Pulling the Curtain Back on Just-in-Time Delivery

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This video was recorded on Jan. 16, 2022.

Ordering something on Amazon may be simple, but getting that something to your front door is anything but. It's a topic that Christopher Mims, technology columnist for The Wall Street Journal, covers in his book Arriving Today: From Factory to Front Door -- Why Everything Has Changed About How and What We Buy.

In this episode, Motley Fool podcast producer Ricky Mulvey talks with Mims about his book, covering topics including:

• The roots of the microchip shortage.
• Why Uber (UBER -2.03%) had a difficult time disrupting the trucking industry.
• What it's like to work in an Amazon fulfillment center.
• How to explain the metaverse to your mom or dad.

Christopher Mims: It was absolutely bizarre to me that to this day, to get every single one of these ships into port, in every port, on the face of this earth, a harbor pilot has to risk their life every time.

Chris Hill: I'm Chris Hill and that was Wall Street Journal Technology Columnist, Christopher Mims. When you buy a USB charger from Amazon.com. If you're like me, you're probably not thinking about the thousands of miles the product travels to get to your front door. 

Today on Motley Fool Money, producer Ricky Mulvey talks with Mims about his book Arriving Today From Factory To Front Door Why Everything Has Changed About How and What We Buy. It's a conversation that pulls the curtain back on just in time delivery to show the roots of America shipping prices. They also discuss the microchip shortage and what it's really like to work in an Amazon Fulfillment Center.

Ricky Mulvey: My guest today is Christopher Mims, he's technology columnist for The Wall Street Journal and the author of Arriving Today From Factory To Front Door Why Everything Has Changed About How and What We Buy. Christopher, this is a book about the things we take for granted, essentially the ability to hit a button on Amazon and then have a USB charger show up to your door in some cases less than a day. Was this the impetus to write this book?

Christopher Mims: Yes I wanted to write an explain but of course halfway through my research, the pandemic hit. It really got bigger than that and became about how the supply chain that get us everything that we take for granted have really been tested and now in some cases, have if not broken, really been pushed beyond their boundaries and of course how that's affecting everything around us from the availability of goods to persist and inflation.

Ricky Mulvey: It's about this entangled web of people, organizations and ports where you saw this mix of, in some cases, very human interaction with the goods we buy and then in some cases a very automated system. Can you tell me a little bit about what you saw in Vietnam and how that contrasted from what we have in the ports of the United States.

Christopher Mims: The main port in Vietnam which is the terminal I went to is called Cai Mep. It is average in terms of the level of automation that it has, which means that you have lots of machines, cranes, trucks, but they're all driven by people. Now, that is still an extremely efficient system because the whole thing is overseen by the support management software, which is doing all of these really complicated things in software like deciding when a container needs to move, how to minimize the number of touches per container as it's lifted by these gantry cranes and then lifted by the really big ship to short cranes onto a ship. Because the whole game is when a ship comes in, how do you unload thousands of containers as quickly as possible? Oftentimes it's 24 hours or less or two days or less. Then how do you load the appropriate containers back onto it as quickly as possible? That's all software. That part is very sophisticated, but it's all done by humans. Humans are being directed by the algorithm. Once that container gets to the United States, if it's going to the biggest port on the West Coast, which is LA/Long Beach, two ports that are joined but governed by separate civic bodies. 

Especially if it's at the board of Long Beach, but also if it's at the tray pack terminal at the Port of Los Angeles, those are highly automated ports. What that means is they can stuff more containers into a smaller footprint and they can move those containers off of ships faster. Part of the reason they can do that is because they have so much more predictability because they're getting so many robots which are driven by this software, which is deciding where to move containers. That allows them to schedule the trucks that come in and take the containers out of the port in a much tighter way and the turnaround is much faster. That has been a major bottleneck at those ports. It's not just how can we get the containers off of the ships fast enough, really at this point, it's how can we get them onto trucks quickly enough? That's a place where automation and robotics really helps. That tray pack port, for example, in Los Angeles it's so automated that those containers, once they get off of the ship, that's the last time a human beings involved in moving them around until they get onto a truck. The entire time that they're resident and the port is literally these robots, self-driving robots, moving them around, self-driving cranes, picking them up, stacking them, and rearranging them.

Ricky Mulvey: In a lot of the algorithms you describe, it's all about cutting wasted movement. But even as they get to this thing I kept thinking about reading your book is, even as we get these algorithms looking for wasted movement or trying to solve things like the traveling salesman problem, it still tends to be almost impossible because of the human interaction with it or because of just life happening essentially as these containers move along.

Christopher Mims: Yeah. A supply chain, I call it a physical Internet. The problem is that there is a lot less predictability because you have things like weather. If you're trying to move stuff on trucks, the algorithm can only predict so much.

Ricky Mulvey: You also described some of these absurdities to it, which is you described the card that is caught in Scotland and then filleted in China and then shipped back to Scotland. My question that I wanted to get to is back to Vietnam in a way which is you see these constant shipping for packaging and for assembly. How does that play into something like microchip's where it's being assembled someplace packaged in Malaysia and then shipped to the United States.

Christopher Mims: Microchips really embody the way that manufacturing and supply chain have become one and the same. Because in the old days, days of Ford it was like a steel rubber fuel would go into a factory, raw goods and then finished goods would come out the other end. That doesn't happen anymore in almost any goods. With microchips especially the journey is unbelievably long. I will give you the short version because I love how profitable it is. It starts with ultra pure quartz sand in Appalachia of all places. That is then shipped halfway around the world where it's melted down and turned into like an ingot, which is a single crystal and silicon that might happen somewhere in Australia or something that has been shipped to let's say South Korea, Taiwan, China. Those ingots are sliced into wafers which are going to be shipped to a so-called fab chip fabrication facility where there are hundreds sometimes thousands of individual manufacturing steps to etch the circuit into the chip. 

Then once those chips have been broken off of those individual waivers and tested, then they're going to, let's say the central places like Malaysia for what's called packaging. That's where the chip because into the little black being with legs that makes it look like a bug that's fixed it to a PCB board. Only then may go to a place like Foxconn in Shenzhen or somewhere in South Korea where it's going to be put into a phone and that involves a lot of human labor. That journey you see this individual item crisscrossing the world multiple times. The supply chain is so long that it is tremendously vulnerable to disruption because if anything goes wrong in any of those points, it can impact a significant portion of the world's advanced semiconductor manufacturing. That is an extreme example but as you said, like there are other examples to like card being caught off the Coast of Scotland, shipped to China where it is filleted, frozen and then shipped back to Scotland where it has made into efficient chips. This is around the world journey just to save on labor costs because traditionally at least chip shipping has been so cheap.

Ricky Mulvey: Yeah. I think you've mentioned that a flat screen TV is two dollars to get it through a port.

Christopher Mims: Yes.. That was the case. Now it's 10 times that. Because the cost of shipping container from Asia to the US West Coast was around 2,000 and then it has peaked at as high as 20,000 in the last six months.

Ricky Mulvey: Is shipping costs the only reason for something like microchips? One of the common questions complaints is why can't you just build the resiliency in the United States for that, you have the raw materials here. Why hasn't that been done by a lot of these makers and manufacturers?

Christopher Mims: A short answer is expertise and what's called the path dependence of technological innovation. But the bottom line is that the supply chains to build every little piece of every little thing you need to make a cellphone, let's say that's all within 100 miles of Shenzhen. But all of those individual suppliers and there may be hundreds, or thousands of them. You'd have to recreate that entire ecosystem inside the US. That's why when people say oh we should bring chip production back to the US, great but you're only bringing back a portion of that production. It's almost like if somebody said hey, why doesn't Canada have its own Detroit or something? We'll it's because Detroit is this massive connected web of suppliers all feeding into the big three. You can't reproduce that overnight. As a matter of fact, it takes like a century or if you're China and you really accelerate the process. You can leapfrog and create like the Detroit of electric vehicles which of course they've done now.

Ricky Mulvey: I've heard you reference in other interviews the book Entangled Life by Merlin Sheldrake which is a great book about fungal networks and how they affect life around us are much more complex than we think and do things that almost seemed conscious. What are some of those as you're reading that book about fungal networks and thinking about supply chains, what are some of the similarities you saw from the natural world and are very human world?

Christopher Mims: Well there is this discipline which I really think deserves more attention. It's called industrial ecology. Can we apply what we have learned about the way that ecosystems function to the way that economy's function, like what is the crossover between economics and natural science? Because look, they're both Sciences at the end of the day. I think that what these things have in common is that like the fungal networks beneath our feet on which we depend for all of our food, all of our forests, all of it. They're massively interconnected and they are networks of trade. Like so, trees and fungus are trading sugars for micronutrients all the time. They are using these networks to send the goods to one another. When you look at the global human webs of trade, they're no less complicated. That's why we keep getting caught flat-footed by a natural disaster or factory shutdown in some places we've never even thought about before, turns out to be integral to the production of a drug or smartphones or whatever. It's because there's just this incredibly dense inter-connectedness. 

I think that a useful way to think about that is really to think about it in the aggregate like macroeconomists trying to study this stuff generally by looking at top-line numbers but there is a lot of value in examining the individual networks of trade and components. Frankly, there are people who are in business schools everywhere who study this, but they've been ignored for a long time. One person I talked to said, like the operations professors here, this is really their time to shine because normally people are like, well, we don't really care, logistics is boring. It turns out logistics is not just fascinating, but essential. If you look at the world's biggest companies. Who is the CEO of nearly the world's biggest company? Tim Cook, logistics experts. There's a reason for that. Why is Toyota the biggest manufacturer of automobiles and the world? Logistics. This is really the secret sauce for so many of the biggest companies and those who can't master it, just get eaten.

Ricky Mulvey: But in some cases it can be a life or death experience for people like harbor pilots who are taking these ships just a few miles into the port.

Christopher Mims: Yeah. That's the thing that's so remarkable about pressing by now and getting something tomorrow is that there's so much automation, there's so much AI but there are parts of it that are just absolutely 18th century. It's like something out of our Herman Melville novel. One of those is the harbor pilot. Ninety percent of the goods that are around you right now came to you by ship. Every single one of those items to get to you in a containerized ship. At one point a harbor pilot had to get on a small dinghy harbor boat and travel out to this giant container ship that's waiting in the harbor and get onto that ship in order to navigate it into the port because it's so hard to navigate into ports. You need a specialized pilot to do that. You can't have a regular pilot. 

Those pilots actually live at or near the ports that they are employed by. In order for that harbor pilot to get onto that giant ship. They literally have to stand on the edge of their harbor pilot boat and time it just right and just gingerly take a step-up. It's like almost like a little leap onto what is to this day a rope ladder and then scramble up that rope ladder to get into this giant ship that can be carrying hundreds of millions of dollars worth of goods. Harbor pilots over the course of their careers have a one in 20 chance of dying on the job. If they mistime that little leap or don't scramble up the rope bladder fast enough than the swell of ocean is going to catch them in, suck them under, and then their survival rate is like zero. It was absolutely bizarre to me that to this day, to get every single one of these ships into port, in every port, on the face of this earth, a harbor pilot has to risk their life every time.

Ricky Mulvey: For you to get your flat-screen TV or your USB charger. It goes into this theme where supply chains now have these jobs that are intensely skilled harbor pilots, long haul truck drivers. Then you also have companies like Amazon trying to remove every piece of skill that the human needs to have to the point where you're just essentially a placeholder between robotic assembly machines.

Christopher Mims: You're the glue between the islands of automation as people in the industry call it. It is very polarized and I think this is true of a lot of our labor force. This is why I think Logistics is such a powerful lens for the present and future of work because you assume any jobs that are deskilled, whether it's fast food or call centers, or are working in an Amazon performance center. Then you have so many people above the API as they say that so many people above the automation and the algorithm, whose jobs are incredibly important and have more leverage than ever in their paid more than ever.

Ricky Mulvey: Some of this is a product of, as you described, Taylorism and Bezosism.

Christopher Mims: Yeah. I mean Fredrick Taylor so he is just like the OG of management consultants at the beginning of the 20th century. He famously or infamously figured out all the time and motion studies in the ways to optimize the actions of people who work in factories. That thing happened at the same time as Henry Ford was figuring that out in his factory. That was really the birth of this modern industrial labor that gets depicted by Charlie Chaplin in the movie Modern Times and that thing. Then Bezosism is just a modern version of all that time and motion and optimization stuff. Where every single action is intensely monitored by technology. If you work in an Amazon fulfillment center, there is a camera that is watching every single move that you make as you pluck items off of a robotic shelf and put them into a bin to be sent on their way to a customer. Before they had cameras, they actually would, and this's still true a lot of facilities, the gun that you were scanning items' UPC code with was monitoring the rate at which you are doing that. If you slow down for even just a few minutes, it would beep at you and be like, Hey, time-off task, like I'm flagging you. If this happens again, I'm going to warn your manager who is going to give you a talking to you and ultimately could fire you. It is this very intense surveillance which is used to optimize workers. I want to say to within an inch of their life. Amazon would take issue with that because it is a floating rate at which people are pushed to work at but the system is really designed to push people to work as hard as they can and as efficiently as possible. Of course, for some people that's too much and that's why Amazon has had problems with worker injuries.

Ricky Mulvey: It fundamentally changes the relationship a worker has with their boss. Which is instead of the bosses saying, hey, I noticed this. Now the bosses in a place like an Amazon Fulfillment Center is just looking at the algorithm and almost reporting to the employee.

Christopher Mims: The boss gets to play the good cop in this equation and the bad cop is the algorithm which is actually monitoring the pace at which you are working. This is true across a lot of industries and you have seen it with another examples like automated scheduling systems. Starbucks had trouble with this few years ago where people would get scheduled for a shift late at night. Then the algorithm with no human involvement would schedule them for the next shift, first thing in the morning, so they'd be going home at midnight and then coming back 5:00 AM to reopen. They got in trouble for that and changed their policies. I think it's very telling that when you look at why workers unionized at the first unionized Starbucks ever just happened and I believe Boston. It wasn't about pay, wasn't about benefits. It's about they want more control over the conditions of their work. The same thing happens every time workers walk out at an Amazon Fulfillment Center. Workers want some agency. It's partly about dignity, but for a lot of people, it's also just that they legitimately want to be able to push back and be like, sometimes I have a bad day or sometimes the algorithm or this thing that's monitoring my work is misunderstanding what and why I am doing, or maybe there's some perverse incentives here, which are pushing me to bump up the numbers that the algorithm is measuring. But that's not actually leading to good work outcomes.

Ricky Mulvey: The work becomes repetitive in a way that injures. You talked to one Amazon worker who I think was there for about six weeks and then ended up getting carpal tunnel.

Christopher Mims: I think Amazon does a very poor job of screening out people who are most likely to get injured. We all know that working in these facilities is difficult. It's repetitive, it's hard. That's why people who work in them are called industrial athletes. The same thing is if you were going to go be a logger, work in construction but people above a certain age, their bodies cannot cope with the pace of work and the repetition of things over and over again. There's also a danger if you do enough repetitive work like this that you can get repetitive stress injuries that show up years or decades later. That was told to me by academic researchers who had actually worked with Amazon, with workers in their own facilities said we are trying to optimize workflows at Amazon to prevent injuries. Even that might show up years later.

Ricky Mulvey: This is something where you would almost. A company like Amazon really prides itself on Kaizen, continuous improvement if a worker sees something going wrong, they can help fix it. You don't see that play out for something like preventing workplace injuries, would you say?

Christopher Mims: No. Amazon uses continuous improvement, so-called lean principles, Kaizen, Toyota Production System, whatever you want to call it. They definitely use that to identify problems and bottlenecks and such but integral to the original formulation of that at Toyota was workers have a lot of agency, workers have a so-called andon chord next to them, which they can pull stop the entire assembly line. We have a problem right here, we need to deal with it. Any Amazon worker, thanks to Amazon's automation, totally interchangeable and can be replaced with somebody who can be trained within a day, has a very different relationship with their employer than a lifelong assembly worker at an automotive plant in Toyota in a country like Japan, which has a totally different relationship with work and with the social safety net. Amazon has really imported a lot of those ideas as have other manufacturers in the US. But the thing that they did not import was the agency of workers.

Ricky Mulvey: Do you see this is like a long-term risk for Amazon, which is simply. The turnover is so high and they're so large that they might almost run out of people who are willing to do this work.

Christopher Mims: That's a good question. You should ask the same question of Walmart or Dollar General. I think that it is obvious that Amazon now has been offering $22 an hour and a $3,000 signing bonus at some of its fulfillment centers. I mean, this is only two years after they were touting moving to a $15 wage. I believe that Amazon has to raise wages like that in order to attract and retain workers. Does Amazon have enough money to continue to attract and retain people regardless of working conditions? Maybe, but does that affect their bottom line? Is that affecting the profitability of their retail business? I would say absolutely. Could they reorder things so that the workers were maybe working a tad slower but in a more sustainable way and there was low turnover. Probably, but Amazon doesn't seem to want to explore that fork of the realm of possibility.

Ricky Mulvey: I also want to transition and talk about the trucking industry with you, which is a topic I know you're pretty passionate about. The thing that struck me so much is that you have a lot of companies trying to automate trucking as much as possible. You even rode on a truck that was being driven by a computer, by an algorithm. But in so many cases, this industry is driven by human relationships that many tech disruptors have found it very difficult if not in public, Uber Freight, for example, very difficult, if not impossible to completely disrupt.

Christopher Mims: Billions of dollars investment has been important to you. Hey, can't we just replace all of these agents who are assigning loads to long-haul truckers with an algorithm and just keep turned it into a job board or like an Uber type algorithm, like the way the Uber's passenger service or Uber Eats works? The answer is no. This remains an incredibly labor-intensive business. There's a reason that the world's largest logistics company, CJ Robinson, based in the U.S. This is mostly what the do is just thousands or hundreds of agents, just connecting shippers with truckers, and it is because carrying a load of goods, it's not like just picking up a random passenger and dropping them off at a bar 15 minutes later. There's so much that needs to be considered in terms of what driver is this? Are they willing to take this load, can connect up this load with subsequent loads rate like imagine if I live in the East Coast and somebody wants me to haul something all the way to Middle America or the West Coast. Well I'm not going to take that job unless you can immediately connect me with another load going the other direction. These are the problems that algorithms should be able to handle but it remains just this resolutely ad hoc, relationship-based business, which is remarkably immune to any attempts by anyone to automate it. It remains also very fragmented business, partly for that reason.

Ricky Mulvey: Do you think that has to do with one of the reasons it's hard to automate is the,in some cases, race to the bottom for what truck drivers are paid the whole things. I think one of the agents companies in your book describes how he wanted to work with Uber Freight, but then the job he'd got taken away and then he'd seen it was given to someone for a lower wage. There's a little bit less trust with a lot of these large tech companies who want to get involved in the business.

Christopher Mims: Yes, he actually was working with Amazon Logistics for a very short period and he'd felt really screwed by them. The thing is that these people being small trucking companies, which is the majority of truck transportation in America. They're operating on razor-thin margins. The moment that rates dropped for shipping, dozens or hundreds of these little companies get wiped out. Trust is very important, and if you are putting loads on a job board and then you take it off and give it to somebody else right away and it's transparent that's where you didn't like. You're dead to that business and they're just not going to deal with you anymore. I think that's absolutely true, and part of the problem here, is that, trucking in America truck transportation is still relatively cheap because it was deregulated in 1981 under President Jimmy Carter. But that means that there's not a lot of resilience in the system because you have all these owner-operators and small trucking companies, it's pretty easy to get into the business to get alone and a truck. As long as you have drivers with rate driving license, you can just get on the road. But there's not a lot of longevity because these little companies and these little owner operators get wiped out as soon as rates drop because everyone is paid by the mile.

Ricky Mulvey: I've heard you talk about how when trucking became deregulated, a lot of the lobbying groups that represent truckers end up just looking after the largest companies, while that might not better of serve the interest of the majority of those in the trucking industry.

Christopher Mims: The American Trucking Association basically represents America's largest trucking companies in any other industry. That would mean they represented the lion's share of the industry and trucking. Incredibly that means they represent less than 20 percent of the industry. Yet they're the ones talking to Congress, they're the ones talking on the press they're the one setting the agenda, they are the ones you've got a provision in the latest big spending bill that got passed in Congress which expands. It's a smallest program to expand training and licensing of long-haul truck driving to 18-year-olds previously had to be 21, which is in their interest rate. They want more people fresh out of high school to join their big trucking companies and drive for a while because there's an industry with very high turnover, so they constantly need new warm bodies to becoming into it.

Ricky Mulvey: It's not as simple as saying there's a trucking shortage because no one wants to drive a truck.

Christopher Mims: Tons of people want to drive trucks. They just don't want to keep driving trucks.

Ricky Mulvey: I want to ask one question is we're getting to time. You've gotten a little bit about the metaverse and how difficult it is for going away from logistics and how difficult it is for companies to essentially enter and get people to where things are on their face. By talking to a Wall Street Journal tech columnist. I'm going to see my family over the holidays. How do I explain to my mom what a metaverse is?

Christopher Mims: You can just tell her it's mostly nonsense for now. I would say it's the internet in 3D.

Ricky Mulvey: Perfect. My guest today is Christopher Mims he's a technology columnist for The Wall Street Journal. He is the author of Arriving Today: From Factory to Front Door-Why Everything Has Changed About How and What We Buy. Christopher, where is the best place for someone to buy your book?

Christopher Mims: Ironically of course it's Amazon.

Chris Hill: That's all for today. Quick reminder, the stock market is closed on Monday for the MLK holiday coming up later this week. We've got a lot more as earnings season heats up, including the latest results from Netflix, and a deep dive in the financials with Jason Moser and Matthew Franke. As always people on the program, may have interest in the stocks they talk about. The Motley Fool may have formal recommendations for or against, so don't buy yourselves stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you on Tuesday.