Monday, June 26, 2017

Hard Externalities in a Long Supply Chain

Hard Externalities in a Long Supply Chain
USA Today recently put out a great in-depth report on short-haul trucking out of LA, called "Rigged". These are not the 18-wheelers you pass on a cross-country road trip, but rather trucks that take goods from a port in Southern California to local warehouses and rail yards: "one small step on their journey to a store near you." 

After taking on unexpected debt at the behest of their employers, these short-distance truckers became embroiled in what has been described as a modern day form of sharecropping: coerced into debt by employers who then used that debt to exploit them, and to keep the workers captive.

Following a seemingly common-sense law requiring short-haul trucks to reduce their pollution emissions, trucking companies were faced with a tough choice: modernize their fleet overnight, or go out of business. 

Many of these companies decided the best move was to pass along the cost of the new trucks to their workers: asking them to turn in their old trucks as a down payment, sign a contract on the spot to take on six figures of new debt, or be fired. To make matters worse, many of the truckers were immigrants, and could not interpret the contract without the help of a translator or an attorney, neither of which were available.

Suddenly with a huge truck payment due each and every month, truckers were loathe to upset the owners who decided who got good routes, and who did not. Drivers were coerced into working twenty hour days, in violation of federal law:
"Trucking companies force drivers to work against their will – up to 20 hours a day – by threatening to take their trucks and keep the money they paid toward buying them. Bosses create a culture of fear by firing drivers, suspending them without pay or reassigning them the lowest-paying routes."
Truckers were not allowed to work for any other employer despite being "independent contractors", and in some cases were physically restrained from going home until work was completed.
"To keep drivers working, managers at a few companies have physically barred them from going home. More than once, Marvin Figueroa returned from a full day’s work to find the gate to the parking lot locked and a manager ordering drivers back to work. “That was how they forced me to continue working,” he testified in a 2015 labor case. Truckers at two other companies have made similar claims."
Truckers were often paid absurdly low wages despite long hours worked, as owners passed expenses back onto their labor force.
"Employers charge not just for truck leases but for a host of other expenses, including hundreds of dollars a month for insurance and diesel fuel. Some charge truckers a parking fee to use the company lot. One company, Fargo Trucking, charged $2 per week for the office toilet paper and other supplies...
A stack of weekly paychecks he keeps in a drawer at home shows his worst weeks. He grossed $1,970 on June 3, 2011, but it all went back to QTS. After the lease and other truck expenses, he took home $33. 
On February 10, 2012, he took home $112 after expenses.
The next week, he made 67 cents."
The workers suffered under these conditions with the promise of someday owning the vehicles they were making monthly payments towards. But in many cases the truckers were fired, forfeiting all the money they had paid towards the truck over the years.
Many drivers thought they were paying into their truck like a mortgage. Instead, when they lost their job, they discovered they also lost their truck, along with everything they’d paid toward it. Eddy Gonzalez took seven days off to care for his dying mother and then bury her. When he came back, his company fired him and kept the truck. For two years, Ho Lee was charged more than $1,600 a month for a truck lease. When he got ill and missed a week of work, he lost the truck and everything he’d paid.
The story is beyond depressing, and eye-opening for me, since I shop at many of the stores that are receiving these goods at the end of the long supply chain: Costco, Target, and Home Depot. These short haul truckers are not taking their goods to Neiman Marcus or Barneys of New York: stores that reflect elitism, or yuppie consumerism. Rather, these are establishments frequented by people who, like me, consider themselves frugal, and who are indeed trying to push back a little on American consumerism. 

One takeaway is that I, as a consumer, am at least a tacit participant in the exploitation of these truckers, since this is apparently the way things get from Asia, through the port of Los Angeles, onto a train or a long-haul truck, and to a warehouse store in our local community while keeping the sticker price low. My consumption has an unfortunate externality: a cost that we in some ways cause, but don't feel ourselves, and indeed aren't even aware of.

My desire for affordable goods, and perhaps my frugality itself, ended up unwittingly hurting a bunch of truckers, as the downward pressure I put on prices was felt by Home Depot and Costco and Target, then onto the logistics companies in their supply chain, all the way down to the individual drivers. Like, really hurting them, to the point of economic ruin in some cases.

So what should I do about this? 

For one, I could try to shorten the supply chain for the things I buy. If I really want to understand where things come from and make sure I feel good about the business practices in each link of the chain, a logical conclusion is to buy things with shorter supply chains. That probably means buying local.

For people who know me personally, they understand the idea of buying locally is a hard one for me to come to terms with. I work in supply chain management, and like most of my colleagues, I'm a globalist at heart. Or maybe a recovering globalist now. 

Still, as the USA Today story shows, it's nearly impossible for a consumer to really understand the end-to-end lifecycle of our purchases if they're traveling halfway around the globe. Do we know how well the workers putting those goods onto shipping containers in Hong Kong are being treated? How much thought do we give to the conditions in factories in Asia, or to the workers in the mines where the raw materials that eventually make up our goods are sourced? 

If our goods are only traveling across town, or maybe across the state, we can at least see the whole chain, and can do a better, if not perfect, job of understanding how the things we want and need get to our stores.

Another takeaway could be a type of activist consumerism: I could refuse to buy from Costco and Target and Home Depot until they put pressure on this part of their supply chain, and ensure their suppliers' workers are being treated fairly. I could tweet about it, too, and try to get others to stop spending their money with these massive corporations. 

Voting with our dollars is a common refrain, even if research shows that boycotts have questionable effectiveness. And, not to be a defeatest, I'm not entirely sure these big companies care what drives the decisions of we frugal consumers anyway. Since we buy so little, we're probably the least important customer group in their portfolio.

Nonetheless, I feel like we should do something. It's weird to find out you're contributing to modern day sharecropping, and then go to Target to buy some sunscreen and lotion for your upcoming trip. Which is, ironically, what we were planning to do tomorrow: to make a trip to Target. We are traveling abroad and, human suffering notwithstanding, we would like some socks and deodorant.

Mrs. Done by Forty and I don't have a fantastic idea of what to do instead. Should we shop at Walmart, the store we boycotted for over a decade? Maybe CVS, or Bashas, our city's local grocery store? 

Suggestions are welcome. Because in our quest for cheap goods that fit within our frugal budget, we up and accidentally contributed the exploitation of poor and immigrant workers, in unwitting support of that quintessential capitalist goal: to keep costs down.

*Photo is from Road Warrior Press at Flickr Creative Commons.


  1. When I read the article, I was thinking that this is what the future of jobs will be. Automation, globalization and competition could lead to modern day employees turn to indentured servants.

    Unfortunately, I am not smart enough to know how to make changes..

    1. Agreed: there are a lot of downward pressures being put on companies, and they're going to look at their labor force to absorb a lot of that. I think this is an extreme case, and an illegal one: but perhaps this is a canary in the coalmine situation.

      Automation in particular is going to be terrible for these truckers. How many more years before we have fully automated big rigs? Two? Five? That is coming, and right quick.

  2. This just shows that no store company is immune or above exploiting workers for profit. Thanks for sharing this powerful story - I had no idea!

    1. Thanks, Laurie. I agree that it's almost impossible to trace the path of our goods end to end, let alone really understand how workers are affected in each link of the chain.

      The clumsy but effective answer might be to buy small and buy local. While I don't really believe in the approach, I believe in the benefits the approach has: more knowledge about your goods and services, and likely more ethical treatment of the animals we eat, the people we interact with via purchases, and the planet.

  3. I am constantly trying to balance frugality with ethical consumption. And it can be really, REALLY hard. I'm so depressed I didn't know about the shitty situation these truckers are in. I'll be interested to see if you find more ways to shorten the supply chain.

    1. I am starting small, at first. Trying to shop (most of the time) at our local grocery chain, Bashas. But we still are ordering from Amazon, which is maybe the most opaque supply chain I can think of.

      Maybe that would be our next step: just stopping our Amazon purchases...

  4. A sad tale but one that doesn't surprise me one bit (sad face at my cynical outlook). I always think if something is ridiculously cheap then someone has likely been mistreated or at the least grossly underpaid to keep the costs down, as that is the most simple scenario, I can't really think of any other way of achieving such a feat (magic?!). Having said that, it doesn't stop me from buying that sort of thing... most of the time.

    Can you be sure your local grocery store isn't ordering stuff from half way around the World, or is it one of those "we buy everything local" type places? If the latter then that's all good.
    How much are you adding onto your grocery bill for the privilege just out of interest?

    Local/farm/organic produce in the UK is so much more expensive and hard to obtain than the usual chain store grocery stuff I just can't be bothered with it... I know that's harsh but with this sort of thing I practice a "you can't beat them so join them" sort of mentality... poor show I know.

    1. I'm sure that for many of the items in our grocery store, they are traveling half way around the world. And for some of the produce, it's being grown in our city. (I'd wager this is the case for almost any grocery.)

      But there are some benefits for our local economy (i.e. - taxes) when the 'reseller', so to speak, is also locally owned. And many of the 'store brand' products are local as well: generally, the choices of food in Bashas seem to traveled less far than those at, say, Safeway.

      As for the additional costs, I haven't noticed many yet. Basha's is actually a bit cheaper than Safeway (maybe on par with Fry's/Kroger). But it's farther away: about 4 miles instead of 1 or 2. Still, nothing too crazy.

      I think the harder thing for me to do is doing this kind of shopping with other stuff. We get almost everything that we can from Amazon, simply for the convenience. Shopping around is a real pain, especially with brick and mortar.