Logistics can be informally defined as “getting the right products to the right place at the right time” (Gutelius 2015). The critical logistics, transportation, and warehousing sector has undergone dramatic changes in recent years, partially reflecting the growth of online commerce. The rise of e-commerce and consumer expectations of rapid shipping, for example, have had profound ramifications for the industry and its workforce (Gutelius and Theodore 2019). Some argue that this sector has grown in significance as production networks and economic activity in general have become more widely dispersed (Jaffee 2010).
Recent Trends in Logistic Outsourcing
Previously, manufacturing firms, among the largest users of logistics, ran much of their own transportation and warehousing operations in-house, but the logistics industry has evolved substantially over time (Bernhardt et al. 2016). The “logistics revolution” of the 1970s and 1980s, made possible by computerization, electronic recordkeeping, and federal deregulation of freight transportation, led to both cost reduction and restructuring (Loewen 2018), and by the 1990s and 2000s, there were dramatic increases in the outsourcing of warehousing and transportation.
Moreover, as logistics evolved, retail firms increased in size, and major retailers pioneered new methods to increase efficiency and strengthen control over their suppliers. Walmart, in particular, became known for such practices in its attempt to continuously reduce supply costs, often using its size to exert leverage over labor practices of not only its own logistics workers, but also over those of its suppliers (Bonacich and Wilson 2005).
Much of the logistics work formerly done in-house by manufacturers, retailers, and other firms is now contracted out to other parties, sometimes through complex arrangements. Companies, for example, commonly outsource warehousing to third-party logistics companies (3PLs) which manage these operations for them. Third-party logistics firms specialize in warehousing and transportation customized to clients’ needs and often provide additional related services. Most operate in highly competitive environments with low profit margins (Gutelius 2016; Gutelius and Theodore 2019; Loewen 2018). Companies are particularly likely to hire 3PLs if they do not view logistics as a core function of their business (Langley et al. 2005).
Fourth-party logistic companies (4PLs) constitute yet another layer in the provision of logistics services. 4PLs typically manage integration between the client firm and one or more logistics services providers, including other 3PLs (Association for Supply Chain Management 2018), although the distinction between a 4PL and a strong 3PL can be hazy (Gutelius 2016; Hochfelder 2018; Saglietto 2013).
Motivations
Lead firms often claim to use 3PLs and other logistics firms because they want innovation and value-adding services. Research has found, however, that, in practice, most lead firms treat warehousing as a commodity differentiated on price (Vitasek et al. 2015). Indeed, Gutelius (2016) reports that 77 percent of lead firms predominantly award their contracts based on price alone, which is consistent with the low margins mentioned above. Consistent with a focus on cost concerns, firms often supplement 3PLs with temporary staffing agencies, and sometimes the 3PLs themselves use temp help labor. A case study that interviewed warehouse and staffing agency managers in New Jersey concluded that maximizing efficiency was the primary goal and that managers treated workers as disposable, regardless of whether they were hired through the temp agency or directly by the 3PL (Loewen 2018). Amazon warehouses also have received considerable media coverage for their demanding workloads and high rates of turnover (Berkowitz and Tung 2020).
Working Conditions
The demanding workloads, high turnover, and relatively low pay for logistics workers represent a change from decades past when work in the sector was highly unionized, chiefly by the Teamsters (Bonacich and Wilson 2005). The rise of e-commerce—and especially Amazon—have undoubtedly changed the dynamics. As consumers have come to expect free next-day shipping, logistics firms and workers have had to restructure workflow to meet the increased demand. For example, FedEx now delivers packages on Sundays, which it previously did only during holiday periods (Mull 2020). Moreover, FedEx had tried to classify its delivery workers as independent contractors rather than employees (Bernhardt et al. 2016) until this policy was overturned by the Ninth Circuit Court of Appeals in 2015 (Wood 2015). Within warehouses, the need to speedily route ever more packages has strained worker safety: internal injury records from 23 Amazon fulfillment centers nationwide showed these facilities had serious injury rates more than double the (already high) national average for the warehousing industry (Evans 2019).
At the same time, even as growth in the industry has spurred greater demand for labor, cost-cutting pressures and the adoption of new technologies in the industry have prompted anxiety over the possibility of widespread job displacement and the creation of “dark warehouses,” run only by robots. Automation has been widespread regardless of whether logistics is handled in-house or outsourced to 3PLs, and this has affected how work in the sector is carried out. In some cases, job tasks such as inventory management are being combined or automated, with workers increasingly specializing in manual functions that are still difficult to automate—and dangerous, as noted above. In other cases, there has been upskilling: the online retailer Boxed.com, for example, implemented cutting-edge automation processes in its warehouses but trained its workers to use the new equipment (Gutelius and Theodore 2019). Nonetheless, many scholars believe that the sector will remain heavily reliant on low-cost labor, at least in the immediate future (Gutelius and Theodore 2019; Loewen 2018),
Changes in organizational structure and working conditions in the logistics industry have also been associated with changing worker demographics. Whereas work in the sector was originally performed mainly by white, unionized workers, many logistics workers today are black or Hispanic, and few are unionized (Bonacich and Wilson 2005). Women are more likely to work in e-commerce warehouses than traditional warehouses. Research finds that jobs in the former have lower wages and less predictable schedules and are subject to greater cost-cutting pressures (Gutelius and Theodore 2019).
Conclusion
Today’s logistics sector is dramatically different from that of decades ago. Many of the jobs once done in-house are now outsourced, largely to cut costs, and this change in employment structure has been associated with lower wages, higher turnover, and less-safe workplaces. In the future, 3PLs will likely continue to play a major role in logistics and fiercely compete on price. Technology and e-commerce will likely continue to shape the sector as well, though the implications for worker well-being are unclear.
References
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Berkowitz, Deborah, and Irene Tung. 2020. “Amazon’s Disposable Workers: High Injury and Turnover Rates at Fulfillment Centers in California.” National Employment Law Project. March 6. New York: National Employment Law Project.
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Bonacich, Edna, and Jake B. Wilson. 2005. “Hoisted by its Own Petard: Organizing Wal-Mart’s Logistics Workers.” New Labor Forum 14(2): 67–75.
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———. 2016. Global Production Networks from Below: Geographies of Labor in Logistics. Unpublished doctoral dissertation, University of Illinois at Chicago.
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Wood, Robert W. 2015. “FedEx Settles Independent Contractor Mislabeling Case For $228 Million.” Forbes. June 16.