A 2019 report by the American Trucking Associations (ATA) revealed that labor shortages in trucking grew after the Great Recession, the first leap occurring in 2014 when the driver shortage more than doubled from nineteen thousand in 2013 to forty-one thousand in 2014. After that, “the shortage skyrocketed to roughly 50,700 in 2017” and then sixty thousand in 2018, just as delivery times rose and well before the pandemic drove it further to over eighty thousand in 2021.11American Trucking Associations, Truck Driver Shortage Analysis 2019 (American Trucking Associations, 2019), 4; Statista, “Truck driver shortage in the United States from 2011 to 2030 (in 1,000s), Statista 2022, https://www.statista.com/statistics/1287929/truck-driver-shortage-united-states/; Madeleine Ngo and Ana Swanson, “The Biggest Kink in America’s Supply Chain: Not Enough Truckers, “ New York Times, November 9, 2021, https://www.nytimes.com/2021/11/09/us/politics/trucker-shortage-supply-chain.html It was little different in warehousing. The journal, Material Handling & Logistics, writing in 2018 under the headline, “Labor Shortage Hurts Logistics Industry” and citing a study by the commercial real estate firm CBRE Group, Inc., projected that the huge demand for “warehouse and distribution workers in 2018-19 […] could turn out to be unsustainable in the already labor-strapped industry.”12David Sparkman, “Labor Shortage Hurts Logistics Industry,” MH&L Material Handling & Logistics, September 10, 2018, https://www.mhlnews.com/warehousing/article/22055211/labor-shortage-hurts-logistics-industry. The reasons given for these shortages at the time generally focused on low unemployment, high retirement rates, etc. While these were factors, it was the “constant pressure to deliver goods at ever-cheaper prices [that] has resulted in working conditions so poor and pay rates so low that they amounted to ‘indentured servitude’” that created high levels of workforce turnover and kept workers away from these jobs.13Erin McCormick, “’Indentured servitude’: low pay and grueling conditions fueling US truck driver shortage,” The Guardian, November 22, 2021, https://amp.theguardian.com/business/2021/nov/22/indentured-servitude-low-pay–and-grueling-conditions-fueling-us-truck-driver-shortage.
The seven major Class I rail freight carriers actually created their own labor shortages by constantly reducing the workforce to meet the demands of Precision Scheduled Railroading (PSR), the industry’s version of lean production first implemented around 2000 by CSX.14Amy Morrison, “The truth About Precision Scheduled Railroading,” February 3, 2020, RailBite #8: “The Truth About Precision Scheduled Railroading”—Solutionary Rail; (From Railroad Workers United, Rail Workers Weekly News Digest, Number 7, February 18, 2020); Ryan Ansell, “Employment in rail transportation heads downhill between November 2018 and December 2020,” Monthly Labor Review, October 2021, https://www.bls.gov/opub/mlr/2021/article/pdf/employment-in-rail-transportation-heads-downhill-between-november-2018-and-december-2020.pdf The appalling conditions faced by railroad workers were highlighted when the unions’ demand for fifteen paid sick days to relieve the pressure on employees was rejected in the government-imposed “Tentative Agreement” in November 2022.
Thus, the “Supply Chain Crisis of 2021-22” was but an escalation of deep problems facing capital in manufacturing and transportation/logistics, particularly the vulnerability to disruption all along the supply chain. The debates about “resilience” versus “lean” or “just-in-time” logistics have gone on for some time due to the failure of capital’s previous organizational, technological, and logistical “fixes.” Not surprisingly, however, the 2021-22 supply chain crisis, exacerbated by the climate crisis, the pandemic, increased conflict with China, and most recently the Russian invasion of Ukraine has led to a serious reconsideration of just-in-time delivery and the structure of both global and domestic logistics itself and to at least some moves to find a new “fix” for capital.
The “Amazonification” of Logistics: Neither “Just-In-Time” Nor “Just-In-Case”
The question of how supply chains and the whole logistics system are restructured within the United States is key to both the problem of reducing the circulation time within the overall turnover of capital, on the one hand, and the vulnerability of US capital to worker actions, on the other. As the 2023 Citi GPS report put it, “One common change is an increase in inventory as corporates switch from a just-in-time to a just-in-case approach.”15Citi GPS, Supply Chain Finance, 20. The problem with this explanation is that while JIT means something quite precise—delivery on time of a specific commodity at an exact location as needed—beyond implying larger inventories, JIC does not. There is also the common misunderstanding that just-in-time delivery equals greater speed of movement through the supply chain. It does not reduce circulation time or cost because it requires more frequent, smaller, and (on average) costlier deliveries; hence, there are no economies of scale.16Moody, “Motion and Vulnerability,” 52. The Biden administration’s Department of Transportation’s 2022 Supply Chain Assessment adds, “The pressures associated with shorter delivery windows and just-in-time inventory management […] can incentivize the use of more costly or less-efficient freight transportation services.”17U.S. Department of Transportation, Supply Chain Assessment of the Transportation Industrial Base: Freight and Logistics (Washington DC: 2022), 17.
What JIT does do is reduce costly inventories for those on the receiving end along the supply chain. From a Marxist point of view, inventories are important not only because they are an obvious additional cost, but because the labor of storage does not create value, while that of transportation and movement of goods is considered part of production, and does.18Marx, Capital, Volume II, 222-227. So, inventory which must be tended to is also a waste of labor time and a deduction from total surplus value produced by a given workforce. It can, to some extent, be offset by larger increases in productivity as was the case in the post-WWII “golden era.” But, as we have seen, since 2010, productivity increases in production and transportation have almost entirely vanished. So, while larger inventories may allow companies to withstand the initial impact of a strike or other disruption, they will also become a greater burden in the case of a prolonged conflict.
During the classic “just-in-case” post-WWII “golden era” of US capital, the non-farm inventory-to-sales ratio rose significantly from 2.85 in 1962 to 3.49 in 1981 as manufacturers stored large amounts of intermediate goods for production and retailers stockpiled products for sale. With the introduction of lean methods and JIT, this ratio then fell dramatically to levels around 2.24 in the 1980s and up to no more than 2.35 by 2019. Since then, during the pandemic with ups and downs, the inventory/sales ratio didn’t change much until 2022, when it rose significantly to 2.53.19BEA, Table 5.8.5B. At the same time, the PMI index of the ”Stock of Purchased Materials,” as opposed to those of “Finished Materials,” another measure of inventory, soared to new highs after the 2020 pandemic recession.20Citi GPS: Global Perspectives & Solutions, Global Supply Chains: The Complexities Multiply, Citi Group, June 2022, 18. Indeed, the growth rate of inventories accelerated from an annual average rate of 4.3 percent from 2010 to 2019 to 7.1 percent from 2019 through 2022.21BEA, Table 5.8.5B “Private Inventories and Domestic Final Sales by Industry,” Revised on January 26, 2023.
This is a significant increase in inventory for the economy as a whole, but is nowhere near the high levels of the post-WWII JIC. While it is too soon to be certain, competition alone is likely to put some limits on the levels of costly stocks. Furthermore, while just-in-case implies higher inventories and multiple suppliers, it doesn’t tell us anything about the speed or cost of transportation or even the levels of, or attempts to regulate, inventories. So, how will the changes taking shape affect the speed of the movement of goods and hence value through time and space, and the ability of workers to halt the production and movement of goods and services?
My argument is that the changes proposed and taking place in the organization of supply chains, inventories, and logistics taken together can best be understood as the “Amazonification” of the circulation phase of the turnover time of capital. Here it applies to manufacturing in its various phases as well as to wholesale and retail firms and to most services. By using the term, “Amazonification,” I mean first that Amazon is primarily a logistics firm engaged in moving products in which sales are only one step. Industry journal Transport Topics agreed that Amazon should be “considered one of the largest logistics companies in North America.”22Daniel P. Bearth, “Is Amazon a Logistics Company?” Transport Topics, April 8, 2019, www.ttnews.com/articles/amazon-logistics-company-all-signs-point . “Sales and Marketing” and “General and Administrative” account for only 10.8 percent of Amazon’s total operating costs in 2022. The rest covers what and how it moves into, around, and out of its facilities—basically its fixed and circulating capital in Marxist terms.23SEC, Form 10-K 2022, 25-26. What Amazon calls “Cost of Sales” are actually defined as “the purchase price of consumer products, inbound and outbound shipping costs, including costs related to sortation and delivery centers, and where we are the transportation service provider,” etc. Thus, “Cost of Sales”, Fulfillment, and Technology and Content amount to 89 percent of Operating Costs, while Sales and Marketing and General and Administration together were only 10.8 percent, the rest being amortization or damage to equipment or property. So, Amazon is a comprehensive logistics firm. It circulating constant capital is composed mainly of the products and inventory it sells whether from its own purchases or production or that of its 1.7 million or so Third Party (3P) sellers most of whom use its facilities and pay Amazon 34 percent on average of their sales price. See Moira Weigel, Amazon’s Trickle-Down Monopoly, Data & Society, January 2023, 3-4, www.datasociety.net. As such, much of the labor of the hundreds of thousands of workers employed by Amazon transports and transforms goods to which it adds value; this labor is therefore productive of surplus value.
Amazon is engaged in the endless pursuit of growth (accumulation), created by the “optimized” movement of goods and value through the location and configuration of its facilities, the means of transportation between them and to the final buyer, the deployment of communications technology to keep everything in motion inside and between facilities, and the intense exploitation of labor at every turn. This is neither “just-in-time” nor “just-in-case.” It is more a matter of “high inventory velocity,” as Amazon puts it in its 2021 Securities and Exchange Commission (SEC) 10-K report.24Securities and Exchange Commission (SEC), Form 10-K, AMAZON.COM, INC, “For the fiscal year ended December 31, 2021, 18.
As Amazon describes its strategy in the 2022 SEC 10-K annual report, “We seek to turn inventory quickly and collect from consumers before our payments to vendors and sellers become due.”25Securities and Exchange Commission (SEC), Form 10-K, AMAZON.COM, INC, “For the fiscal year ended December 31, 2022, 19. Here, a little explanation is required. On average, Amazon receives payment, mostly from credit cards, eighteen days before it, in turn, pays its suppliers. This is a reversal of common business-to-business practice of receiving payment after delivery to the buyer. Thus, Amazon reduces its turnover time by receiving early payment. This up-front money Amazon calls its “free cash flow” rather than profits, although they clearly represent realized surplus value.26Rani Molla, “Amazon’s tiny profits, explained,” Vox, October 24, 2019, https://www.vox.com/recode/2019/8/21/20826405/amazons-profits-revenue-free-cash-flow-explained-charts.
This “free cash flow” pays for Amazon’s expansion which is at the heart of its business model. In 2022, it amounted to $11.6 billion compared to “operating income” of a little over $12 billion.27SEC, 10-K, 2022, 24, 28. This can only be sustained or increased by being “able to turn our inventory quickly.” As the 2022 10-K report suggests, “for every 1% of additional inventory valuation allowance as of December 31, 2022, we would have recorded an additional cost of sales of approximately $390 million.” For 2022, that would have been an additional “cost of sales” of $390 million for every $345 million of inventory valuation—more than one-for-one.28Securities and Exchange Commission (SEC), 2022, 21. Thus, any reduction in the movement of products through the entire “fulfillment” and delivery system that increases stationary inventory becomes expensive. So, rapid movement from fulfillment center to sortation center to delivery station, next-day delivery, and the development of its fleet of trucks and vans are now central to its business model and a key reason why Amazon resists unionization so adamantly.
Not many companies and certainly few manufacturers can achieve the rapidity of cash flow managed by Amazon. On average companies in the US have to wait thirty-two days before receiving payment for goods delivered to a buyer, compared to Amazon’s eighteen days in advance.29William Jefferies, “The US rate of profit 1964-2017 and the turnover time of fixed and circulating capital,” Capital & Class, first online April, 14, 2022, https://doi.org/10.1177/03098168221084110. Jeffries constructs a table quantifying the annual turnovers of “circulating capital” from 1964 to 2017 which roughly corresponds to trends in manufacturing output and productivity over that period. But these long-suffering firms can aspire to “optimize” or “turn inventory quickly” in order to minimize costs and maximize cash flow and actual profits. This isn’t the same as JIT because it isn’t limited to a specific, pre-determined time, point of delivery, or type of product. When describing its risks, Amazon’s 10-K talks of “the failure to optimize inventory” as a source of increased costs.30SEC, 2022, 10 Thus, for Amazon, inventory, which cannot be avoided altogether by a company moving millions of products a day, is to be “optimized,” regulated, and kept in motion within and between facilities. In other words, when Amazon in its report speaks of optimizing inventory, what they are actually describing is the optimized inventory velocity (OIV) of goods into, through, and out of their facilities as “quickly” as possible.