How articulated forklifts transform warehouse economics

Whenever buying or hiring new forklifts, buyers will often hear about the need to consider life cycle costs above initial truck price because over, say, a five-year hire period the truck's running costs will far exceed initial purchase/rental costs and, therefore, the truck's reliability and productivity, in terms of pallet loads moved per hour, is paramount. Productivity is important because some truck designs and quality make them 20% more productive than competing models but getting to the bottom of the veracity of competing claims is difficult and perhaps viewed with suspicion by potential buyers.

 While it is undeniably critical to put life cycle costs before initial truck cost and be assured of consistently excellent after-sales service, there is another type of cost that can dwarf life cycle costs -- the truck's interface costs. These costs may be defined as how a truck affects overall storage costs, like building costs, rents and rates, utilities and all other running costs, including safety issues.

When, by dint of its versatility, a truck's design combines higher productivity with a huge impact on interface costs, then the case for buying such a truck, despite its higher initial cost than conventional, counterbalance (cb) trucks and reach trucks, is unassailable. The only forklift design that qualifies for this accolade is the articulating truck, yet there still seems to be some convincing to do, perhaps because of conservative inertia over step changes in handling techniques. Such inertia was faced by the British pioneer of articulated forklifts back in the mid 1980s when Translift Engineering, as it was called then, launched the game-changing, articulating Bendi forklift to initial derision from purblind truck competitors who likened it to a Heath Robinson contraption. Today, however, there are now three manufacturers* in the British Isles: Translift Bendi, Narrow Aisle Flexi and Aisle Master.

Interface costs can be key

Counterbalance forklifts, reach trucks and dedicated very narrow aisle (VNA) trucks will not always be the wrong choice, of course, because, as with any large investment in materials handling hardware, careful analysis of stock handling must precede any investment. If forklifts are worked non-stop throughout their shifts (often not the case) then the conventional cb truck could be the most productive in terms of pallets shifted per hour, especially if gas or diesel-powered. But productivity, while important, is often not, or should not be, the decisive factor in the truck choice exercise. Productivity must also be combined with interface cost-cutting issues.

The origins of the articulated truck go back as far as the 1940s when a US Company, Baker, produced a machine that articulated to 45 deg with the aim of reducing the stacking aisle width. Pallets were stacked in a chevron style to help in speed and to achieve smaller aisles. In the early 1950s, Towmotor developed a truck to rotate the load a full 90 deg, much like a modern articulated truck. However, the truck retained all the other counterbalanced design traits so it required two rotating hydraulic support legs that were activated when stacking on either side of the truck. For various reasons it did not galvanise the marketplace in the way that modern articulated trucks have done. It fell to Freddy Brown, inventor of the Bendi design, to apply a new, articulated concept. He found that by reversing the triangle of stability and changing the weight distribution he would solve the issue that had long eluded his pioneering forbears.

Today's articulated forklifts come in a wide range of models, including side loaders, cab-equipped cold-store models and, in the case of Bendi, a pedestrian version and man-up model. The gas and electric articulated trucks can rotate their masts through a 220 deg arc, lift loads up to 12.5 mt and work in aisles only 1.6 mt wide but just how good are they at productivity claims and cutting interface costs?

Proving the claims

The Bendi was developed initially to cut the number of trucks a warehouse operator needed. This can be achieved owing to the articulating truck's versatility that allows it to perform well outside on rough yards loading and unloading lorries and transferring loads directly to narrow aisle or VNA racking. This function is often performed by a cb truck unloading yard vehicles and then placing loads inside for a reach or VNA truck to take over for racking tasks -- a time-wasting exercise that involves two truck types, of which the VNA is far more costly to buy and run than an articulated truck. Significant though this cost-saving advantage is, there are far greater rewards to be had and most are related to space savings.

The two main truck types that compete with articulated machines are the cb forklift and the reach truck, both of which need much wider aisle space. A cb truck typically needs 3.5-mt wide aisles and can stack no higher than about 6.5 mt. A reach truck needs at least 2.6 mt of aisle width but can stack to 12 mt. This means that typically an articulated truck can store 50% and 30% more pallets within a given cube than cb and reach trucks respectively.

It is no wonder with advantages like these the articulated trucks have replaced over 20% of Britain's reach truck market. However, even dedicated VNA trucks are also losing market share to the artics. This is because VNA trucks not only cost far more initially they also require the added costs of rail or wire guidance within aisles, possibly floor upgrades, are more costly to maintain and need more space at aisle ends if they need to change aisles. When they are no longer required owing, perhaps, to the loss of a long-term storage contract, they have a very low resale value. Articulated trucks, however, retain their second-hand value far more than any other truck type.

Instant truck payback

One example should serve to show just how great an impact on warehouse economics and the environment an articulated truck can have when the interface costs are factored in. When warehouse expansion or contraction beckons there are circumstances which can deliver instant forklift payback when a switch from one type of forklift to rented or leased artics occurs. When growing business demands more storage space there are only three means to achieve that: enlarge existing store, rent offsite warehousing and, if possible, make better use of existing storage space. The last of these is by far the least costly. When Stateside Foods, of Bolton, England, was forced by growing demand to expand its factory warehouse storage capacity it simply made better use of space by switching from a fleet of cb and reach trucks to renting two Bendi artics. The former trucks had been working in 3.6-mt wide aisles but the switch to artics meant the aisle widths could be narrowed to 2 mt, allowing far more pallet storage positions. The result was that Stateside could close a satellite cold store 30 miles away and save £250,000 per year, which did not include the costs of handling and transport between the two sites. The result of the truck change was instant forklift payback. It is overwhelming advantages like these which now convince many warehouse operators buying new or redesigning existing premises to realize their plans based on the use of artics.

Among the many other advantages from artics is their undeniably greater safety advantage compared with reach trucks and cb machines through better pallet load vision and lack of rear-end truck swing. Thetford-based Century Logistics, for example, not only gained 25% more productivity than reach trucks and 20% more storage space after switching to artics, it also sharply reduced rack, load and truck damage. In an age when environmental factors and rising energy costs make the best use of storage space more urgent there is no other type of forklift that even remotely comes close to matching the ability of artics to slash interface costs and improve productivity and safety. It is a message, however, that swathes of industry still have not taken on board.
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*Translift Bendi: www.Bendi.co.uk
 Narrow Aisle Flexi: www.flexi.co.uk
 Aisle Master: www.aisle-master.com

By switching to articulated forklifts from reach 
and counterbalance trucks Stateside Foods
saved £250,000 a year through closure of its
Satellite cold store 30 miles away from its main
factory and warehouse 

Big Data solves big logistics problems

Big Data has been around for decades in which lie gems that could transform logistics efficiency but those gems cannot be mined while the data remains largely unstructured. This was the main message from John O'Brien, Vice President for Transport and Logistics, at DataArt* during a presentation hosted by DP World at London Gateway, its new container port, and organised by the Logistics Leaders Network#.

Vast amounts of data are generated by people talking to people (Facebook), machines talking to machines (EDI), and the internet of things, involving sensors collecting and sharing data, but ordinary data processing, involving traditional business intelligence using databases, does not work, says Mr O'Brien. But if the information can be structured efficaciously then those who run global supply chains can seriously cut their exposure to supply risks and even improve predicted demand.

By using big data in this way one fuel retailer, for example, employed sensors at its network of service stations and convenience stores so that it would know in almost real time what its fuel/product mix and consumption rates were in each of its geographical territories. Such incoming point-of-sale data also tells it in which mixes of products besides fuel work best by geographical area so it can tailor offers accordingly. The result is faster time to market with offers and better revenue positioning and agility because offers can be instantaneously changed to respond to customer demand shifts.

Market response time is key

This emphasis on time-to-market can be a game-changer for many businesses because it means that their supply chains are their competitive advantage. Zara, the world's leading clothing retailer, built its empire on the unconventional premise that speed and responsiveness are more important than product cost and so it is renowned for its ability to deliver new clothes to stores quickly and in small batches. Another key, successful plus for them is that Zara controls more of its manufacturing than do most retailers and so is less of a hostage to fortune when natural, political and social risks erupt to disrupt far-flung supply sources.

Perhaps mindful of the Japanese tsunami in 2011, one large manufacturer has used big data to minimise exposure to risk in its global supply chain by overlaying its geographical supply chain locations with weather statistics for tornadoes, hurricanes and earthquakes. It also then calculates the probabilities of natural disasters occurring through a predictive analytics program. The result is that the company now has a way to orchestrate its suppliers so that it has back-up plans if a key supplier gets hit by a disaster and the incident takes down production.

In a JIT-dominated supply chain, having a robust, disaster recovery plan is indispensable but global logistics is still exposed by the concentration of too much supply of one key product in one factory. The Japanese tsunami exposed the folly of this because Japan is a choke point for about 95 products key to the auto industry and consumer electronics. When that disaster struck it disrupted just one factory producing 40% of the world's microcontrollers used in cars, leading to idled car plants around the world and multi-billion pound losses in production and profits. Now might be a good time to hold stocks of such small components in higher amounts at point of final assembly, given that the extra costs of holding such inventory would only be a small fraction of, say, a car's cost, if the supplier controls a worrying percentage of world output in a disaster-prone region.  

It would be difficult to single out any business discipline more complex and demanding than logistics. It is not simply a job trying to arrange a supply chain most effectively, or trying to manage production flows in factories and warehouses efficiently. It involves grappling with socio-geopolitical issues that could disrupt global supply chains; in short dealing with numerous what-if scenarios. It could even involve the input of bad corporate governance on consumer sentiment. Many leading global players, for example, use Far Eastern labour by subcontractors where working conditions are often atrocious. One huge Chinese-based supplier to the mobile phone and computer industries became so concerned over staff suicides relating to working conditions and pay that it reportedly asked new employees to sign contracts promising not to commit hara-kiri. But poor corporate governance, like use of child labour and morally repugnant, though legal, tax avoidance schemes has led to effective consumer boycotts. It is every boardroom's worst nightmare and there is no reason why we should not see more of these problems and so logisticians should take note.
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*www.dataart.co.uk
#Info@gyrosgroup.co.uk   

London's new container port will change Britain's logistics

As ambitious civil engineering projects go, DP World's new London Gateway shipping container terminal, officially opened on November 7, is impressive by any standards, not just for its monumental achievements on time but the likely seismic impact on Britain's logistics map. It took the ancient Egyptians an estimated 30,000 men toiling 30 years to build the 5.8-million ton great pyramid at Giza. It took DP World only three years to dredge 28 million mt3 of river silt, lay a concrete base many times that of Giza's pyramid, lay 25 km of new railway track, build roads, offices and engineering facilities and install eight of the world's largest quay cranes, each towering 448 ft and weighing 2,000 tonnes. Other creditable achievements include DP World's environmental concerns, as it involved the relocation of 350,000 animals and reptiles to amenable sites around Britain, the largest exercise of its kind in Europe. Quite what the good burghers of Wiltshire thought of having 2,000 venomous adders as new neighbours, however, is not known. Little wonder that the project, which when fully operational could create 32,000 full-time jobs, cost £1.5 billion so will it deliver a good return and what are the risks that could upset the apple cart?

London Gateway (LG) has its detractors, and not all from competitors who can expect to lose some business to LG. On close examination, however, these criticisms are largely unfounded. But the risks are palpable and what concerns this writer most of all is the natural risk, on which more later. Two risks are of a competitive nature, and include the new deep-sea Peels Ports' container terminal for Liverpool, due to open in 2015, and uncertainty about growth in world trade, particularly between the Far East and Europe on which LG is banking for much of its traffic.

If world trade proves sluggish over the next few years then the result would be a slugging match with Felixstowe, the country's premier container handling port, and in this LG has logistics very much in its favour owing to its advantageous location to London and the South-East where 40% of England and Wales' population live and have the highest disposable income. Its proposed 10 million ft2 logistics park, the largest in Europe, will also leverage LG's competitive potential, offering tenants huge savings in transport, handling, and stock-holding costs, plus quicker time to market and less food waste through longer shelf life. It was remarked that Marks & Spencer (M&S), who will build a 1 million ft2 distribution centre there, will be able to deliver directly from ship to retail store in three days against three weeks. This recalls the days of yore when London opened the West India dock in 1804 and so reduced ship turnaround time from one month to four days and deprived the 11,000 waterfront thieves, classified into groups from relatively harmless mudlarks to murderous scuffle hunters, of their income. Even the customs men, with their pigs' bladders for siphoning off the rum puncheons, were discommoded. Other potential clients see LG as a platform for e-tailing directly from the logistics park to consumers' homes.

Ships rather than ports at risk?

A third risk, though not of a competitive nature, is allied to world trade growth and involves changing trade flow patterns brought on by a desire to re-shore outsourced manufacturing facilities from the Far East back to Britain and Europe. The reasons are many, not least soaring inflation  in China, poor quality, long delivery times, widespread intellectual property theft and natural hazards disrupting JIT deliveries. Although only a trickle so far, if the re-shoring becomes a flood, and it is difficult to see why it should not, would this pose a significant threat to LG? This writer posed that question to LG's chief executive, Simon Moore, who agreed that trade patterns were changing but that it was a problem for shipping lines rather than ports. "I think it is certainly an interesting topic with the shipping lines, who have invested in very large tonnage, the majority of it really applicable to Asia-Europe trade," he said. "As a UK national, to see some of our traditional manufacturing return to this country I personally think is fantastic. Can those companies grow again to become potential exporters to the growing consumer markets in Asia and the Continent? Again, that is fantastic and a very positive trend," added Simon.

He believes that 90% of our international trade will continue to move by sea, and some large UK retailers who import by air transport are thinking of switching to sea owing to LG's strong business case. He also believes that most of that 90% will still come from points east of the UK and that if there is a trend to more cargo to and from the Continent that LG's location is a positive. Concluding, he said: "One of the things M&S will be doing is not just importing but also using this as a base to export. So I think we can say that we can't inhibit, stop or encourage any particular market trend. We will hope to be flexible enough to have the physical capability to grow with them. So whether it's more use by rail, we are ready for that. If it's coastal shipping we are ready for that. It does not have to be big ships."

LG seems to have all the angles covered but is there an unpredictable Achilles heel? As a tri-modal port operating at all tidal stages in wind speeds of up to 60 mph, it promises quick vessel turnaround for the world's largest 18,000 TEU box ships. It's 41-tonne capacity automated stacker cranes, unique in Britain, offer uninterrupted 24-hr working, as straddle carriers from quayside positions feed containers to them. The logistics park is flexible enough to cater for many users with building sizes to match. Some floor plates will be up to 120,000 mt2 and building heights up to 41.5 mt, high enough for automated stacker cranes within clad-rack buildings that makes construction costs so much cheaper. There is a large common user facility which apparently is 2-3 times oversubscribed, so the port is not just for large businesses.

LG claims that it can save £186 on each London round trip and the present practice of sending some goods north to distribution points only to be sent back south again will be eliminated. The rail connection should remove 100,000 TEU round trips a year from the roads, a significant improvement to the environment, in which air pollution, much of it from road traffic, has been shown to be a leading cause of lung cancer and a major factor in soaring asthma rates world-wide. The whole operation should also be a safer one, as LG has fitted its handling equipment with weighers to detect deliberately misdeclared container payloads, a major cause of accidents at sea, on roads and rail and which nets the miscreants billions of pounds a year through lower shipping charges and import duties. There remains, however, the thorny safety problem of lax container packing, which the IMO/ILO/UNECE's new code of practice, available after next May, will not solve unless money is spent on adequate training. It is to be hoped that any container stuffing which may be done in the logistics park will be by properly trained packers.   

DP World, however, appears to have a non-union policy at its ports. This is an issue exercising minds at the International Transport & Workers Federation (ITF) who seem determined to allow workers union representation if they wish it. This could be LG's Achilles heel. The issue, however, that worries this writer most of all is Nature's fury. The port seems to have adequate drainage facilities to cope with heavy downpours but a proposed bund of sorts around the logistics park of only 1.5 mt high seems inadequate should a storm surge occur at the highest of tides. Sea levels are also rising at an accelerating rate. A three-metre high bund would be much more comforting, especially for insurers. Having so many eggs in one basket, which would be the case at LG, need not be a nightmarish risk provided the calculated risks have been realistically assessed and catered for. One only has to look at the disastrous logistics impact of the Japanese tsunami in March 2011 where Japan was a choke point for about 95 products.The result was idled car plants around the world for want of JIT-supplied parts, leading to multi-billion pound losses in production. There is nothing wrong with the concept of JIT principles provided the ground rules are unswervingly obeyed. One of those rules is to have a robust disaster recovery plan in place. A bund of only 1.5 mt around the logistics park seems tempting fate.

With those caveats, DP World must be commended for their vision and tenacity in bringing a project to fruition 10 years in gestation with a care for the environment that is, alas, still uncommon in big projects. And there seems little doubt that LG will change the logistics map of Britain for the better.  

Salient statistics

Container handling capacity: 3.5 million TEUs per year when all 6 berths are operational
Logistics Park: 10 million ft2, including large common user facility.
Quay cranes: Currently 8 with 24 planned, all supplied by Shanghai Zhenhua Heavy Industries Company (ZPMC) capable of handling 25-box wide ships.
Rail Terminal: currenlty equipped with three 400-tonne rail mounted gantry cranes from ZPMC
Automated Stacker Cranes: 20 from Kalmar (Cargotec)
Straddle carriers: 28 from Kalmar

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New container packing code enfeebled without training

A new, official code of practice for packing shipping containers should be available after next May but will it make much difference to the annual toll of carnage at sea, on roads and railways and appallingly high material losses? History suggests not unless it is combined with adequate, essential training for all operators engaged in stuffing containers.

Since 1997 there has been an ILO/IMO code of practice for packing of cargo transport units (CTUs) but, astoundingly, only about 1,000 copies were disseminated. It must come as no surprise, therefore, that despite being quoted in numerous other documents produced by relevant bodies, there was breath-taking, global ignorance of the code. An ILO research project, for example, published in 2011, found that only 15% of packers used the guidelines while most were unaware of the CTUs' packing guidelines. What little awareness prevailed was often fuzzy as packers thought they applied only to the shipping lines.

The ILO thought, therefore, that the 1997 guidelines should be updated and revised, but as a non-mandatory, though enforceable code of practice. How successful such enforcement would be is a moot point and would vary from country to country. In the UK if, following an incident, the investigation found that the container packers failed to follow the new code they would be at risk of a successful prosecution. But there is a big problem here -- the often impossible task of attributing blame to one container. The problem is less pernicious when, for example, a container lorry has overturned but even here the container may have been loaded by more than one packing firm. At sea it is a much more intractable problem. It takes just one poorly packed shipping container alongside many others to cause mayhem out of all proportion to the value of its contents. One destabilised container could take dozens more with it into Davy Jones' bosom, making it impossible to attribute blame. Some inside industry observers even suggest cynically that there is a sinister incentive for container dispatchers to be deliberately lax over sound container packing techniques. If one of their container loads is lost or damaged at sea they can claim the insurance and hopefully look forward to a replacement order.

The new code, which should be accessible online and published in at least six languages, including Mandarin Chinese, is much more comprehensive than the original guidelines, giving all supply chain partners details on their responsibilities and how to pack and secure contents, taking account of transport forces, load distribution and the CTUs' anchor and lashing point strengths. It also places a responsibility on the shipper to declare the cargo's composition correctly as well as the gross mass of the packed CTU.

So just how serious is the container packing problem and will an updated code really make much difference, especially in the light of the recent IMO watering down of the proposed amendment to Safety of Life at Sea (SOLAS) regulations to make weighing of containers mandatory at all ports?* At a recent one-day London seminar hosted by the International Cargo Handling Coordination Association (ICHCA) it was suggested that accurate weighing of containerised cargo is only a small part of safety in the supply chain and that the way in which cargo was packed is arguably more dangerous in leading to load shifts and cargo spillages. The operative word  here is arguably because there is a clear, commercial incentive to misdeclare cargo weights in order to save on shipping costs and import duties. If a shipping line has many containers with fictional payloads declared it is impossible to distribute loads evenly without port weighing and that could lead to the entire loss of ship and cargo when rough weather hits. Even so, it is clear that poor packing is a major issue. How great is impossible to say as no reliable, global figures seemingly exist which definitely prove losses caused by lax packing, but there is plenty of unaggregated evidence.

The insurers group,  the TT Club, found that its own experience shows that 65% of all incidents involve loss or damage to cargo and of these analysis suggests over one third result from poor packing. It also found that 28% of cargoes were misdeclared . The Cargo Information Notification System's statistics found that 35% of incidents investigated were found to have been caused by poorly or incorrectly packed containers. In Britain, spot roadside checks on one day found that where vehicles were defective 49% of them related to inadequate load securing, 24% had no secured load and 15% an unstable load. On American roads, in just one year, there were 18,000 'straight line' container lorry incidents but without identifying causes.

The reasons for container packing laxity are many and no amount of beefed-up codes of practice will make a tremendous difference. For supportive evidence of that one need look no further than the SOLAS regulation 5 which covers the legal and therefore mandatory need for safe cargo securing, seemingly with inadequate effect. This is not to decry the ILO's move to improve the 1997 code but rather to explain that without other supportive issues there is unlikely to be much improvement on the tragic losses. A key supportive issue must be training, something the ICHCA conference speaker from the TT Club, Peregrine Storrs-Fox, admitted: "There is a long way to go on training." A problem here, particularly in Britain, is the lack of knowledge and experience in packing containers caused by cutbacks on logistics staff over recent years to save money who would have overseen safe packing.

The issue of warning labelling and full description of loads, especially where hazardous cargo is involved, must also be addressed in languages of load recipient countries because a big problem with containers is that they may carry almost anything, including coal and fumigated logs. Not for the first time have fumigated logs or timber overcome container dischargers when entering. At a final, end-user level, the fallout can be truly tragic. The World Health Organisation estimated that acute pesticide poisoning affects 3 million people globally, with 20,000 unintended deaths a year. Much of this can be attributed to poor storage practices and product labelling in languages not understood by its users.

If the new code of practice is to be efficacious there must be a major culture/behavioural change through education and training and in this it is hoped that the ILO will do a better job than last time at getting the message across. Supply chain partners must be prepared to incur more costs by ensuring container packers are adequately trained and even paid more because if one issue is certain it is that not any fool can stuff a container safely.
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*See my report: IMO's container weighing compromise shames shipping

Slavery shames Britain's food supply chain

Logistics is the art of controlling supply chains cost effectively but how are costs measured and are they all- inclusive enough to reflect the true total costs for humanity? Obviously, costs are measured to reflect only those costs affecting a business's accounts and so they will not be all-inclusive. Environmental costs, therefore, will not be fully factored in because there is no legal requirement and they would be incalculable anyway. That is not to say that responsible corporations are not addressing environmental cost issues but it must be said that some of their actions are goaded by legal pressures rather than altruistic sentiments. But there is another, hidden, sinister and blatantly illegal cost -- slavery -- and nowhere is this more evident than in Britain's food supply chain. It is all the more disturbing because it could not flourish without the tacit connivance or disinterest of leading food retailers and their suppliers.

United Nations figures suggest 800,000 people are trafficked every year in one form or another, with more people in slavery today than in the entire 350-year history of the Transatlantic slave trade and one in eight are in Europe. It is now considered the second most organised criminal activity worldwide, generating an estimated US$32 billion a year.

Modern day human trafficking for the UK's food supply chain employers does not just mean paying labour rates far below the minimum wage to mainly East European workers entitled to live and work in Britain. It includes regular beatings, often sexual exploitation and threats to harm their families in their homeland countries should they complain to the UK authorities. The scale of the problem is staggering, even though the full extent of the ill-treatment across Britain's entire food and drink industry, which employs 400,000, is unknown. In an enquiry conducted three years ago by the Equality and Human Rights Commission, one fifth of workers interviewed in the meat and poultry processing industry in England and Wales reported suffering physical abuse in a sector employing 90,000 workers.

These victims are hidden within the supermarkets' supply chains and they are usually brought in through employment agencies or gangmasters, a euphemism for slavemasters in many cases. Many of the latter are acting illegally, targeting and controlling non-English speaking, uneducated, vulnerable workers, using violence and intimidation. One egregious case involved supermarket eggs in which workers could toil in 17-hr shifts often completely unpaid. Dissent was allegedly crushed by their Lithuanian enforcers with beatings and the threat of unleashing fighting dogs.

On a general level, when not working employees are often locked in their squalid accommodation and allowed out only when chaperoned. The mainly East European labourers are enticed to the UK with promises of much higher pay and better conditions. Given that the alternative may be homeless unemployment on freezing Polish streets on winter nights it is hardly surprising they accept the lure, whatever suspicions they may have.

The crime that dares not speak its name

So what can the food supply industry and the public do to eradicate this shameful scourge of untold misery at a time when budget cuts have decimated police numbers, consigning human trafficking to a non-priority status? Britain is probably Europe's most logistically efficient country but there is still much room for improvement. In the food industry there is certainly a serious lack of transparency from the retailers about their supply chain  partners, and the ease with which they can be hoodwinked was made plain enough by the horse meat scandal, an event, alas, that seems to have produced little change. While outfits like the Gangmasters Licensing Authority believe the supermarkets are not complicit in the abuse it is difficult to dismiss entirely the notion that supermarkets' cost-cutting practices placed on suppliers and their gangmasters do not harm the workers who ultimately bear the brunt. The Joseph Rowntree Foundation charity believes that these cost-cutting exercises could lead to exploitation. A co-author of its recent report on the issue believes there are at least 4,000 workers in forced labour in Britain. "It's the crime that dares not mention its name," he says, explaining that the pressure for competitive prices are passed all the way down the supply chain to the workers.

Supermarkets and their third party logistics providers, however, can be obtuse in other ways. Supply chain collaboration has been a hot topic for years and those companies that have collaborated effectively across the supply chain have seen dramatic cuts in inventories and therefore costs. In many cases, stock-holding costs dwarf all other warehouse costs combined. Why, then, have not many more interested parties followed suit?

Many retailers, it seems, still regard collaboration as a threat rather than an opportunity and are reluctant to reveal the kind of business critical information to their logistics partners that will enable strategies to be developed to deliver the best outcomes for all parties. During a recent United Kingdom Warehouse Association networking lunch, the supply chain director of a leading retailer commented: "In our company we see no advantage in developing a personal relationship with suppliers. We just talk through the numbers and details of the contract." It is a commonplace attitude, and one that encourages practices like ringing up to demand thousands of lettuces over the next few days, thus putting huge pressure on suppliers. Leading retailers undoubtedly bully their suppliers so could it be honestly said that their hands are spotless over slavery in the food supply chain?

Left to itself the food industry will never clean up its act. Government action is needed and if that proves inadequate then consumers could use their ultimate weapon -- shame and boycott. Fortunately, Britain's Home Secretary, Theresa May, has made a good start with plans for a new anti-slavery bill and one MP is calling on Parliament to pass the Transparency in Supply Chain bill. This would compel companies with revenues over £100 million to disclose their efforts to eradicate slavery, including audits of suppliers, training for staff and help for victims. To their shame, Conservative MPs talked down the bill, concerned it would saddle businesses with more red tape. The cost of such measures, however, would be relatively insignificant.

The strength of public concern over this issue is encouraging, with seemingly 82% supporting such legislation, but there is more that they could do. The public could become the eyes and ears of the authorities, reporting any suspected, overcrowded properties housing exploited immigrants to bodies like the Salvation Army* and the Gangmasters Licensing Authority.* They could write to their supermarkets urging them to back the industry-funded Stronger Together initiative. Write also to the Home Secretary, urging her to compel large retailers to report publicly on their work to expunge slavery from their suppliers. Finally, for those retailers who ignore such calls there is always the final solution -- concerted, sustained boycott -- every company's worst nightmare. Boycotts have been shown to work, as with Starbucks, and they will work again. When sitting at home enjoying free-range eggs for breakfast consumers would find that their actions would give their eggs a less tainted taste.

*Salvation Army: Tel: 020 7367 4500
 Gangmasters Licensing Authority: Tel: 0800 432 0804
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Corporate tax avoidance threatens your children's future

Death and taxes are life's two certitudes but global corporations have done remarkably well at minimising taxes, especially corporation tax. The scale of avoidance is incalculable, insidious and threatening to society's composure and therefore your children's future.

The recent furore over such tax avoidance, however, overlooks other, more sinister aspects which if not addressed comprehensively soon risks social breakdown and anarchy on the streets. Is that a gross exaggeration? Well, let's look at some of the facts. In 2010/2011 the UK government's total tax revenues of £551 billion included £163 billion in business taxes, of which £42.1 billion was corporation tax, or only 7-8% of the total tax take. One might think should such a low percentage be a cause for concern, especially as corporation tax rates are steadily declining and may one day be replaced by other business taxes. The answer is YES because the current uproar over corporate tax avoidance is not just about one tax; it involves others, it involves employment levels, an even playing field for all businesses and the insidious threat from emerging monopoly power. Worst of all, perhaps, is a possible future dominated by plutocracies.

The UK government is under pressure to slash the social security budget, along with its EU counterparts, and what do we see are the consequences? We are treated to an almost daily diet of TV news showing huge protests, violence and incendiarism, the last typified by London's 2011 summer riots in which looting suggests an economic connection. This is not to argue that there is no abuse and colossal waste in Britain's social security budget. Far from it and so the Government must act accordingly to expunge it but there can be no doubt that if all global corporations doing business in Britain had paid their fair share of UK corporation and other taxes the Government's coffers would have swollen by billions of pounds every year and so relieve the pressure to slash the social security budget.

CBI condemns abusive tax avoidance

What is it, however, that allows global corporations to avoid taxes on a staggering scale and what should be done to excise this canker from society? The facilitator is a complex, global web of disparate tax regimes first set down by the League of Nations nearly 100 years ago and now badly in need of root and branch reform. First, however, some definitions. There are three aspects to tax minimisation schemes: 1) Tax evasion through ploys like under declaring taxable income, which is clearly illegal, 2) Abusive tax avoidance which is legal but considered unacceptable even by the Confederation of British Industry (CBI), 3) Responsible tax management which is both sensible and necessary. There is no suggestion that largely American-owned businesses generating significant sales in Britain, like Starbucks, Amazon, Google and Microsoft, are operating illegally but it is clear that their tax planning, based on highly artificial devices with no commercial purpose, falls within unacceptable abuse. Here are a few examples of how the irresponsible schemes work.

1) Starbucks sources UK coffee from a wholesale subsidiary in Switzerland, which is commercially sensible because it is cheaper to have one team responsible for sourcing all of its coffee and Switzerland seems to be the centre of the world coffee trading business. But there can be little doubt that Switzerland would not be such a world centre if it did not charge a low 12% tax rate on the trading profits. The issue becomes even murkier still when global corporations use "transfer payments", an issue first tabled for cleansing before World War 2. Transfer pricing and payments have great scope for tax reduction because they mean global companies like Starbucks can decide how much its UK business pays to non UK companies within the Starbucks' empire for access to the US firm's brand, coffee making technology, engineering support and so on. Unsurprisingly, the overseas companies are based in low tax regimes so there is a strong temptation for a multi-national to overprice the goods and services provided. to reduce or eliminate profits, and therefore tax, in a relatively high tax country. This odious transfer charging has been used to devastating effect over many years in developing countries least able to afford multi-billion pound losses through tax avoidance by wealthy, global businesses. The benefits from these financial artifices mean that Starbucks, for example, paid only £8.6 million in UK corporation tax over the last 14 years and nothing at all in the last three years, despite clocking up nearly £400 million in sales during 2011.

2) E-commerce also eases the path for creative tax avoidance schemes and Amazon is a good example. When buying a book from Amazon, UK purchasers enter into a legal contract with and pay their money to Amazon Luxembourg where the VAT rate is only 3% -- an example of how more than just corporation tax avoidance is involved. Despite booking multi-billion pound sales in Britain last year Amazon reportedly paid no tax on the profits from these sales because they were funnelled through Luxembourg. Experts claim that if Amazon did not route sales' profits through Luxembourg it would be paying as much as £100 million a year in UK corporation tax.

3) Microsoft sells its software from Ireland or, in the case of electronic downloads, through Luxembourg, so most of the money the company makes from British customers is earned in Ireland, where corporation tax is only 12.5%, about half the UK rate. This is part of an elaborate structure that the US Senate committee described as designed "to shift and keep profits offshore."

Overly concentrated wealth threatens democracy

There are no accurate figures on how much has been lost to tax havens but the figures are undeniably staggering, one estimate being $20 trillion. Another estimate indicates that the 70 plus "business friendly jurisdictions" are sheltering between $21 trillion and $32 trillion, up from only $11.5 trillion in 2005. This, of course, includes a large element of individual tax avoidance, and along with company tax avoidance should be tackled to prevent future social disharmony. Britain' HMRC (formerly the Inland Revenue) estimates that the country is losing £5 billion every year through corporate and individual tax avoidance.

As remarked earlier, tax loss does not just harm government revenues. Aggressive tax avoidance schemes also create an uneven playing field for competitors. Whitbread, a British company for example, owns Costa Coffee and pays its fair share of UK corporation tax, unlike Starbucks and Caffe Nero, the latter reportedly having paid no corporation tax on a $40 million profit in just one year. This puts Costa Coffee at a serious disadvantage and could even lead to market domination (monopoly) as fair tax payers are driven to the wall. One could argue that Amazon's unfair tax advantage over bricks and mortar book retailers is helping to drive them out of business. Reportedly, Amazon already has a 25% share of the UK book market. What then for the future prices of books? No monopoly can ever be trusted to work in the public interest. But potentially far worse than all these is the threat to democracy from plutocracy.

Ever since World War 2 the disparity between income groups has widened, first slowly but now rapidly. A key component behind this is the growth in global tax havens. As Angel Curria, head of the OECD warned, big corporation tax avoiders  "will undermine democracy. This is about the survival of democracy." If civilization is to work harmoniously then those who enjoy its benefits must also be prepared to pay their fair share of the costs. The warning signs of failure to do so are plainly evident. Greece came close to anarchy over austerity measures brought on by rife tax evasion, corruption and crass economics. Spain is flirting with political dismemberment while the wealthier, economically more responsible EU members are tiring of subsidising fiscal delinquents. Most of their citizens believe that their governments will renege on the their debts.* If nothing is done to reform rich-world financial centres as well as island tax havens then anarchy on the streets is not a fanciful notion.

Fortunately, the right noises are now being made by governments. France has slapped Amazon with a $252 million contested demand for back taxes, interest and penalties. It has been rumoured that Google may also receive a French tax demand for one billion Euro. The UK Government is suggesting that the public sector should tie their contracts only to companies that pay their fair share of tax. This shows the huge importance of concerted power because such spending accounts for £1 in every £7 spent in Britain. It signpost the way consumers should go. Consumers hold the ultimate weapon but for it to be effective it must be concerted and sustained. No global corporation, no matter how big and wealthy, can withstand consumer action through boycott. It is every company's worst nightmare and it has already been proved against Starbucks, who have now agreed to pay £20 million in corporation tax over the next two years. But be not deceived. It is a short- term sop akin the the Roman emperors throwing bread to appease the Roman mob. Such boycotts also worked against multi-nationals using child slave labour in the clothing industry.

The likelihood, however, is that consumer protest will wane and the matter soon forgotten. That would be risky because although a global initiative is under way to clean out the Augean stables of tax avoidance it will take years to reach consensus, if ever. That is why pressure must be kept up. The public should pressure their MPs and MEPs about what, if anything, they are doing to make the tax regime fairer for all. They should themselves learn more about the main tax exploiters and be prepared to engage in peaceful, lawful protest. Apathy is not an affordable luxury. The next time you sip your Starbucks or Caffe Nero coffee ask yourself if you are sipping to your health or toasting to your descendants' angst. Is that the kind of future you wish to bequeath to your children?
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*Google my blog headline: "Good governance must prevail"

IMO's container weighing compromise shames shipping

In the world of shipping when money and safety issues clash it is money that prevails. That, essentially, is at the root of the IMO's compromise last week to an amendment to make container weighing mandatory for all the world's ports. But for compromise read bastardise for the watering down of the amendment castrates it so much as to render it of dubious, disturbing value. Consequently, more ships and seafarers, road users and port workers will continue to suffer unnecessary loss and injury at the altar of Mammon. The environment, too, can expect deleterious consequences. It is a great missed opportunity, a shameful, shabby compromise and one that will come to haunt the objectors to global, mandatory container weighing as the risks rise with the growing size of container ships.

What the IMO has settled for is the decision by its sub committee on dangerous goods, solid cargoes and containers to accept an alternative mode of verification to the mandatory weighing of packed shipping containers, much to the chagrin of the International Transport Workers Federation (ITF) who since 2007 have been lobbying for a system of mandatory weighing of containers. This serious watering down means that governments will be allowed to either choose the gold standard of mandatory weighing or the lesser measure of certifying containers based on an unformulated process of verifying the weight by adding together the different constituent parts of a container load at unspecified times and places along the transport route.

"Opportunities to implement this compulsory system have been missed and as a result the ITF has launched the container weight campaign," says ITF. What the ITF and transport unions want are: 1) An international law requiring the mandatory weighing of loaded containers, 2) A process in place to address misdeclaration of container weights, 3) The ship's master to have the ability to refuse to load un or misdeclared containers.

Other interested objectors to the compromise include the United Sates and Danish governments, The World Shipping Council, The Baltic International and Maritime Shipping Council, The Institute of Chartered Shipbrokers, the International Association of Ports and Harbours and the International Cargo Handling Coordination Association. This is curiously at odds with bodies like the Global Shippers Forum (GSF) praising the IMO for making the 'right' decision and that the compromise proposal was "the best possible outcome for shippers and the maritime industry". This apparent chutzpah, however, becomes less curious when one considers what the GSF is. It does not represent the carriers (shipping lines)  nor the governments who are routinely defrauded of billions of pounds every year through deliberate under declaration of container payloads. Carriers lose huge sums because they charge by the container not the cargo weight within and there are limits to the maximum weight allowed in them. This means that if shippers and/or their packers were honest about cargo weights they would have to hire many more containers. Governments lose heavily because their import taxes are calculated on cargo weight.

An idea of the scale of the fraud can be adduced by the numbers of TEUs shipped by sea six years ago -- 141 million, or 1,272 million tonnes. The GSF is a body representing shippers' interests, i.e. the owners of the cargoes whichever way they are transported. On their website they crowed that they had "persuaded the ILO/IMO not to introduce new regulations increasing shippers' responsibilities for the safe stowage of containers throughout the whole supply chain in favour of enhanced guidelines in the promotion of training and best practice." It went on to say that it believes the compromise proposed is "the best possible outcome for shippers and the maritime industry as it provides a flexible and workable solution which can be adopted by industry without significant cost or delays in the supply chain.

One could be forgiven for thinking that the reasons they put forward for the need for compromise  are shallow if not disingenuous. They and the IMO argue, for example, that a number of countries and interested parties had made the point that there are many ports in the world where there is not the equipment nor the finance to acquire it to weigh every container and so an alternative method was needed. This seems a shallow, if not baseless, argument because the cost of retrofitting container handling trucks with weighers and linking them with the terminal operating software is tiny when set against the extremely costly port container handling equipment. It is not, therefore, an unrealistic expectation to fit mobile port container handlers like RTGs, reach stackers and straddle carriers with weighers. Weigh bridges would not be feasible as these would be delaying choke points while ship-to-shore cranes so fitted would be too late in the handling process.

To claim it is in the best possible interests of the maritime industry would strike a discordant note with the many bodies who opposed or complained about the compromise deal. Apart from the bodies already mentioned they also include: Asian Shipper' Council, the European Shippers' Council, the European and International Freight Forwarders Association and the European and Maritime Terminals and Stevedores representative who all complained that the compromise proposal was based on insufficient evidence and would make little difference to ship operations. The European Shippers' Council went further, urging that the regulation covers only one aspect of the dangers of working with containers and so ignores others such as stacking and packing of containers and as a result will do little to enhance overall safety standards.

                                                            ITF fights on

Explaining the flaws in the IMO's compromise to the amendment, Paddy Crumlin, ITF President and Dockers' Chair, said: "We have a compromise that some countries will put in place a process that is likely to be bedevilled by the obvious questions: Who will certify, when and how?" They now seek transparency and clarity from the governments that fail to take up the safer method of how they plan to made certification work. "We are not prepared to walk away from this so we are redoubling our campaigning efforts and planning further lobbying," said Mr Crumlin. Concluding, he said: "It must be made a legal requirement that containers are weighed accurately. There must be repercussions for those who misdeclare. That's what we are campaigning for because anything less is just not good enough"

The GSF maintains that the majority of shippers act responsibly and comply with their responsibility to make accurate cargo declarations. That may be so but evidence suggests that the minority of fraudsters is so big as to pose an unacceptable, global risk to seafarers, dockworkers, road users and the environment. ITF has consistently been of the opinion that the incidence of misdeclared and overloaded containers is widespread in the shipping industry and any solution that does not require the container to be weighed before loading will be subject to abuse. They base their view on container ship loss investigations by bodies like the Maritime Accident Investigation Branch (MAIB). When the container ship, MSC Napoli, was beached in 2007, MAIB found that no less than 20% of all the on-deck containers were over 3 tonnes heavier than their declared weights and in one case the difference was 20 tonnes. This was not carelessness on the part of container stuffers; it was deliberate fraud. On this, MAIB was scathing about the marine industry's hypocrisy. "While key industry players will attest that safety is of paramount concern, evidence obtained during this and other MAIB investigations suggests that in reality the safety of ships, crews and the environment is being compromised by the overriding desire to maintain schedules while optimising port turnaround times," it said.

Only two months before the IMO watered down the amendment, the 90,000dwt container ship, MOL Comfort, broke in two, subsequently caught fire and sank, fortunately without loss of life. The insurers for the 5-year old, 8,000 TEU ship reportedly may be in for a US$400 million bill plus the value of cargo lost. Had this loss occurred close to shore its 3,100 tonnes of fuel oil would have posed a serious environmental threat. The causes may never be known but the smart money is on the longitudinal stresses induced by under-declared container weights which shippers routinely refuse to take with any seriousness. There have been plenty of other warnings about excessive container weights leading to dangerous incidents which are not always allied with adverse sea conditions. Feeder container ships have regularly been rolling over, even against quay walls. The MOL Comforts' loss also brings into question whether the construction standards of large container ships are good enough to stand the potential rigours at sea. If this writer were a shareholder in Maersk he would pray nightly that its launch of the world's largest ship, the 18,000 TEU vessel, Maersk McKinney Moller, will never mean accepting containers that have not been weighed at ports. Its loss at sea fully loaded with, say, 182 million ipads would run into billions of pounds, a thought that should also worry insurers.

The MOL Comfort loss, however, failed to concentrate minds at the IMO deliberating the container weighing issue. It is hardly surprising. Shippers' organisations have been defending their flawed position on container weights for over 40 years. It is stark testimony to the industry's overriding will to put money before reasonable safety practices, but it is tainted money that will most assuredly become blood-stained.
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