Tag: unions

OM in the News: The Port Strike and Automation

An economically devastating port strike was averted last week after a 3-day work stoppage. Dockworkers secured a 62% pay raise, but the central dispute was never solely about wages, even though the tentative deal that averted the strike will result in dockworkers at the NY-NJ port earning more than $500,000 a year on average.

Port automation could ease supply chains

The ocean carriers, which pay the bills at U.S. ports, can perhaps afford that level of increase. What they can’t afford, and the U.S. economy can’t either, is a ban on the future use of automated cargo-handling technology at ports along the East and Gulf coasts. “Absolute, airtight language that there will be no automation or semi-automation” remains a key demand of the Longshoremen’s union that still must be negotiated ahead of a new Jan. deadline.

Why is this such a crucial issue, and why do port managers adamantly oppose the demand? The key reason is the need to create future port capacity. Since the U.S. is building new port facilities at a snail’s pace, the only way to expand capacity is by handling more cargo more quickly through existing facilities. The only way to do that is with automated cargo handling.

The lack of automation in the U.S.—only 3 port facilities are fully automated, all on the West Coast—exposes ports as an Achilles’ heel of U.S. trade competitiveness. High costs and inefficiency have long been the status quo. Not one U.S. port ranks in the top 50 globally in productivity, reports The Wall Street Journal (Oct. 8, 2024). Charleston is the highest at No. 53.  The consequence of low port productivity is that “instead of facilitating trade, the port increases the cost of imports and exports, reduces competitiveness, and inhibits economic growth,” says the World Bank.

The purpose of automation isn’t to lower costs by replacing workers with machines but to increase it within existing port footprints to accommodate growth. The fully automated Long Beach Container Terminal can handle 12,000 to 15,000 20-foot equivalent units per acre per year versus 1/2 that at a nonautomated terminal.

Classroom discussion questions:

  1. What are the top-ranked ports in the world and how does the U.S. differ from them?
  2. What can the U.S. do to be more competitive?

OM in the News: Your Long Wait for Packages

Global supply chains are buckling, driving up prices, creating shortages and frustrating consumers. If at any point in the past 7 months you looked out to sea from the LA-Long Beach container port complex, the largest in the U.S., you would see the problem: up to 40 container ships anchored, with nowhere to go. There’s no space in the clogged ports. To put it another way, you’re looking at as many as 100,000 containers—holding everything from running shoes and home electronics to frozen seafood and furniture—waiting to be unloaded and then shipped to factories, stores and homes across the country.

U.S. ports are severely stressed, a problem that won’t disappear with the pandemic, writes The Wall Street Journal (June 3, 2021). Not one U.S. port was represented in the top 50 container ports globally in productivity performance. Why? The answer comes down to a complicated transportation market. Capacity is deployed according to shifting company and investor calculus, a complex system of handoffs between land and sea that has long resisted coordination.

There are no solutions in sight. In Asia, ships are worked 24/7, or 168 hours a week, compared with 16 hours a day, or only 112 hours a week, at LA-Long Beach. Terminal gates used by truckers to deliver and receive seaborne containers operate only 88 hours a week, vs. 168 in Asia. For larger ships, it takes 24 seconds on average to move a container at the Chinese ports, vs. 48 seconds at LA That leaves the port system chronically vulnerable to unanticipated volume surges.

Global Supply Chains Pressures

Longshore labor relations also hinder improvements in productivity. A decades-long history of toxic labor-management relation has led to huge cost increases that discourage operators from expanding work hours, limit their ability to automate terminals, and end in avoidable delays during contract negotiations. And there is no sign that this labor-management paradigm will change with the new pro-union presidency.

Classroom discussion questions:

  1. Why does productivity lack at US ports?
  2. What can the US do to unclog ports?

OM in the News: The Amazon “Factory” and Unions

All of our students are knowledgeable about Amazon, its growth, its products, and its hyper-wealthy chairman, Jeff Bezos. Many may have followed the news about the recent attempt to unionize at Amazon, starting with the Bessemer, Alabama, fulfillment center. The New York Times (April 12, 2021) takes an interesting perspective on the story, tracing the Bessemer facility to its origins as steel plant in the mid-20th century that provided middle-class lives to its workers. Now defunct, the steel factory is still a “factory”, writes The Times, but of a different sort, with Amazon paying $15 per hour, double the federal minimum wage.

That is not the kind of pay that seems likely to help again build a thriving middle class. And Amazon jobs are looking more and more like the future of the U.S. economy, with the company growing from 750,000 to 1.3 million workers in the past 18 months.

amazon book

A new book about Amazon, called “Fulfillment,” points out that Amazon’s warehouse jobs have a lot in common with the industrial jobs of the past. They are among the main options for people who graduate from high school or community college without specific job skills. They are also physically demanding and dangerous.
Fulfillment reminds us about the injuries and deaths that came with old factory jobs, and documents the similar risks that warehouse jobs can bring. Jody Rhoads was a 52-year-old mother in Carlisle, Pa. Her neck was crushed by a steel rack while she was driving a forklift in an Amazon warehouse, killing her. (“We do not believe that the incident was work related,” an Amazon manager reported to the government, falsely suggesting her death was from natural causes.)
One former Amazon worker adds: “Amazon is reorganizing the very nature of retail work — something that traditionally is physically undemanding and has a large amount of downtime — into something more akin to a factory, which never lets up.” And rather than working in teams of people who are creating something, warehouse workers often work alone, interacting mostly with robots.

Classroom discussion questions:

  1. Why did the Bessemer workers soundly turn down the union organizing effort?
  2. How do fulfillment center jobs resemble factory jobs? How do they differ?

OM in the News: U.S. Steel’s Last Stand–Alabama

Nucor's plant in Decatur, Alabama
Nucor’s plant in Decatur, Alabama

“At this unionized U.S. Steel World War I-era mill near Birmingham, the construction of a new furnace signals a major shift for American steelmaking, as the country’s major steel producers face mounting pressure from a flood of low-priced imports,” reports The Wall Street Journal (June 19, 2015). U. S. Steel’s first electric arc furnace in decades is a step toward replacing the iconic steelmaker’s stable of iron-ore-reliant blast furnaces with a more flexible scrap-based process that allows for stopping and starting production when there isn’t enough demand to keep churning out steel.

Just over an hour’s drive away, in Decatur, Nucor, the other big American steelmaker, has been turning old cars and refrigerators into fresh batches of steel for more than a decade, with 2 electric arc furnaces and a flexible, nonunion workforce. The 2 companies are the only U.S.-based steelmakers left in the top 50 global steel producers, a list now dominated by Chinese companies. But they represent starkly different approaches to the same business. U.S. Steel has 2,500 workers currently laid off. Nucor has an unofficial nonlayoff policy. U.S. Steel has lost money in 5 of the last 6 years, while Nucor has been consistently profitable.

The Nucor plant in Alabama produces roughly the same amount of steel as U.S. Steel, 2.4 million tons, but employs 1/3 the workers. Managers and workers emphasize their unique brand of steelmaking. Nucor employees call each other “teammates” and talk up their competitiveness. The company’s incentive-based salary structure means worker salary can range from over $100,000 to less than half that. Workers get a scorecard assessing their performance each time that they make a batch of steel. “A high percentage of our teammates are athletes or military,” said Nucor’s plant manager. “We hire can-do innovative guys who want to bust their butts every day.”

Classroom discussion questions:

1. Outline the human resource differences between the companies.

2. Why are there only 2 American steel producers?

OM in the News: Incentives Drive Boeing Back to Washington State for the 777X

777XAfter much wrangling and predictions that Boeing would locate its new 777X plant in nonunion South Carolina, the firm may have reached deals with state and IAM union officials to win the aerospace giant new tax breaks and 8 more years of labor peace in exchange for building its planned jetliner in Washington. The Wall Street Journal (Nov.6, 2013) reports that Gov. Jay Inslee called for a special session of the state legislature to approve a package of tax and policy incentives valued at $18.7 billion. Inslee said approval of that package and of the labor agreement are necessary for Boeing to make the 777X in its longtime Puget Sound base. “Inaction will cost the state of Washington,” said Inslee.

The moves capped an intense period of maneuvering over the plans for the 777X, a long-range jetliner considered pivotal to Boeing’s future. The 777X, scheduled for its 1st delivery by 2020, is likely to be the last major new jet from Boeing for many years, and there has been intense speculation over where the plane and its huge carbon-fiber composite wings would be built. The Wall Street Journal reported just last week that Boeing was leaning towards a nonunion plant in South Carolina. Boeing also announced it would give “much” of the engineering work on the 777X to engineers in 5 U.S. states and Russia, with no mention of plans to use engineers in Washington.

The South Carolina facility, Boeing’s first aircraft assembly plant manned by a nonunion workforce, has been a source of tension with the IAM. Boeing selected it in 2009 as the site of its second 787 Dreamliner assembly line, prompting a complaint from the National Labor Relations Board that the move was retaliation for a 2008 strike by the IAM that halted Boeing’s assembly lines for 58 days. The potential new agreement with IAM leaders conveys to 2024 and includes a $10,000 signing bonus for workers. The union said the deal would provide an “unprecedented degree of labor stability in the volatile and competitive industry.” “It’s a tough one, if you call their bluff and you’re wrong, then you’re just kicking yourself,” adds a machinist.

Classroom discussion questions:

1. Why is this such a critical OM decision for Boeing?

2. What factors discussed in Chapter 8 did the company consider in selecting Washington over S. Carolina?

OM in the News: Walmart vs. Walmart

walmartAlthough I am not a big fan of shopping at our nearby Walmart Superstore, I respect the company from an OM perspective. It has become a leader globally in sustainability (see the case study in Ch.7) and its feats in supply chain management and logistics are legendary (a fact we discuss in Ch.11). Further, my ever-budget conscience niece continually praises the store for its across-the-board low prices.

But as Businessweek (Dec.14-21, 2012) points out in its recent cover story, the company does not always have its employees best interests at heart. Walmart has been vilified by activists who say the company’s relentless growth has come at the expense of its workers and the law. Since 2005, it has agreed to pay about $1 billion in damages in six different cases related to unpaid work. The largest private employer in the U.S., with nearly 1.4 million workers in 4,602 stores and sales of $464 billion, Walmart’s operations management efficiency has remade the retail industry. Its decisions about workers’ schedules, wages, and benefits likewise ripple through the industry.

Here is a brief history of labor disputes in the company:

1970 Walmart’s lawyer calls Missouri clerks “blood sucking parasites” to stop their union drive.

1992 Sam Walton writes in his autobiography: “I have always strongly believed that we don’t need unions.”

2000 Butchers in a Texas Walmart vote to unionize, spurring votes at other stores. Two weeks later, Walmart closes its 180 meat counters and switches to prepackaged cuts only.

2001 A class action suit claims gender discrimination. Walmart fights the case for 10 years, finally winning a Supreme Court ruling by a 5-4 vote.

2003 Walmart is caught using illegal immigrants to clean stores in 21 states. It pays an $11 million fine.

2004 Workers at a Canadian Walmart unionize. Walmart closes the store the next year.

2005  A California jury fines Walmart $172 million for failing to provide meal breaks to 116,000 workers.

2006 A Pennsylvania judge orders a $188 million payment for Walmart’s failure to pay 187,000 workers for “off-the-clock” work.  Weeks later, Walmart settles 63 other class actions over unpaid work for $640 million.

2009 Walmart pays 87,000 Massachusetts workers for shortened breaks and “off-the-clock” unpaid work.

2010 Walmart pays $86 million for failing to pay vacation wages to 232,000 California workers.

Discussion questions:

1. Why does Walmart fight to keep out unions?

2. What issues regarding Chapter 10’s discussion of human resource strategy arise from this article?