Vital DHL contract threatened by differentials

The strike by DHL Supply Chain staff at Jaguar Land Rover is a serious development for the contract logistics division of DP-DHL.

Members of the ‘Unite’ trade union have voted in favour of strikes in the coming month at all three Jaguar Land Rover (JLR) assembly plants in the UK. It is far from certain that any strike will actually take place, but it is a bad omen for DHL.

The dispute at the assembly plants in the English Midlands revolves around the differences in pay between staff employed by JLR and those by DHL Supply Chain. Arguments over the issue have been simmering for over a year throughout JLR’s facilities, with minor conflicts between DHL and its workforce.

The problem is that the dispute goes to the heart of the outsourcing project at JLR. The logistics operations at JLR are one of DHL Supply Chain’s most ambitious contracts, with the company operating a lead-logistics supply/single sourcing arrangement which encompasses almost all logistics processes into and around the three assembly plants.

This means that DHL Supply Chain staff are working alongside JLR employees, often doing very similar work. Yet, the DHL workforce earns less and has less job security. Indeed, one of the objectives of such an outsourcing operation is to focus resources on operations directly concerned with assembly rather than the feed of components, which is in the hands of suppliers, such as DHL Supply Chain; who have a lower cost base.

The trade union is demanding double digit pay rises for the DHL staff, however even if these ambitions are realised it will not remove the question of the different approach to pay and employment conditions. Whilst it would be wrong to assert that the outsourcing contract at JLR is just about cost, it is still an important issue and increasing wage rates to the levels of those directly employed by JLR would probably not be viable.

There may also be background issues to the friction at the plants. Such has been the demand for both the Jaguar and Land Rover brands’ new products, the car producer is having to take extraordinary measures to increase output, including 24 hour production in certain circumstances. Whilst this has been highly profitable for JLR it is also possible that this has put systems and people under considerable strain.

The issue of different pay and conditions for employees of vehicle manufacturers and suppliers is a familiar problem in the automotive sector. Indeed, it is really about the need to control the wage costs of assembly line workers employed by the vehicle manufacturers. However, it is a significant problem for the more sophisticated logistics service providers who aspire to a more central role in automotive assembly. If DHL Supply Chain cannot at least contain the problem, it might place a question mark over the long term future of such contracts.