP has been an unmitigated failure and obscenely wasteful, as by the EU's own admission between 40% and 60% of all caught fish is dumped dead, owing to quota regulations. In some trawl fisheries the dump rate is 70-90%.

British trawler owners could be said to have a much greater grievance than Irish owners and therefore a higher incentive to cut corners and abuse foreign crews to improve profitability but to the authorities' great credit the UK Border Agency began a massive crackdown on similar abuses after fishing boat owners and operators failed to respond to an amnesty. They now face fines of up to £10,000 or two years imprisonment if they continue to ignore regulations. Owners, masters or agents caught bringing in non EEA crew into the UK intending to use them in breach of the law may also face prosecutions for facilitation, which carries penalties of up to 14 years imprisonment and an unlimited fine. The concessionary visa arrangement was in effect a three-months amnesty introduced in March 2010 that would allow up to 1,500 migrant fishermen working illegally in British ports to be registered with the authorities and thus be allowed to work legally until September 2011, provided they received proper employment contracts.

MAIB rebukes MCA over fishing accident

A serious accident on board the beam scalloper, Olivia Jean, on October 10, 2009 has not only revealed abuse of unqualified, sleep-deprived crew, three of whom were Ghanaians, but shows shortcomings in the Maritime and Coastguard Agency's administration of survey and inspections, despite a previous internal review, says the Marine Accident Investigation Branch (MAIB). It also found that the main trawl wire which had snapped, not for the first time, was not subject to inspections under LOLER. Consequently, there is a need for the fishing industry's exceptions to compliance with LOLER to be reviewed. Following this, the guidance on LOLER and PUWER to both surveyors and the industry should be clarified to ensure that lifting and working equipment on board fishing vessels is properly maintained and surveyed. MAIB also suggests that to reduce the risk of fatigue-induced accidents the fishing industry's extensive exceptions from the working time regulations should be reviewed to ensure that the risk of crew fatigue is properly controlled.

MAIB believes that a policy change within the MCA is required to improve fishing vessel standards and fishermen's occupational safety. "While safety remains the owners' responsibility," says the report, "MAIB believes the deep-rooted failings in the MCA's procedures require significant policy changes to improve fishing vessel occupational standards and to ensure the safety of fishermen."

For long now, fishing has been the most dangerous of occupations, but the deep-seated greed of many trawler owners is now adding to the risks of injuries and deaths and nowhere is this more glaring than among Irish trawler operators. Back in the 1930s Ireland was roundly condemned for its filthy trade in live horse exports. Must it now be condemned for its filthy trade in migrant fishermen?
This story first appeared in Bob Couttie's Maritime Accident Casebook under the headline: "Ireland's trawler fishing shame exposed"

Thursday, 26 August 2010

Sexual shame before the mast

In the South African village of Nxarhuni, Eastern Cape province, a freshly-dug grave marks the last resting place of Akhona Geveza, a 19-year old female officer cadet just short of qualifying as a navigation officer. Ordinarily such a grave would have passed unremarked but this is no ordinary grave, for it exposes a deep canker that infects and shames much of the world's mercantile marine. That shame is sexual abuse, often by officers, including female rape and sodomy. The lash may have gone but rum and sodomy remain deeply ingrained, to which must now be added the growing scourge of rape, despite the attempts by organizations like Nautilus International and ITF to eradicate the shame.

An only child and hope for her unemployed parents, Akhona Geveza was found dead on June 24 floating near the port of Rijeka, Croatia, after her ship's captain raised the alarm on board the British-registered container ship, Safmarine Kariba. Suicide is suspected but murder has not been ruled out by the South African police who are conducting their own enquiry.

The South African newpaper, The Sunday Times, reported that Akhona Geveza alleged being repeatedly raped by the ship's Ukranian chief officer but was reluctant at first to report the issue to the captain because, according to a fellow female confidant on board, she feared that she would not be believed. When she finally complained to the captain he immediately confronted the chief officer and convened a meeting with him and Geveza for 11 a.m. When she failed to arrive, a search was conducted, and following the discovery of pills and thinners in the foc'sle, the captain raised the alarm. Safmarine ordered the chief officer to be relieved of duty.

Akhona was one of over 100 young South African women to have gone through the Transnet National Ports Authority's maritime studies program as part of the campaign to encourage young women to become seafarers. In a sense, she was a pioneer in a male-dominated industry and her tragic and suspicious death risks setting back the issue of equal opportunities by decades, warns Mark Dickinson, general secretary of the maritime officers' union, Nautilus International.

Some 10 years ago Nautilus issued its own report, Fairplay, which showed serious problems of sexual harassment in shipping. Although only 35 questionnaires were returned, a response rate of 13% and therefore deemed not be be statistically significant, it nevertheless confirmed findings of other surveys and research that had been carried out by the ITF and the Seafarers International Research Centre at Cardiff University. The report revealed "alarming levels of sexual harassment," with over three quarters replying that they had suffered sexual harassment at sea. This included unwelcome physical contact, leering and rude gestures. Half of respondents said that the harassment affected their morale and 38% their health and safety.
As a result, the union developed equal opportunities policies with the UK Chamber of Shipping and these have been subsequently taken up across the European Union.

The 10-year old report, however, is revealing in that there was no mention of the most serious sexual offence of rape. Following the story of Akhona's death, other Transnet cadets have come forward alleging male and female rape, bullying and harassment. Speaking under conditions of anonymity, several cadets told South Africa's The Sunday Times that there was systematic abuse of power by senior officers who threatend cadets' careers if they did not perform sexual acts. The sex abuse allegations include claims that two male cadets were raped by senior officials while at sea. One female cadet terminated two pregnancies following alleged rape and three female cadet trainees were made pregnant by the end of their 12-month training stint. One male cadet was sent home a month before finishing his training program because he refused to have sex with a senior official.

This form of blackmail, i.e. the threat to cancel cadets' contracts, is probably what keeps many more cadets from coming forward to expose shipping's hidden vices. It is all part of the odious marine culture which says the captain is God, that the sea is no-man's land and that what happens at sea stays at sea.

Spurred by the failure of the industry to clean up its shameful act, Nautilus International is reviewing its existing arrangements for enabling members to report problems on board their ships and has approached the Chamber of Shipping to discuss ways in which the industry can reassess its equal opportunities policies and to ensure lessons are learned from the case of Akhona Geveza. "We have a 30% wastage rate among young people entering this industry," said Mark Dickinson, "and we really need to make it very sure that bullying and harassment and discrimination are not tolerated in shipping and that all seafarers, regardless of sex, sexual orientation and race are not treated in ways that were not even acceptable 100 years ago." Nautilus is also calling on the UK Transport Minister and Home Secretary to highlight the need for Britain to play a leading role in the criminal and accident investigations.

Akhona Geveza's tragic death marks the tip of a very ugly iceberg but if her case can galvanise the marine industry to clean out its Augean stables her death will not have been entirely in vain.

Thursday, 5 August 2010

Recession exposes Just-in-Time failings

Just-in-Time (JIT) supply chain practices have done much to make manufacturing leaner and financially fitter and although the problems of and solutions to JIT interruptions have been well documented from the outset there is, perhaps, one aspect no experts have warned about. This is the impact of a sudden, global recession on suppliers and the lack of support for them from leading manufacturers. Such a scenario is now unfolding as suppliers are unable to meet the demands of leading manufacturers experiencing an upturn, and thus threatening to delay the nascent global recovery. Ultimately, there can only be one solution to this problem -- the elimination of violent, cyclical swings in the global economy through better governance to excise the casino-style mentality that the financial industries and acquiescent governments have wrought upon the world in recent years.

It has been said that JIT mainly benefits the leading manufacturers, who have effectively offloaded their costly stock holding problems onto their suppliers. This is not entirely true as some leading producers have helped their suppliers to become leaner through better logistics practices but there is some justification for the accusation, though less so for Japanese producers whose Keiretsu arrangements protect suppliers.

In the current downturn, leading companies were quick to turn off the tap, which caused suppliers to cut back sharply on capacity or go out of business altogether. Now that demand is picking up again, leading manufacturers are plagued with shortages of parts, particularly from the electronic component makers. The problem is worse than in previous recessions since many large companies have outsourced their parts supply, putting the onus on suppliers to raise deliveries more so than in the past. A good example of how this can trip up manufacturers is the recent strikes in China which disrupted supplies and output at Honda & Toyota's Chinese plants.

There is, however, another problem holding back suppliers. This is the apparent reluctance of banks to lend to manufacturers at acceptable interest rates. American small businesses, for example, are having to pay more to borrow relative to the Federal Reserve's benchmark rate than at any time in the last 25 years. To be fair to banks, they may only be trying to restore their financial strength as quickly as possible because many have still not come clean on their exposure to bad commercial property loans and huge, multi-billion pound potential losses from loans to shipping lines, most of whom are probably bankrupt.

Supply chain companies may also be reluctant to invest heavily in new capacity to meet rising demand because of volatile, uncertain, global economic conditions. China's vigorous growth rate appears to be faltering and the impact of government spending cuts across Europe and the dreadful US housing market has still be be felt.

A double dip in the global economy, expected by many, may well ease the supply chain deliveries problems but companies, nevertheless, are now committing JIT sacrilege -- stockpiling scarce components as a buffer in case supplies run out. The leading producers, however, are now beginning to realize that they should have paid more attention to their supply chain partners, at least towards their tier one suppliers. This could involve extending easy credit terms to suppliers who feel that they are being fleeced by their traditional lenders, a common practice in Japan.

Ultimately, however, governments and business institutions must work more together to smooth the economic cycle, and above all that means trammeling the greed culture which has seen so many financial institutions throw caution to the winds. As ye sow, so shall ye reap.

Tuesday, 20 July 2010

Will Trident sink blue sea Royal Navy?

The current wrangling between Britain's Treasury Department and the Ministry of Defence (MoD) over defence cuts will decide the fate of the Royal Navy's blue sea capability, and by extension the safety and rule of law on the high seas. The stakes have been raised recently because the Treasury ministers are now saying that the MoD must fund Britain's nuclear deterrent, embodied in the £20 billion renewal of the Trident submarine defence system, from within its own core budget, currently running at about £35 billion a year.

Liam Fox, the Defence Secretary, insists that the Treasury must stick to a commitment made by the last Labour Government, that the nuclear deterrent is of special strategic significance and that the cost of renewing it, therefore, must be ring fenced from spending on conventional defence equipment. If not, then the MoD claims that within 10 years the Trident replacement programme will absorb a huge chunk of the equipment budget, about 25%. This would mean a hugely skewed defence structure, dominated by two aircraft carriers, fast jets and Trident.

The problem is not just a shortage of money brought on by the credit crunch, oxygenated by a global, casino-style environment. It is also a function of a globalized economy in which money moves at electronic speed and punishes those deemed to be financial delinquents.

For Britain, in some ways still cursed by its imperial legacy, the problems are greater than for other countries. It must decide if the wellbeing of the economy and the approval of foreign creditors, who could so easily pull the plug on Sterling, are more important than a defence commitment to replace the ageing Trident nuclear submarines. If the decision to go ahead with the costly Trident replacement prevails, then the Royal Navy's blue sea capability will almost certainly be seriously impaired, if not reduced to a brown sea navy status confined to protecting home shores.

The jury may still be out on whether Britain still needs a sea-borne nuclear deterrent in a post cold war environment but what cannot be in doubt is that such a costly project, if approved, will cost far more than current estimates. Such huge capital projects involving taxpayers' money invariably over run substantially and the MoD is the least reliable department to trust on estimates. A department that has had its accounts qualified for three successive years and has lost track of over £170 million of battlefield radios, can surely never be trusted to come clean.

Other bodies, like Greenpeace, believe that the Trident replacement bill will be at least £34 billion once costs like VAT are factored in. Nick Clegg, the coalition government's number two, claims that the lifetime cost of Trident will be £100 billion for a defence system that he claims no longer meets Britain's needs.

There is, however, another costly fly in the ointment. Critics argue that Britain is so technically dependent on America that, in effect, Trident is not an independent system. The British Tridents, for example, are serviced in a Georgian port and the warhead components are also made in America. But the United States Government, like Britain's, is also looking at its defence budget because its own economy is, in some ways, messier than Britain's. The US navy plans to build 12 new submarines to replace the Ohio class nuclear submarines that carry the Trident missiles but the US Defence Secretary, Robert Gates, is expected to challenge these plans, which could cost up to $80 billion. Up to another $120 billion could be spent on 60 of America's latest guided missile destroyers. If cuts are made to America's proposed submarine nuclear deterrent then, owing to Britain's dependence on the US, this could raise UK costs hugely.

Given the parlous state of Britain's economy, logic suggests that the case against replacing Trident is overwhelming on economic grounds and therefore economics should overrule politics.
There are precedents on what harm profligate military spending can do to economies, from which not even super powers are immune. Was it not the threat of an American star wars defence shield which finally forced Russia into a rapprochement with America because the cost of developing its own such shield would have been cripplingly expensive? And did this not lead to a partial dismantling of its nuclear capability?

Britain's former First Sea Lord, Sir John Slater, believes that submarine-borne nuclear weapons are the best means of deterrent because they are almost undetectable under water. If that was ever true it is far less so today, as some nations have sea bed listening devices capable of tracking submarines over vast areas. There are also other weapons, extant or under development, in national arsenals capable of killing whole populations but at far lower costs than nuclear weapons, such as biological* and weather warfare through projects like HAARP.#

This is not to argue that Britain should relinquish all of its nuclear weapons now. Rather, it should examine ways and means to a much cheaper nuclear stance, perhaps based on cruise missiles launched from mobile platforms, despite being much slower than Trident, of shorter range and more prone to effective counter measures.

The problem for the Royal Navy in parlous economic times is that if Trident is not scrapped, whether ring fenced or not from the MoD's core procurement budget, it is hard to justify a Royal Navy without a reduced blue sea reach. The two costly aircraft carriers now on the stocks will preserve some of that reach but they will have no impact on the navy's splendid work, for example, curtailing the Caribbean drugs trade or piracy wherever it rears its ugly head. That would be tragic for safety issues on the high seas. The go-ahead for Trident could also spell the end of at least one naval dockyard, with Portsmouth and Devonport the most likely contenders for closure.

*Although biological weapons are subject to a global ban, many countries have not signed up to it.

#High-Frequency Active Aural Research Programme. Run by the US air force and navy, it is the Pentagon's main weather warfare programme. It constitutes a system of powerful antennas capable of creating controlled local modifications of the Ionosphere.


"When might is right money takes flight"

Saturday, 10 July 2010

Logistics will be Britain's Afghanistan Calvary

Afghanistan is a harsh, arid, unforgiving land, prone to temperature extremes, two thirds mountainous and honeycombed with caves -- ideal guerrilla warfare terrain. As if these natural advantages were not enough for any home-grown insurgents, the Taleban have one other great advantage -- their enemy's logistical problems, the cost of which could break the coalition forces' will at a crucial time when nations must tighten their belts as the world faces another, possible financial meltdown.

Earlier this month, Britain finally came clean on the cost of its 9-year Afghanistan war. Between April 2001 and March 2010 Whitehall figures show that tax payers stumped up £11.1 billion for Afghanistan and currently about 30% of Britain's £35 billion annual defence budget is devoted to that country. Such a staggering cost, however, does not include troops' basic salaries or long- term care for the seriously wounded. And the payback for such a war? Over 300 British dead, many permanently maimed and traumatised, with suicides certain to follow, and a conflict that is worsening almost daily, along with commensurate cost rises.

Wars are often sparked by unexpected international incidents and the reactions hasty and poorly thought through. If the American and British governments had carefully considered the logistics of fighting in a distant, land-locked country, surrounded by friendly neighbours or others suspicious of America, and recalled the lessons of history then events might have taken a more sensible turn.

History is important but only if its lessons are learned by subsequent generations. Over the last 170 years Afghanistan has humiliated two super powers, Britain and Russia, by sending their invading armies packing with their tails between their legs. In both cases, the combination of natural and logistical forces crucially forced their humiliation. In 1842, the British retreat of 16,500 during a horrendous winter, harried by Afghan attacks in the passes, massacred all but one survivor. Would a British public tolerate such losses today? Hardly. In the 1980s, attacks on Russia's stretched supply lines in perfect, mountainous, ambush country played a major role in their defeat, helped, admittedly, by stingers.

Land-locked but sinking the Royal Navy

The military mind, alas, is rarely original and often blinkered on subjects outside their remit and so we have fatuous cases of top service chiefs griping, for example, about cutbacks in the Royal Navy while insisting that Afghanistan must still be the MoD's top priority. The former First Sea Lord, Sir John Slater, berated the outgoing labour government for a decade of underinvestment which "has left the Royal Navy with a serious shortage of ships."Any further cuts, he warned, would lead to "an enormous strain on the service." He was particularly concerned at the decision to halve the number of type 45 destroyers. Labour said it had to make Afghanistan its priority and could not afford to pay for the number of ships in service. Sir John agrees that Afghanistan must be Britain's top defence priority but seems unable to grasp that Afghanistan is part of the Royal Navy's underfunding problem. Can Britain really afford an Afghan war while at the same time properly funding the navy during severe financial belt tightening?

The incumbent First Sea Lord, Sir Mark Stanhope, is similarly fighting his corner for a properly funded navy, arguing that: "Maritime capabilities are not a luxury, they are a necessity."Agreed, but he, too, should recognise that you cannot have it every way with limited resources and a worsening economic climate. The British electorate is being asked to make huge sacrifices and as Bob Crow, general secretary of the Rail, Maritime and Transport Union said, ministers could not cut jobs and services while the "grotesque waste of money in Iraq and Afghanistan dominate spending priorities."

The grotesque waste of money can be gauged by a look at the logistics of the Afghan war, but first the military reality. The occupation has failed to suppress an insurgency that has significant popular support. Even with the extra 17,000 US personnel promised there will still be less than 90,000 US and Nato troops. Given the size and population of the country, military analysts estimate that a force of up 500,000 would be needed.

President Obama has admitted that the US is not winning the war in Afghanistan. Even in Pakistan, the operations of 100,000 Pakistani troops have failed to break the Taleban's grip.
The coalition forces cannot hope to engage the Taleban in pitched battles, much as they would like to. It is not that kind of war. This means that the use of superior weapons, which in some wars was decisive and even changed the course of history, like the needle gun and Krupp steel cannon, is not an option.

The $105 billion bill so far

The logistical scope of resupplying US forces in Afghanistan is immense. There are currently nearly 400 US and coalition force bases in the country. The Pentagon has said that there are now 87,000 US troops alongside 47,000 troops from 44 other countries. The number of contractors to the US military is a staggering 107,000. By the end of 2010 fiscal year, Afghanistan will cost nearly $105 billion.

Examples of obscene waste can be judged at specific levels. The cost of airlifting one Stryker brigade of 3,900 men and all its vehicles is $210 million at a cost of $14,000 per tonne for all the 15,000 tonnes needed. Transport by rail through Russia would only be $500 per tonne, or just $7.5 million.

America is looking at other supply routes than through Pakistan, where currently 75% of supplies pass through the port of Karachi. But this involves a treacherous, 1,200-mile road journey taking in the Khyber Pass. In just one attack in 2008, 42 oil tankers were destroyed. "The idea that you can wage an effective military campaign in this land-locked country without safe and dependable logistical support is crazy," one US Defence Department official at the policy-making level was heard to have remarked.

But whatever 'safe' routes may be negotiated it is clear that a determined, fearless, war-hardened Taleban, whose per capita support costs are less than one tenth of American troops, with logistics problems working in their favour, will stymie a coalition victory. National cohesion will only come through a political process. The recent announcement of up to $2 trillion worth of mineral reserves in Afghanistan may only serve to lengthen the endemic conflict. But if all Afghans could agree to adopt good governance of the people and by the people as one unified nation, eschewing petty sub nation differences, then a golden age would beckon.
"Before the fighting proper, the battle is won or lost
by quartermasters" -Erwin Rommel

Thursday, 10 June 2010

Palletised Networks Could Save Billions

Logistics costs in Western Europe roughly accounted for 6% of sales in 1995*, and is unlikely to have changed much since then, yet means that exist to cut those costs sharply are still largely ignored or misunderstood. A glaring example is the pallet exchange shared network, a concept exploited in Britain for the last 18 years. Within the logistics sector, transport soaked up 1.75% of sales but for France, a relatively large country with a scattered population, it was 3.5%. Revealingly, however, for medium-sized firms it was 4.5% and 2.75% for small firms. This shows how much scope there is for cuts when SMEs, in particular, switch over to shared pallet networks.

In the early stages, the hub and spoke principle behind this shared network concept was confined to 1-6 pallet loads per consignment, which network member hauliers would deliver to a central hub for decanting and reloading onto other member companies' vehicles to trunk back to their regional depots. The great advantage was that vehicles could make outward and return journeys fully loaded, rather than run empty one way. This greatly impacts costs, the environment and even safety. So why is it then that, according to Palletforce, a major network player, that there are still many business leaders who do not understand or know about the benefits of shared network, palletised freight distribution, which last year accounted for only 10.5 million pallet movements in the UK?

The answer seems to be a lack of identity, so much so that businesses often mistake such operations for pallet manufacturers! A more intelligently-honed and robust marketing exercise nationally may be needed to break down the ignorance barrier. The current recession, however, may give a push in the right direction as it is making businesses focus more on their supply chain costs and there is a growing realization that pallet networks offer a viable alternative to inhouse/dedicated solutions, says Pall-Ex, another major network player.

Since the early days, the palletised shared network has branched out in may directions and invested heavily in IT systems to make operations slicker and more profitable and, unwittingly, perhaps, much safer in ways that the industry little imagines. Today, the networks offer full, half, quarter, micro pallet distribution and even ugly pallet loads that do not fit in with the rest of the load. Delivery service choices vary from express next day to 2-3 days.

Security investments, like CCTV and product tracking throughout, are also widening the market, believes Fortec Pallet, so that high value goods, for example, hitherto considered unsuitable for pallet networks, can move with owners' full confidence.

Many network users also look for green initiatives and so Pall-Ex developed Eco-Drive, which uses in-bound vehicles to take back recyclable waste rather than using a skip and separate waste vehicle. At the hub, the waste is baled and Pall-Ex's partner in the scheme, The Green House, collects them once there is a full load for recycling, thus avoiding landfill sites.

The networks have also taken on the big third party logistics (3PLs) companies by offering much more than a mere haulage operation. This includes storage, re-packaging, order picking, sorting, direct line side deliveries on trolleys or in roll cages and overseas haulage.

This British pallet network model is undoubtedly exportable, which can be refined to reflect individual national conditions, believes Pall-Ex. Already Pall-Ex has tied up with an Italian partner, Alberti e Santi, and has now decided to take its model to the Iberian peninsula, Poland and the Benelux countries. Extensive market research confirms that similar supply chain demands exist at different stages of evolution in other European economies.

Pall-Ex believes that the green issues will convince responsibly-minded corporations that pan-European pallet networks are the answer to reducing the carbon footprint of the logistics industry on a national scale.

Other companies, like Palletforce, are using IT investment harnessed to forklifts not only to improve efficiencies but also safety on roads and sea. One innovative example is a new scanning and dynamic axle weighing solution, claimed to be the first in Britain. This allows every pallet to be tracked and traced from the moment it enters the hub. When a forklift touches a pallet, a laser beam reads its barcode to transfer the information to the IT server, including the weight, performed by the forklift's weigher. The server then instructs the forklift driver to go to an appropriate outbound loading bay --a good example of cross-docking. As the pallet weight is known, the forklift driver can load it correctly onto the top and bottom decks of the outbound lorry. This maximises the weight that can be safety loaded and so eliminates issues of overloaded vehicles.

There is, however, a potentially far more important safety issue, given the development of integrated European-wide pallet networks using sea-borne containers or trailers. For many years, container stuffers/consignors have deliberately under declared their container payloads to swindle shipping lines and governments out of billions of pounds every year. When the MSC Napoli container ship was beached on a Devon coast several years ago it was found that 20% of the above deck containers were at least 3 tonnes heavier than was declared and in one case, 20 tonnes. This has grave consequences for ships' safety, given the need to avoid adverse stability and hull stress issues, and was a major factor in the Napoli's foundering.

Container shippers know that they can get away with overloading so easily because there is, as yet, no requirement in European ports to weigh containers. Instead, ports take on trust the shippers' payload declarations. Mandatory weighing will come at ports but meanwhile Palletforce customers shipping trailer loads overseas can do so knowing that they are complying with the law and safety issues. When such port weighing is mandatory it would make sense for container stuffers to use their own forklift-fitted weighers, rather than wait for a port operator to 'phone them to sort out their overloaded containers, which could mean missing sailing times.

Most, if not all, pallet network members now use double deck vehicles, a still, as yet, underused way of transporting goods efficiently. These vehicles can carry 67% more goods than single deckers and so cut down the carbon footprint and wasted money. UK road congestion alone is estimated to cost £25 billion a year. They do, however, require special handling equipment at depots, usually scissor lift deck pods at loading bay doors, as ordinary dock-levellers could not cope.

The good news with double deckers is that there seems to be, at last, a sharply rising uptake of their palpable advantages. How much longer it will take for Europe to realize the huge benefits of palletised exchange networks is anybody's guess, but the longer it takes the more billions of pounds will be lost annually.
*European Logistics Comparative Costs and Practice 1995. Institute of Logistics, Corby, UK

Thursday, 20 May 2010

Good Governance Must Prevail

When people begin to doubt their nations' debts then the end game is much nearer than one supposes. If polls are to be believed, this is the disturbing, unfolding scenario that could face all industrial and trading nations. A recent Financial Times/Harris poll of over 6,000 respondents found that Europeans and Americans see a plausible chance of their countries defaulting over the next decade. The French are the gloomiest, 53% of whom believe it is likely that their government would be unable to meet their financial commitments within the next 10 years. At 46%, the Americans were not far behind. German pessimism over the future of the welfare state was acute and lent support by their Chancellor, Angela Merkel, who proclaimed: "We cannot live beyond our means forever." Jean-Claude Trichet, European Bank President, lent solemnity to the issue when he told the German magazine, Spiegel, that doubts being cast over Governments' credit worthiness "is a problem for all industrialized countries."

There is, of course, no one simple cause of the global fall from financial grace if, indeed, there was any such grace in the first place, and nor is there any one simple solution. But just as bad governance, both of the people and by the people, is the root cause of the angst, so, too, good governance could still win the day and avert catastrophe.

Politics and economics are inextricably entwined, and in any struggle between the two it is the former that will castrate the latter and so render it ineffective. Yet, ultimately it is economics that will humble nations over the full economic cycle, leaving a desolate trail of unimaginable misery, and all because there was no good governance by all.

So why is there inadequate governance? In a word, greed, at any and every level. But stupidity is also involved. This writer began to warn in print* four years ago of the dangerous build up of debt and in particular the deep exposure of Britain's banks and building societies to commercial property lending. Of America I warned that the negative domestic savings for a straight 21 months, adopted so that people could pursue their have-it-all-now culture, often based on taking out second mortgages and liar loans, meant that "much higher interest rates than three years ago (2004) now means many borrowers have reached the end of their rope." Then, on January 12, 2007, eight months before Britain's first major bank failure in over 100 years, I wrote: "The Bank of England's rate policy since being spooked by the dot com crash six years ago, aided by overly eager banks to lend irresponsibly, is a major cause of dangerously high national indebtedness. The banks and credit card companies may well pay a high price for their rapacious stupidity through record numbers of strapped consumers seeking voluntary insolvency deals."

If a mere hack journalist can foresee these developments unfolding then readers can be utterly assured that Governments and their financial regulatory bodies also saw it, but to their great indelible shame did nothing to avoid the gathering storm. In this the ratings agencies must also take some of the blame. Their deferential ratings of suspect corporate debt, which were financially motivated rather than by good governance, is a stigma and stench that will linger long. Many investors bought bonds and shares based on such deceptive ratings and are now ruing the day.

It is natural and right for people to seek a meaningful real return on their post-tax savings but governments and their central banks should not encourage people to seek riskier alternative investments owing to ludicrously low interest rates on traditional forms of saving. This is precisely what happened after 9/11 and the dot com bust when the Fed dropped its interest rate to 1%. This unleashed a spending binge, which in Britain most notably led to alternative investments in buy-to-let housing and commercial property, creating a bubble which could only burst, leaving banks and building societies nursing huge write offs and investors' dreams shattered.

Cheap, lax credit also spawned other serious problems, which ultimately led to the American sub prime housing bust, and so ushered in the world's most serious credit implosion since the 1930s. This involved the creation of new financial instruments like collateralized debt obligations (CDOs) packaged by investment banks for fat fees and sold to unsuspecting banks and other financial institutions around the world who relied on suspect ratings by debt rating agencies.

Beware Greeks bearing debts

In Europe, nowhere is the lack of universal good governance more obvious than in Greece. A country in which more than half the middle class reportedly think it their God-given right to evade taxes, Greece is the epitome of lousy governance, both of the people and by the people. Since joining the EU gravy train, Greece has lived far beyond its means, with other countries paying the bills. This has allowed civil servants to draw full pensions at 45 and others in their fifties, which can amount to more than 90% of their retiring salary.

Despite the Greek Government's robust start in moving towards good governance, there remains international scepticism over the Euro 750 billion EU bail out plan to save Greece and any of the other PIIGS nations#. But bad governance is ubiquitous and it ill befits President Sarkozy, of France, to browbeat Germany's Angela Merkel over her reluctance to have Germany remain the paymaster for profligate and corrupt nations like Greece. After all, is the Greek bail out so different from the billions of Euros paid every year to subsidise hopelessly inefficient small French farmers? Hardly. The Common Agricultural Policy is, perhaps, the supreme EU example of lousy governance in economics. Germans are rightly incensed at paying for the sins of others and have shown their displeasure over Merkel's reluctant decision to help the bail out by voting out her party's control of the upper house in recent elections. Other profligate nations should take note.

"Banking establishments are more dangerous than standing armies," declared Thomas Jefferson. Clearly, part of any good governance exercise must now include much stricter controls of banks, be they retail or investment, but not so much that is stifles acceptable enterprise. But there is another issue of global economic importance which denies peoples' aspirations for a better life -- staggering military expenditure. As Sun Tzu remarked in 400 B.C., "Where the army is, prices are high, when prices rise the wealth of the people is exhausted." Perhaps the most striking recent example to support this sage's acumen of costly military spending is the price tag for America's latest destroyers, $2 billion each, of which up to 60 may be ordered. Meanwhile, America's spending on the Iraq war and its aftermath alone has long since exceeded $1.5 trillion, and Britain's former labour government was too ashamed to reveal its costs of the Afghanistan involvement. Such huge transfer payments from taxpayers yields no significant tangible benefit -- only the feeling that it may provide protection from malcontents. Such is the price of people's suspicions of their neighbours, but as a famous general warned at the dawn of the Atomic Age: "It must be of the spirit if the flesh is to survive."
*Warehouse & Logistics News, London
#Portugal, Ireland, Italy, Greece, Spain

"If you are wise, you will dread a prosperity which only loads you with more." Ralph Waldo Emerson

Wednesday, 5 May 2010

Lousy Logistics Wastes Billions

Each year, in Britain and other countries, billions of pounds are wasted through inappropriate logistics techniques, adversarial business relationships and lack of holistic logistics solutions. What, therefore, could be realistically done to drive down those costs while delivering environmental advantages?

There are mainly two kinds of logistics costs -- storage and distribution, and both are pilloried for their adverse environmental impact. Of the two, storage must cost more if only because stocks put money to sleep. The higher the stocks the greater the opportunity cost. There are many simple ways to reduce storage costs and they need not always involve heavy new investment.

Take, for example, a warehouse footprint and how the chosen forklift types and sometimes the racking affect overall warehouse running costs. Fixed warehouse running costs include rents, rates, utilities, insurance, security and maintenance. The variables include materials handling equipment, with fuel, and labour costs.

There are basically four types of forklifts: standard counterbalance trucks, reach trucks, articulated forklifts and dedicated very narrow aisle (VNA) trucks like man up order pickers and combi trucks, and all require substantially different footprint sizes to handle the same, given pallet loads. The most wasteful of these in terms of space usage is the counterbalance truck, requiring typically minimum aisle widths of 3.6 mt and maximum lifts of 6-7 mt. The reach truck is better, needing only 2.6 mt wide aisles and able to lift to 12 mt, but these are generally unsuited to outdoor yard work. Likewise, the dedicated VNA trucks are internal machines and while able to to work in 1.5 mt wide aisles and up to 15 mt (more with crane types) they are slow, wasteful of space when aisle changing and incur significant extra costs like rail or buried wire guidance.

The articulated forklifts, produced in the British Isles by Translift Bendi, Narrow Aisle and Aisle Master, are easily the most space efficient and versatile of the trucks and such is their cost- cutting ability that in certain circumstances they can render instant truck payback. They may not always be the best choice, of course, as it depends on the nature of the business but the fact is an articulated forklift will allow 50% more pallet storage than counterbalance trucks and 33% more than reach trucks. Moreover, because of their yard-working abilities, the artics can reduce the overall number of forklifts on site and handle more pallets per hour than any other truck type. Such cost-cutting should particularly appeal in the current economic downswing.

There is help in the form of warehouse software to test layout options cheaply. It is better to choose a simulation package from an independent software house as those provided by forklift manufacturers may be skewed towards their own truck designs, and so give less than optimal results. A good example is CLASS, from Cirrus Logistics, which allowed one leading UK retailer, ASDA, to raise storage capacity by 10% at is warehouses and 40% in one case.

No matter how efficient products may be stored and internally moved, the operation could be seriously compromised by excessive stock levels, stock-outs, slow-moving and obsolete stocks. This is where a good stock forecasting program can save millions, particularly when used in real time with weather forecasts. Typically, they will allow users to reduce their total stocks by one third without adversely affecting customer service. Given that stocks in UK warehouses are always worth billions of pounds, the scope for savings is immense.

Once goods leave their warehouses, many cost-cutting initiatives beckon and their impact on the nation's economy would save billions of pounds. Congestion on UK roads alone is estimated to cost £25 billion a year. Any developments, therefore, which cut that congestion, but do not require costly new road building schemes, will be highly cost effective at both micro and macro levels. Already, UK pallet exchange operations, like those operated by Pall-Ex, Palletways and Palletline over the last 20 years, are ensuring that their members' lorries run full on both outward and return journeys, thus cutting emissions and running costs sharply.

Of far greater savings potential, however, is the use of double deck trailers. Typically, these trailers can carry 67% more goods per vehicle than single deck models, thus cutting costs and emissions by up to 40%. Yet, double deckers remain largely ignored and the adversarial relationship between third party logistics (3PLs) providers and their clients, and between 3PLs themselves, stymies true cooperation, leading to excessive empty mileage running.

The changing face of information technology (IT), however, could be the greatest cost cutter and environmental boon when applied by the consumer. Home online shopping is the only part of the UK retail industry that is growing like a weed, but a weed that needs nurturing. Each medium-sized van used by the likes of Tesco, Britain's leading food retailer, could eliminate 50 or more car journeys made by weekly shoppers. This would drastically reduce vehicle emissions, road congestion and repairs and accidents. If shoppers are encouraged to place online shopping orders earlier, food retailers and manufacturers could fine tune their supply/demand models so that less food would be wasted.

Such developments have the potential to disintermediate the current retail set ups, where manufacturers deliver to shops often via distribution centres. Large manufacturers of household consumables with a huge product range, could join with similar businesses to build giant order picking warehouses, accessed by shoppers online. This would eliminate a huge swathe of distribution/retail costs. It is difficult to see, however, given the current stranglehold on shopping by a handful of retailers, such a scenario unfolding, and might, for political/security reasons, be undesirable. This writer once pondered when visiting a huge warehouse that stored a quarter of Britain's tea stocks, what kind of cathartic experience would tea drinkers have deprived of their cuppas because the warehouse in question went up in flames. Even so, online shopping will continue to grow at a lick, posing financial problems, perhaps, for all those financial institutions heavily invested in bricks and mortar shops.

Friday, 23 April 2010

Has Volcanic Ash Lessons For Logistics?

Warehouses put money to sleep, pithily remarked one Toyota vice president, but idled assembly lines can cost far more. This is now the prospect that faces car production plants worldwide as air-freighted key electronic component supplies dry up, caused by the Icelandic volcanic ash cloud which grounded all flights to much of Europe for five days.

Some 40 years ago such a world-disrupting event would not have raised a logistics eyebrow because all factories had some buffer stock that would tide them over for weeks or more and/or relied on locally-sourced parts. But in today's globalised markets, typified by dependence on complex worldwide supply chains geared to Just-in-Time (JIT) deliveries, that is no longer an option but the Icelandic event does, at least, spur a rethink of JIT techniques. But what, if any, changes should be made to stretched supply chains, particularly with respect to JIT?

Doubtless, expansion in global trade, partly underpinned by JIT, has done wonders to reduce world poverty. The most globalised countries, like Chile, China, Thailand and Bangladesh, to which much Western manufacturing has been outsourced, have grown the fastest and benefited the most. This helped cut world extreme poverty, defined as less than $1 a day, from 28% to 21% between 1990 and 2001, while infant mortality rates between 1980 and 2002 fell and life expectancy rose in low and middle-income countries. If only for that reason, JIT and globalisation are here to stay but vulnerability to disruption much be reduced.

Airfreight may only account for a tiny fraction of freight by weight --about 0.5% for the UK, but in value terms it is 25% and for Ireland 30%. Most UK car makers use suppliers near their factories and mainly road and sea for most deliveries, but high value electronic components come by air from far-flung places where production costs are much lower.

A case could be made for manufacturers to stock higher levels of these small electronic components at point of assembly and use more road/sea deliveries. While this would add to logistics costs it would be far cheaper than idling whole plants for the want of tiny components or, worse still, losing overseas markets to unaffected, opportunistic suppliers. As explained by the Irish Exporters Association's chief executive, John Whelan, "the big thing is to hold onto your customer base. Asian suppliers will try to grab US customers of European exporters and US suppliers will do the same in Asia."

The Icelandic event may be a rare occurrence and so prompt many to deride any calls for higher stock levels of air-freighted items. However, JIT-orientated manufacturers are exposed to a legion of disruptive supply risks and just one, tiny, isolated incident can be highly damaging. One of the most unlikely examples was the collapse of a container crane at Southampton Container Terminal in 2006. It disrupted parts supply to Honda's Swindon car plant so much that the whole plant was closed temporarily.

There are, of course, techniques for efficient disaster recovery, anticipatory measures and production philosophies that could sidestep or ameliorate supply chain disruption. Useful guidance on this can be found in Yossi Sheffi's book, The Resilient Enterprise.* As the book explains, insurance companies have well-developed models of the likelihood of earthquakes, floods, hurricanes and tornadoes for America and other countries. Volcanic eruptions are usually preceded by tremors but these signs are often dismissed or ignored by managers. Supply chain managers need not become Earth scientists but they could do better by reacting faster to top up critical item supplies by air before it is too late.

In time, the global supply chain environment could be expected to change for the better in terms of JIT risks. More global corporations see the value of locating their manufacturing and supplier base close to their main markets. Not only does this reduce supply chain risks it also enhances quality control and faster response times to customers' changing demand patterns. It seems customers require products faster than supply chains can respond. The growing prosperity of Third World countries like China will also erode their cost advantage, while transport costs will also rise.

On top of all this is the joker in the pack -- environmental concerns. Although the jury may still be out over the causes of global warming, the vociferous environmental lobby should not be underestimated. New legislation through tax disincentives, et al, would discourage far flung global supply chains. As to whether that would economically harm industrialising countries, and so pose political risks, only time will tell.
*The MIT Press, Cambridge, Massachussetts, 2005

Sunday, 11 April 2010

Will Noro virus scupper cruise market revival?

After two years of declining fortunes typified by slashed prices, cruise lines see better times ahead with rising bookings and prices but will the smallest of organisms, the Noro virus, scupper the nascent revival?

The cruise lines badly timed their expansion plans when laying down orders for new ships several years ago, which came on stream just when global credit markets imploded. The situation, however, could have been very much worse if it were not for the growing British love affair with cruises. The Passenger Shipping Association, for example, shows that more than 1.5 million people took a cruise last year, up 4% on 2008 and nearly 50% since 2005.

It is not hard to see why such growth occurred when recession hit other travel markets badly. Cruising is one of the most pleasant ways to spend a relaxing holiday, offering many new sites and entertainment more competitively priced than most land-based holidays. But what land based holidays do not normally have is the Noro virus, which sadly has reached epidemic levels on many cruise ships.

This vomiting virus has the power to cripple the cruise industry and even, on occasions, endanger the running of the ships if sufficient crew members go down with the bug at the same time. On more than one occasion cruises have been cut short for just such safety reasons. The reason for the concern is that many passengers struck down by the virus have said they would not cruise again. This is an understandable reaction because the bug can ruin a cruise. Although the vomiting only lasts for 1-2 days, passengers are normally ordered to remain in their cabins for another 3 days until they have been given the all clear by the ships' doctors. Being mewed up in a small cabin for 5 days is like serving a costly prison sentence.

So far it seems that the media and cruise lines have tended to blame infected passengers for bringing the virus on board. This may be so on some occasions but there is far more to it than that. According to the US Food and Drug Administration, person to person transmission of the Noro virus has been well documented but the virus is transmitted by the fecal-oral route by contaminated water and food. Water, says the FDA, is one of the most likely causes of the virus and that must include water stored on cruise ships. This raises concerns about where potable water is taken on board and why, it seems, there is never a mention of whether the water was tested and what the results of those tests were.

Food supplies can also sicken passengers. The FDA reports that shellfish and salad ingredients are foods most often implicated in Noro virus. This suggests that increased cleaning everywhere on infected ships and frequent hand washing with spirit lotions will have little effect. This writer's own experiences bear that out. On taking a 24-day cruise last November on board Fred Olsen's Balmoral, I had been warned that there might be departure delays caused by sanitizing the ship owing to a serious outbreak on the preceding cruise. Such cleaning, however, did not stop the almost immediate outbreak of the virus on my cruise which lasted almost the whole voyage. The Celebrity's Mercury cruise ship may be another case in point. On two of its most recent cruises alone around 600 passengers fell ill but does that seriously suggest 600 people simply failed to wash their hands?

Cruise lines must clearly do more than sanitizing if they do not wish to see their fortunes impaired by class law suits and a waning interest in cruise ships turned plague ships. One travel law specialist, Irwin Mitchell, already has over 80 angry customers of Fred Olsen Cruise Lines following 5 separate outbreaks over the last few months on Boudicca.

The Centre for Diseases Control reports numerous outbreaks of Noro virus on cruise ships operated by Celebrity Cruises, Cunard, Holland-Amerika Lines and Royal Caribbean. If left unchecked there will be an avalanche of claims against the lines. Now is not the time to imperil the recently launched, costly cruise ships like P&O's Azura and Royal Caribbean's Oasis of the Seas (225,000 tonnes) simply because health and safety issues remain sloppy or inadequate.

This writer has viewed many cruise ships in ports and all failed to have all their rat baffles (guards) in place. Such baffles may no longer be a legal requirement, except where there is a serious rat infestation or plague but their lack of use is symptomatic of the sloppy procedures undermining passenger health and safety.

Saturday, 3 April 2010

MoD's stock mismanagement threatens security

In what must be one of the most damning indictments of a Government department's financial ineptitude the Defence Select Committee has excoriated the UK's Ministry of Defence (MoD) for its accounting failures. In its annual report on the MoD's accounts, published on February 24, the Defence Select Committee comments: "Failures in the administration of service personnel and sensitive equipment are unacceptable" This has led the National Audit Office to qualify the department's resource accounts for the third consecutive year. Usually one year's qualified accounts would be enough to presage a commercial company's obsequies.

Such an embarrassment could not have come at a worst time for a government battered by economic forces and preparing what seems to be deep cuts in this year's Defence Review. Given the three armed services' worries over cuts that could reduce their commitments, such monumental logistics and accounting failures, worth many millions of pounds, must feel like a stab in the back from their own governing department. But if the MoD does not clean out its own Augean stables then the Defence Committee, chaired by the Rt Hon James Arbuthnot, MP believes that the MoD's accounting failures have the potential to threaten its own long-term capability.

The MoD has long been a lumbering, bureaucratic moloch, devouring huge taxpayers' funds, and stock control has rarely been its forte in modern times. Apart from worries over specialist pay of £268 million and lack of evidence to show that the errors in accommodation and food charges of £83m had not been made good, a key worry of the Defence Committee was the inability of the MoD to account for certain items of expensive and sensitive equipment.

The National Audit Office has carried out a selective audit of the army's relatively new £1.3 billion BOWMAN tactical communications system, which provides secure, integrated radio intercom and internet services. Only 89% of these assets could be accounted for by the end of the year owing to problems of accounting for radios in use on the battlefield. James Arbuthnot said that the MoD could not at a given time account for radios worth £155 million, giving rise to serious security implications. "Having an effective audit trail is the only way to ensure that all equipment is accounted for," he added.

Veracity and transparency, however, are two traits woefully lacking at the MoD, the COD Donnington warehouse fire in 1983 being a huge example. Until then, at £174 million, the uninsured fire loss was the costliest in the country's history. On various occasions the MoD had been explicitly warned that the building was not fire safe but the MoD ruled out fire improvements on cost grounds, callously opting instead for the "calculated risk" approach. The consequences of that decision are now being felt decades later with the recent death of a 31-year old woman from mesothelioma, caused by asbestos ash falling on thousands of houses over 15 square miles. The asbestos content was originally denied by the Army and the Controller and Auditor General, the Public Accounts Committee and the Select Committee on Defence all made scant comment on the fire.

The fire's cause was never proven but the investigators thought that the likely cause was workers using lighters and cigarettes to sever plastic wrapping. Another, darker, 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. The sprinkler system failed to work and it is very rare for sprinkler heads to fail. Nearly half of all warehouse fires are maliciously caused.

Astoundingly, five years later, a second fire hit the stores after £31 million had been spent on building 10, autonomous, high bay automated stores designed to limit fire damage spread, destroying most of store B1. Arson was not ruled out but the cause was never determined for certain. Ironically, on another occasion, the sprinkler system accidentally flooded out an entire high bay store. Still, at least the store separation principle was sound and probably saved £800 million worth of stock.

The Defence Select Committee recommends that the National Audit Office should continue to monitor closely the MoD's management of stock, perhaps giving consideration to undertaking a broader analysis of this problem at some future date. But given the broken assurances made last year by the Secretary of State for Defence and the Permanent Under Secretary to provide sufficient audit evidence to support their accounts perhaps a start should be made to encourage these two functionaries to fall on their swords now.