Sunday, 15 June 2014

Thailand's trawlers of terror shame food supply chains

Logisticians have to cope with many variables in their global supply chains but how many realise how intractable, ubiquitous corruption has the potential to wreck their best laid plans, or appreciate that their purblind directors' acceptance of corruption issues perpetuates unimaginable misery involving people trafficking, slavery and murder? The reaction of an outraged public to the results of such corruption and crime can quickly lead to global boycotts of JIT-supplied goods and so without a robust plan B already in place to source elsewhere, logisticians will have nightmares. That is why corruption in their supply chains should concern them deeply.

It is a true axiom that for evil men to triumph it only takes good men to look the other way, and there is far too much of looking the other way in the global food supply chain, in particular. Just such a scenario is being played out in the seas around Thailand where many thousands of trafficked migrants face brutality and murder on trawlers serving the vast Thai prawn farming industry while simply trying to earn a higher standard of living to support their families in relatively poorer countries like Burma and Cambodia. But it is not a new phenomenon, nor is it confined to Thai waters. Such trawler slavery also extends its brutal, corrosive grip to New Zealand's fishing grounds, where cooperation between New Zealand-based fish processors and foreign-owned trawlers crewed by exploited migrants has allowed the trade to flourish for years. Britain and Ireland's trawlers have also tainted hands in this tide of misery.* 

The household name retailers at the end of this odious supply chain have often extolled their roles as responsible citizens eschewing all forms of slavery and exploitation in their supply chains yet the problem remains and worsens, indicating that consumers can no longer rely on such ineffectual protestations. Just how bad the Thai prawn industry is for criminal behaviour can be gauged by the UK Guardian newspaper's revelation based on its own, just released, six-month undercover investigation. It is a damning indictment of supply chain apathy, and Thai Government corruption, without which this vile trade could not survive. 

Torn apart by the limbs
The investigation found that slaves were forced to work for no pay on trawlers for years at a time under extreme threats of violence. Large numbers of poor migrants told by their hired brokers that they would be found jobs in manufacturing or on building sites ended up being sold to trawler captains by the brokers for as little as £250 each. This ruse has also been used for British and Irish trawlers. Shifts could be grindingly-long, 20-hour stints, helped by frequently-offered energy-boosting drugs. Beatings are regular and there is torture and execution-style killings. Some trawler escapees reported seeing fellow slaves murdered in front of them. One trafficking victim claimed he had witnessed as many as 20 slaves killed, including one who was tied limb by limb to the bows of four boats and pulled apart at sea. "We were beaten even if we worked hard", said another. 

Farmed prawns are big business for Thailand, with exports of 500,000 tons, of which Britain and America take about 10%. Overall fish exports are worth about $7.3 billion a year. The largest Thai-based prawn farmer is CP Foods, with reported annual sales of £20 billion. They buy fish meal made from 'trash fish' (too small and inedible) which is caught in huge amounts during pursuit of tuna. Ground into meal, the trash fish is then fed to the farmed prawns, and the company also supplies the feed to other prawn farms. Their products end up on British and American shop shelves as frozen and cooked prawns and ready-made meals like prawn stir fry. Apart from the big four food retailers, Walmart, Carrefour, Costco and Tesco, the Guardian also identified the Co-op, Aldi, Morrison and Iceland as stocking CP Foods' products. 

CP Foods makes no pretence about not knowing that slave labour is part of its supply chains. "We are not here to defend what is going on," reportedly said Bob Miller, CP Foods' UK managing director. "We know there are issues with regard to raw materials that come in but to what extent we just don't have the visibility," he added. 

Thailand a slavery node point 

The brutal fact is, however, that alarm over Thailand's fishing slavery has been sounded before by NGOs and in UN reports. Thailand is considered a major source, transit and destination country for slavery and nearly 0.5 million are enslaved within the country. There is no official record of how many men are enslaved on fishing boats but the Thai Government believes that up to 300,000 work in its fishing industry, 90% of whom are migrants vulnerable to being duped, trafficked or sold to the sea. Rights groups have long pointed to Thailand's big labour shortage in its fishing sector, which along with increased demand from America and Europe for cheap prawns, has driven the need for cheap labour. "We would like to solve the problem of Thailand because there is no doubt commercial interests have created much of this problem," admits CP Foods' Miller. 

A key culprit in preventing any meaningful progress in this vile trade is the Thai Government, long known for its endemic corruption. In the global corruption rankings for 150 countries Thailand is a poor 81st and 97th in democracy rank. One high ranking Thai official who did not want to be identified said: "The Thai authorities could get rid of the brokers and arrange legal employment but the Government does not want to do that. It does not want to take action, and as long as boat owners still depend on brokers and not the Government to supply workers then the problem will never go away."

Others, however, disagree. Two international union federations, the International Transport & Workers Federation (ITF) and the International Union of Food, Agricultural and Hospitality Workers (IUF) are working in Thailand to fight the slavery there. Liz Blackshaw, programme leader for the joint ITF/IUF From Catcher to Counter initiative, says the Guardian's findings show the need to audit the entire supply chain to ensure that all products are sourced ethically and responsibly. "Consumers deserve and demand rigorous checking and transparency. There is a dramatic need for action in Thailand also," she said. 

At a Bangkok meeting last month in a multi-stakeholder forum on labour conditions in the Thai fishery sector, the ITF informed the Government and all stakeholders that it is irresponsible to refuse to ratify the ILO Work in Fishing Convention No 188. "It is shocking that Thailand's new military government was this week the only one to vote against a new ILO protocol to fight forced labour. We would expect the USA to put the country in the worst category of its human trafficking blacklist." 

Many dark secrets

The ITF and IUF claim that the fishing sector has many dark secrets, not just in Thailand, and that there are improvements that could drastically change it for the better. Some of them include:
  • All ILO member states should ratify the new protocol to the ILO "forced labour convention."
  • Full audits by retailers of fishery products supply chains to ensure ethical and responsible sourcing. (Some leading food retailers admit that their audits lack depth)
  • Transparency and comprehensive information on where fish was harvested and the whole chain of processing to enable consumers to make ethical and socially responsible decisions.
  • Aggressive programme of international criminal investigations into criminal activity and criminal failure to act.
  • Company registration of fishing vessels over 20 mt long or 100 GMT.
  • In regional fisheries management organisations and governments the leveraging of licencing allocations and catch quotas against compliance with human rights obligations and labour standards.
  • Fishing vessels to have collective agreements on board to protect crews.
  • Processing plants to have genuine union recognition and the rights to collective bargaining. 
The Thai Governments have already been warned on four consecutive occasions that it was not doing enough to tackle slavery, which belies their claims that great progress has been made in tackling the slavery issue. The latest Guardian investigation further undermines the Government's claims. Its undercover investigators unearthed a lawless and unregulated industry run by criminals and the Thai mafia, facilitated by Thai officials and sustained by the brokers who supply cheap migrant labour to boat owners. 

Human rights activists believe that Thailand's sea food export industry will probably collapse without slavery. This is highly unlikely. Paying agreed wages on time and respecting the rights of migrant crews would at most only add a few pence or cents to a prawn stir fry meal. Yet it is clear that in the light of the Thai Government's refusal to act then more screw tightening should be applied by retailers and consumers. Norway has led the way with one leading retailer, ICA, announcing that it is removing scampi related to CP Foods from its shelves, a move actively backed by ITF and the Norwegian seafarers union. Surely now the time has come for all UK retailers to follow suit by banning all Thai-sourced prawns.

A threat to incomes is the greatest incentive to concentrate business minds to counter the threat with righteous action. If businesses take no action then they should remember that the ultimate weapon lies in the hands of consumers -- concerted, indefinitely-sustained product boycotts. Hopefully it will not come to that and spread beyond fishing slavery issues to other industries, like tourism which accounts for over 7% of Thailand's economy. It would be tragic if many of Thailand's jobs disappeared, for trade is the hand maiden of prosperity and prosperity the surest guarantor of peace. Ultimately, however, trade must rest on the pillars of honesty, decency and respect for the rule of law. If any proof were needed of that then just consider what lack of good governance did for the global banking sector in 2008, the repercussions of which are still being sorely felt. 

* Google my blogs: 
New Zealand's commercial fishing 'slavery' shames the nation
Britain's trawler fishing shame intensifies
Ireland's shameful role in migrant fishermen exposed

Tuesday, 10 June 2014

Time to eschew diesel forklifts?

Thanks largely to EU directives, forklift diesel engines have drastically cut their toxic emissions since the first European legislation got underway in 1996 with Stage I, designed to regulate emissions of nitrogen oxides (NOx), particulate matter (PM), carbon monoxide and hydrocarbons from non road diesel engines. This year sees the latest EU regulation, Stage IV, come into force, which will cut non-road NOx exhaust emissions by 80% compared with Stage IIIB standards they replace. Engines will also be required to use ultra low sulphur diesel, and in the struggle to meet ever-challenging targets engine makers use two main technology options -- selective catalytic reduction (SCR) and EGR, which dilutes the amount of oxygen in the combustion chamber. Both options, however, have their drawbacks and the fact is that the new legislation is not retrospective, so dirtier diesel forklifts, even when fitted with catalytic converters and soot filters, will continue to expose workers within their premises to serious health risks for years to come.

Should we, however, be concerned by air pollution from diesel powered vehicles in general, and is there still an economic case for supporting diesel forklifts over electric, leaving aside, for the moment, the health issues? Yes, we should and the economic case for diesel no longer holds as true as it once did.

In the pursuit of less carbon dioxide (CO2) emissions to ease the perceived threat of climate warming, the European Union favoured diesel over petrol because diesel engines burn fuel more efficiently and emit less CO2. But a by-product of burning diesel is nitrogen dioxide (NO2) and for more than 10 years governments knew that diesel was producing such harmful pollutants. "It's been a catastrophe for air pollution," said Simon Burkett, founder of Clean Air in London. The WHO says that NOx is linked to asthma, now affecting around 6 million people in Britain and killing 1,200 a year, with huge medical costs, and other pulmonary diseases, especially in children. Diesel combustion also generates easily-inhaled fine particulate matter, which probably killed 3,389 people in London during 2010, according to the Government agency, Public Health England. This kill rate equates with some of the worst smogs back in the 1950s, which belatedly ushered in the Clean Air law in 1956. Researchers also think that NO2 has harmful effects independent of particulate matter.

Deadly deal

In 2012, the EU's NO2 limit -- a maximum of 40 micrograms per cubic metre of air -- was breached at 301 sites in the EU, including 7 in London, which is the most NO2-polluted of all the sites and greater even than in Beijing, where smog alerts are common. Owing to a deal between car makers and the EU in 1998 to lower the average CO2 emissions in new vehicles, car companies chose to make more diesel -powered cars, now accounting for about half of all cars against under 10% 10-15 years ago, and diesel fuel was also made cheaper than petrol for some years. So what began as a well-meant EU policy to curb carbon emissions has proved a serious health failure.

Diesel forklifts would or should not be seen operating inside food and pharma premises, including their warehouses, and the same should apply to LPG, despite being cleaner than diesel, but their favourable performance level against electric trucks, and other economic factors, mean they are still found working inside premises, particularly warehouses. But technical advances in batteries and chargers mean that electric trucks are at the same performance levels as diesel, says Matthias Fischer, President of Toyota Material Handling Europe. Hitherto used mainly for loads up to 2 tonnes, electric forklifts and/or AGVs can now be used in ports, for example, moving 60 tonne loads. Electrics were also disfavoured because of the need to recharge batteries over long periods, have costly standby batteries for multi-shift work and the need to set aside charging areas, adversely impacting the total cost of ownership. Recent technology advances, however, have diminished those disadvantages, while the latest EU Stage IV regulation will only raise the cost bar for diesel engines, thus weakening their economic case.

A good example of this is BYD's battery that uses lithium-iron phosphate technology. BYD is a Chinese company that also makes forklifts and its claims for its batteries are impressive. According to Javier Contijoch, forklift director at BYD Europe, users will enjoy 25-30%savings on operating costs. The battery chemistry requires less time and energy than lead-acid batteries for recharging and it can extend total battery life to the point where users never have to replace their truck's original battery. It also eliminates battery maintenance, avoids the emissions associated with traditional battery charging and removes the expense of buying and maintaining spare batteries, a hugely significant cost factor. Charging is also fast (one to two hours) and energy consumption during charging up to 40% less. The battery can be charged incrementally rather than all in one go, so they allow drivers to extend driving times by recharging during break times. The battery is said to be cleaner and safer than alternative lithium-ion solutions.

These and other advances in forklift motive power alternatives should concentrate the minds of all diesel truck users, whether used internally or outside. The question uppermost in their minds should be: "Can we continue to justify diesel forklift usage at the risk to our employees' health and even lives?"

Saturday, 7 June 2014

Beware odious forklift dealer practices

Acquiring forklifts through contact rental/lease, the most popular way in Britain, is a minefield for the unwary but how many truck users realise another minefield lies ahead when the contract period, typically five years, reaches the end? There is no issue if the trucks are bought outright, easily the cheapest form of acquisition, provided in-house maintenance is top notch, and the problem is also much reduced if the rental contract includes full maintenance. But for those users who rent without full maintenance included in the contract they are at risk of odious dealer practices that in some cases border on blackmail.

This is not to suggest that most forklift dealers are sharpers, far from it. The majority work hard to give their clients a good service but the fact remains that the industry is intensely competitive, many of the dealers (typically 20%-30%) are financially weak and so not only are they incentivised to shuffle the pack (deception by omission) at the beginning of a contract period, they may resort to thinly-disguised threats at the end of a contract because they desperately need the contract to be renewed.

Typical underhand examples just before contract renewal time include presenting truck users with unexpected bills for excessive truck use or damage. On the former, the best defence is to examine any new contracts' small print to discover how many hours truck usage per year the contract is based on. If no figure is provided, then customers should hammer that out with the supplier and define what the extra costs would be if those hours are exceeded. To be fair to the supplier, they will want to sell on or hire out their trucks after each five-year contract ends and the truck's rentability will be influenced by its condition and so it may need costly refurbishment.

Even if the designated hours usage has been exceeded and the consequent extra costs agreed at the start of a contract there is still the long-festering problem of paying for truck damage when it is returned to the supplier. A small nick to the driver's seat would mean paying for a new seat which would cost many hundreds of pounds. It is not so much the principle of having to pay for truck damage on return but the very inflated prices charged for the spares/repairs. All truck users should bear in mind that owing to the competitive nature of the forklift industry profit margins on sold counterbalance trucks are wafer thin and so they try to make up for that by charging high prices for spares. After all, they must make an adequate return somewhere. Even so, at times the matter has been highly contentious, with court action threatened, so to clear the air somewhat, the Forklift Truck Association (FLTA)* in Britain has issued a useful guide on what constitutes fair wear and tear issues.

So desperate, however, are some truck dealers to get a contract renewal that after presenting a hefty, unexpected bill at the close of the old contract they will offer to 'write off' those bills provided the customer renews the contract for another five years. This comes close to blackmail and should be strongly resisted because continuing with a new contract could be extremely costly if the nature of the user's business has changed. The user, for example, may wish to change from counterbalanced and reach trucks to articulated trucks to cope with an expanding business or, indeed, use different, more productive trucks not offered by the current supplier.

Another potentially more serious truck supplier ploy, when it realises it will not be getting a contract renewal, is to threaten to remove its trucks from a client's site, leaving the client with no means of shifting goods around the warehouse/factory. This would not be a problem if the renter had lined up a deal with another supplier so that the new trucks arrive at or just before the old contract expires. Alternatively, any truck user should seek greater assurance that their supplier has an ethical exit strategy when the end of the contract is reached.

In theory, truck users are likely to obtain more ethical deals from the large forklift manufacturers or dealers like Briggs Equipment because they have a reputation to maintain and will not risk that through adverse trade press publicity. Moreover, an extra comfort is the greater financial stability compared with small/medium -sized dealers. Smaller dealers should have their financial strength assessed because if one leases a truck from them the contract is with the lease company, not the dealer. If, therefore, the dealer goes bust and therefore can no longer provide a contracted maintenance regime the payments will still have to be made to the lessor on time. Finding an alternative truck maintenance company will almost always be more costly. Some extra comfort may also be gained by dealing only with companies belonging to one of the leading trade associations like the British Industrial Truck Association (BITA) and the FLTA.

If the problem persists or worsens a case could be made for an industry-independent 'watchdog' or ombudsman body to be created to whom one can register complaints of alleged odious dealer practices and where such complaints are upheld the dealers in question are placed on a widely published blacklist.


Monday, 2 June 2014

China's military posturing raises supply chain risks

"When might is right," the adage goes, "money takes flight." In the Far East one could add that foreign trade, too, could also take flight and the world is moving closer to just such a scenario as China begins to make preposterous territorial claims to much of the South China Sea, reportedly rich in oil reserves. But are the posturing spats over the South China Sea worrying enough for foreign investors in that region to consider re-arranging their global supply chains to avoid another 'pants down' exposure like that caused by the Japanese tsunami in 2011 and its consequent mayhem for JIT-oriented global supply chains? Alas, this time around the auguries support the yes camp. I say this time around because China has been through a boy-who-cried-wolf scenario for 30 years when American predictions that China one day would try to dominate its region by force have proven wrong. What is different this time, however, is China's new, highly nationalistic leadership epitomised by President Xi Jinping, egged on by the hawks in the Communist Party who have pressured the top leaders to take more forceful policies.

In an incredible show of chutzpah, President Xi Jinping declared that "in Chinese blood there is no DNA for aggression or hegemony." Hmmm. One wonders if Xi is weak on Chinese history, from the Divine Wind upset of the Mongol fleets, largely comprising ethnic Chinese, against Japan to the bayonets to Lhasa in living memory. Yet Xi probably approved the recent decision to move an oil rig into waters claimed by both China and Vietnam, and shows no signs of backing down. This has led to enmity against Chinese people living in Vietnam, thousands of whom have been forced to return to China. A Vietnamese fishing vessel has also been rammed and sunk by a Chinese vessel.

China also probably senses that Asian nations who could be territorial rivals in the South China Sea cannot over the long run afford to fight back. In pursuit of that strategy it has already defanged the Association of Southeast Asian Nations (Asean), which operates by consensus and unanimity, through buying the votes of one or two members like Cambodia. China also feels that the military capability of its neighbours is not up to their own and, sensing this, countries like Indonesia, Malaysia, the Philippines, Singapore and Vietnam have begun an arms race.

China should think again about its military posturing. It depends heavily on imports of raw materials and its exports to western countries to maintain its growing prosperity. Already, however, there are forces at work undermining its export achievements, not least of which is the move towards re-shoring of outsourced manufacturing back from China to Europe and other countries nearer to their main markets. This has been brought on by strongly rising wage rates in China, where hitherto low wages were the main case for outsourcing to China. But there are a host of other reasons which underpin the case for re-shoring. These include the long production runs demanded by Chinese suppliers, poor quality issues, intellectual property theft, ethical concerns over sweat shops, higher freight charges, long delivery times, and other costs concerning communications when problems arise. If there is any doubt about this one should consider, for example, one of the least likely industries where this is taking place --textiles. According to the head of retail at Britain's management consultants, KPMG, the UK is poised for a revolution in textiles. "The trilogy of brilliant British textile manufacturing, stable wage rates, and shorter lead times needed at retail level have made the UK a compelling proposition once again," he says. So to all these reasons for re-shoring cited above one must now surely add the growing political risk which, of course, would not only affect China but also its neighbours which have relied heavily on cheap labour rates to attract foreign investment.

If, as newspaper reports claim, President Xi came into office vowing to restore the greatness China enjoyed for centuries, then Xi should reflect that true greatness does not spring from the barrel of a gun. Instead, it comes from raising all of the people's well-being through the peaceful pursuit of trade. In any serious shooting war with its neighbours those aspirations would be seriously compromised. The Chinese leadership should also reflect that the country has serious internal weaknesses and threats. Its banking sector is in an unholy mess, which could bring on an internal credit crunch to rival the western eruption in 2008. Denied their aspirations, the people themselves could become China's biggest internal political headache for the Party. And then, as always, there is the natural threat from floods and earthquakes, which is reason enough for the Chinese Government to spend sparingly rather than wantonly on building up its armed forces. The nation's hard-won resources should be husbanded to meet the inevitable threats from Nature's fury. It is no less than the long-suffering Chinese people deserve.