[Special Feature: Thinking about the Logistics Crisis] Roundtable Discussion: Will the "2024 Problem" Really Happen?

Today, I would like to hold a roundtable discussion on the theme of domestic logistics in Japan.

The crisis known as the "2024 Problem" in logistics—where upper limits will be imposed on driver working hours due to the "Work Style Reform Related Laws"—is finally approaching. However, I believe the view of this issue differs considerably depending on one's perspective. First, could you please share your awareness of the issues while introducing yourselves?

I graduated from the Faculty of Economics and worked as a salaryman for about three years, but I loved cars and wanted to try driving a large truck at least once, so I became a driver. Since then, I have been a truck driver on the front lines for over 30 years. I think I am quite an outlier for a Keio graduate. Along with that, I write serialized columns from a driver's perspective for industry newspapers and other publications.

I have driven various trucks, but currently, I drive a large trailer based at Narita Airport, transporting international air cargo such as containers.

Regarding the "2024 Problem," it is said that from next April, an annual limit of 960 hours of overtime will apply to the construction and automobile driving occupations, making it impossible to transport 30% of goods. While the decrease in total working hours is only a few percent, it is said that the number of jobs will decrease, wages will fall, and the number of people leaving the profession will increase.

The reasons drivers work long hours are mainly waiting for cargo and long-distance driving. At factories and other sites, trucks stand by and load products as soon as they are finished. Like the couriers (hikyaku) or wind-waiting ports of old, I believe the transportation industry has a character of "waiting" to accommodate the other party's convenience or natural conditions.

After graduating from university, I joined Mitsui Fudosan. At one point, I learned that there was a real estate sector in the U.S. called logistics real estate, which did not yet exist in Japan at the time. I wanted to do this business in Japan and kept proposing it, but it was not realized at that company. Therefore, I decided to resign and joined an American company called Prologis. Later, I formed the current company, GLP, through an MBO (Management Buyout).

It was a time when Japanese logistics was undergoing major changes. As the world entered a long deflationary spiral, manufacturers and others who had logistics subsidiaries and owned logistics facilities within their group companies were moving toward outsourcing. I took the approach that a rental market for logistics facilities would emerge, and I feel it has now grown into a relatively large sector.

Our sales strategy is how to solve the various challenges faced by logistics operations. Since it is called a "3K" industry (kitsui, kitanai, kiken—demanding, dirty, dangerous) and people are reluctant to join, we are trying to create bright, comfortable logistics facilities where people want to work, in order to dispel that image.

The 2024 Problem is a very important issue, but for our industry, we actually see it as leading to the creation of business opportunities. Therefore, I approach my work daily while thinking about how we can turn these challenges in a positive direction.

I initially joined a think tank, but in 2007, I moved to my current company, Roland Berger, and have been doing what is known as consulting.

About a year and a half after I joined, the Lehman Shock occurred, and for about three years, I did nothing but structural reforms. When it came to structural reforms for manufacturers or distribution companies, logistics was often a significant area for cost-cutting.

In other words, my first encounter with logistics was cost reduction. Manufacturers check procurement costs strictly, but logistics costs often account for only about 5% of sales, leading to surprisingly lax management. While procurement costs couldn't be cut by even 1%, logistics costs could sometimes be reduced by 20%.

When people talk about lowering logistics costs, the conversation tends to focus on increasing truck loading and operation rates through on-site improvement activities. However, I believe there are solutions through innovation. Thinking about the future, it would be better to solve the logistics crisis through innovations where companies with technology digitally match trucks to increase loading rates.

Like Mr. Chosa, I believe the current logistics crisis is both a pinch and an opportunity. Japan is the most aging society in the world, but if we can build a society that can transport and deliver goods even with the world's lowest percentage of working people, we can become the most advanced country in the world. My awareness of the issue is that I hope we can turn this pinch into an opportunity, spark innovation, and solve the logistics crisis.

In my 20s, I worked for several consulting firms, and while I was an entrepreneur throughout my 30s, my first experience with the world of B2B logistics was being involved in a management reform project for a wholesale subsidiary.

There, I realized that the world of B2B logistics is actually vast and a very important infrastructure. However, it is completely analog, and inefficient things are happening all over the place. I thought that if things continued this way, this infrastructure would be in serious trouble, so I founded "Hacobu" eight and a half years ago to see if I could update that infrastructure using IT.

The essential problem of B2B logistics is that despite many stakeholders being involved, information regarding each logistics operation is closed off internally. Because they cannot collaborate, they fall into local optimization and are stuck in the so-called "fallacy of composition" problem.

To solve this, I believe it is difficult unless we take an approach of optimizing between stakeholders using what is called logistics big data, where logistics information flows across corporate boundaries. We are working to first digitize logistics information and create the infrastructure for it to flow.

The 2024 Problem is an issue that has been anticipated for nearly 10 years. However, by the government speaking out in this way, I suddenly feel that the awareness of shippers and the heads of major logistics companies has changed considerably. I also see this as an opportunity to change the world of logistics, which has hardly changed until now.

It's great to have that positive feeling of seeing a crisis as an opportunity.

Mr. Nagano, from a driver's perspective, amid the current talk of driver shortages, do you feel that the way you and those around you work will change significantly as labor laws change?

The problem now from the perspective of drivers and transportation companies is that freight rates are not rising. The government recently released standard freight rates, but they are far removed from actual conditions. Tariffs (rate tables) do not have the same binding force as fares for public transportation like taxis or buses. It's market principles. People say there is a labor shortage, but the reason people don't gather is that only low wages are being offered.

So, it's a structural problem where rates don't easily rise even if labor is tight.

I think labor is actually not that tight.

According to the "Standards for Improvement of Working Hours for Truck Drivers," overtime must be within 960 hours per year in six months. Currently, the annual binding time is 3,516 hours. Reports say that will be reduced to 3,300 hours, but in reality, up to 3,400 hours will be allowed, making overtime 1,060 hours.

The current 3,516 hours are not actually being followed, and it will be reduced from a virtually limitless state to that level. However, if it goes from 3,516 hours to 3,400 hours, that's only a 3.3% decrease, so the claim that "34% of cargo will become untransportable" feels a bit exaggerated.

In terms of the feeling on the ground, I think very little will change in six months. This is because while major companies take the jobs, many of those actually driving are subcontractors.

The Ministry of Health, Labour and Welfare decides the working hours, but in practice, the Ministry of Land, Infrastructure, Transport and Tourism takes over enforcement unless there is a serious violation. Audits by the MLIT only come around once every few years. There have been about 60,000 transportation companies since the deregulation in 1990 and 2003, but the number of auditors and the number of companies are on completely different scales. Therefore, in the end, major companies say "we are complying" and outsource the tough parts to subcontractors, and audits rarely reach the subcontractors. I don't think this current situation will change much. A group called "Truck G-men" was created as a measure this year, but they don't crack down on trucks; they mainly monitor the shippers.

So, I think there might actually be a surplus of vehicles.

In the estimates presented by Nittsu Research Institute and Consulting (NX Research) at the government's "Study Group for Realizing Sustainable Logistics," it is stated that when the 2024 Problem occurs, 14% of transport capacity will be lacking, and by 2030, the shortage will expand to 34% due to a further decrease in drivers. These are official figures used in cabinet meetings, but as Mr. Nagano says, they are based on the premise that the annual binding time limit is 3,300 hours in principle, and the data used for the estimates are from FY2019, before truck transport volume dropped due to the pandemic.

As for whether a crisis will truly occur, I heard from someone at one of the three major delivery companies that they have about 3,000 surplus trucks during normal times. This is because they operate those 3,000 trucks during busy periods like Christmas. Conversely, they have that much leeway and buffer during normal times, and if this buffer is utilized, a crisis might not occur.

Personally, I want something to happen in April 2024. A fatal situation for social infrastructure would be problematic, but for the transport of fresh produce from Kyushu to Tokyo, which is said to be the most critical, if people go to a supermarket in April 2024 and find no tomatoes from Kumamoto, I think awareness of the logistics crisis will increase.

What do you think, Mr. Chosa?

Mr. Nagano mentioned that the driver shortage problem is not actually tight, and I don't think it is very tight either. However, I think there is a lot of unevenness. Since it's the real world, people and trucks cannot always gather where there is a need at the right timing. Sometimes a driver has to wait for cargo for a long time because there is no return load.

Because of such inefficiencies, even if it's not tight, there is unevenness; places that are struggling are struggling, and problems occur where they occur. In the end, the fact that all the burden falls on subcontractors is also due to that, I think.

Various problems are occurring locally, and I believe there are things we can do to address them. For example, in the business Mr. Sasaki is doing, to reduce truck waiting time even slightly, if a berth (space used for loading/unloading cargo) is prepared for just-in-time arrival, the waiting time can be shortened. If the cargo is also prepared by then, productivity will increase further.

Regarding the cause of unevenness, the supply chain fluctuates, doesn't it? If information sharing is not progressing, the waves of fluctuation become larger, or if deadlines are concentrated at a specific time, fluctuations occur. So, I think if we move away from the obsession with things like next-day delivery and extend the timeframe, the fluctuations might settle down.

I also think the point about unevenness is exactly right, but the problem is that we cannot currently capture it quantitatively. It is not quantitatively understood where there is a surplus and where it is tight.

For example, the issue of loading—even if it looks quantitative, it is actually qualitative, based on survey results. No one has captured data on how much is actually loaded onto trucks. Unless we clear the problem that no one is grasping the current situation as a fact, I think we will remain in a state of "it seems inefficient and bad from a macro perspective, but we don't know where to intervene."

When I interview various people, they say different things. If I ask Mr. Nagano, it's not tight. If I ask someone else, they say, "No, it's extremely tight." If I talk to shippers, they say, "The requests for price increases are incredible."

On the other hand, there are others with opinions like Mr. Nagano's. People at service providers who do matching between transportation companies say that transportation companies still want cargo. When I ask if that means vehicles are available, they say yes.

So, the perspective changes depending on the aspect, and the current situation is that we don't know what the facts are. I think we can't take action until we establish the facts.

The loading rate currently averages just under 40%. The problem is that we don't actually know to what percentage we can raise this 40%.

People who don't know say we should aim for 100%, but that's absolutely impossible. For cargo going from Kanto to Tohoku and cargo going from Tohoku to Kanto, there is far less cargo going from Tohoku to Kanto, so even looking at this round trip, it will never be 100%.

Also, for store deliveries, even if a truck is 100% loaded when it leaves a logistics center, it won't be full when it returns after visiting multiple stores. If it's empty on the way back, the average loading rate is 50%. Since we say 40% including all these things, the government actually doesn't grasp how far it can be raised at maximum.

At the government's "Study Group for Realizing Sustainable Logistics," I proposed that we calculate that, but they said it would be difficult within this timeframe. That's why the measures state that we can cover this much by raising the loading rate, but they are implementing policies without anyone knowing the upper limit of how much the loading rate can be raised.

The loading rate refers to cargo on trucks that are in operation, right? For example, if a driver unloads in Tohoku and waits at a parking lot for three days because there is no return cargo, is that included in the calculation?

No, it's not. It's only the time they are moving.

Right. So in reality, it's even lower.

Yes. It's the loading rate during the time they are moving. However, the problem now is not a shortage of trucks but a shortage of drivers, so there is a way of thinking that the time they aren't working is fine for now.

We also have truck waiting areas. They are temporary parking lots, and I see trucks parked there for over 48 hours. Apparently, they are told not to come back until they can get cargo, so they stay there for 3 to 4 days and go to nearby public baths (sento). I think there are quite a few such people staying there.

Exactly. I think long-distance is more critical, but in the case of intra-city delivery, deliveries are overwhelmingly in the morning, so there are cases where they are free in the afternoon.

So, if all of that were "visualized," it might actually be so empty that there is no such thing as a 2024 Problem. However, the reality is that no one knows. Some magazine wrote that logistics is the last dark continent, and that's exactly right; no one knows. The reality is that even the government doesn't know.

Even major logistics companies don't know. For example, the headquarters of a major logistics firm doesn't see the whole picture at all; it's closed off within each branch. Even if the idea comes up that because vehicles are surplus at this branch, they could be used at another branch, it becomes difficult because it has to go through the accounting system. In the first place, the headquarters cannot see that resources are surplus. This is true even within a single logistics company.

Quantification seems very difficult. About five years ago, a concept like the Physical Internet—where optimization is achieved by tracking where cargo and trucks are in real-time, like data communication on the internet—gained attention, but I suspect it hasn't progressed well at all.

As a recent trial, there is an initiative our company is doing with Mitsubishi Shokuhin. We have them put our GPS terminals on all 3,500 vehicles. These are all vehicles of subcontracting companies. Until now, they could see their own vehicles, but for the first time, we made it possible for the headquarters to see the movements of 3,500 vehicles, including those of partner companies known as chartered vehicles (yosha).

As a result, things that were previously optimized only around a single logistics center can now be transported more efficiently by considering how to rotate vehicles across multiple logistics centers.

I think major companies are doing it to some extent on an individual company basis. But the vast majority of transportation companies are small and medium-sized, right?

Almost all of them. They make up 99% of the over 60,000 companies.

It's meaningless unless they do it, isn't it?

The final summary of the "Study Group for Realizing Sustainable Logistics" mentions the "mandatory use of digital tachographs (digi-tacho)." In short, regarding the problem of cargo waiting time, if digital tachographs are mandatory, it can be traced with data that the shipper has a problem.

If that happens, it should cut into the dark continent, but the description in the final summary was "opinions were seen that mandatory use is necessary." Considering the cost burden on small and medium-sized transportation companies, they couldn't go as far as saying "it will be made mandatory."

Certainly, from the perspective of transportation companies, costs will be incurred regardless of who bears them. However, if it is "visualized" and it becomes clear that there are strange waiting times, transportation efficiency will improve, and drivers should become happier. I think it's a waste for this movement toward digitalization to stop because of the talk that the cost burden is difficult.

Even with mobile phone location information, it should be possible to tell that someone is waiting a long time here.

According to NX Research's estimates, the 2024 Problem would not occur just by reducing cargo waiting and handling times, even without eliminating redeliveries or transforming logistics. That's how much cargo waiting time is occurring.

As Mr. Sasaki said, because data is not being exchanged between companies, shippers currently don't know on a map of Japan how many vehicles are heading toward their center. When they open the doors, they find dozens of trucks have arrived, leading to a state where it takes hours to wait for unloading. They should have known since the day before, but that information is not shared.

Another thing is that they could just change the arrival times. Instead of making all vehicles wait for an "8:00 AM sharp arrival," they could operate 24 hours and say, "Please come at this time," which would solve the problem.

That's what berth reservation is, right? We are doing that.

Do shipments also tend to concentrate at specific times due to customer needs?

What often happens with shipments is that drivers go early and wait until the packing is finished. They don't know when the cargo will be ready.

People inside the warehouse should know that they can prepare this cargo in about this much time. That communication is not being done with the drivers. The operation is just to call them early and load them as they are ready.

But that is about to change now. Since constraints on delivery resources are increasing, constraints must be added to supply chain management. Specifically, it doesn't seem to have progressed much yet, though.

In the end, it's because they are weak in terms of power dynamics that truck drivers have no choice but to wait.

It's a matter of "come early and wait." Since the salary system of transportation companies is still customarily often a commission system per job, no additional fees are incurred even if they wait.

The dilemma for logistics companies is that while it is currently easy to negotiate, if they tell shippers to give instructions at the perfect timing, they risk being told, 'Your working hours will be shorter now, so will you lower the price for us?'

There are certainly people who feel that things are better as they are rather than engaging in such negotiations. Considering that there are people at truck-matching companies asking for work, the question remains as to which way the situation is actually leaning.

It's strange, isn't it? If they were truly in trouble, wouldn't they pay even if it meant raising the price? If a driver firmly said, 'If the cargo isn't ready at this time, I'm moving on to the next job,' the shipper should be saying, 'I'm sorry, I'm sorry.' The fact that this doesn't happen suggests that capacity isn't actually that tight, which makes me wonder if the problem really exists.

Looking at 2024 alone, it appears that the labor shortage might not be as severe as the public discourse suggests, but as a medium-to-long-term issue, it seems likely that new workers are simply not entering the field.

If the logic is 'wages won't go up because freight rates don't go up,' then we have no choice but to raise freight rates. But if it's hard to raise them because capacity isn't tight, does that mean we need a shakeout of the industry for things to change?

Freight rates for truck drivers are significantly higher in the U.S., largely because labor productivity is overwhelmingly higher.

Truck sizes are much larger than in Japan. Also, in the U.S. and Europe, 'delivery on the vehicle' is the standard, so drivers don't do the loading and unloading. Therefore, there is no waiting, and if they do wait, it's a separate charge. This structure allows wages per person to rise because labor productivity is high.

In Japan's case, we should be able to address the waiting time issue, but increasing truck sizes to U.S. levels is difficult due to road conditions. Therefore, drivers won't be attracted unless we increase the loading ratio to raise wages. That's why a mechanism to increase the loading ratio is necessary.

Regarding the question of whether capacity is 'tight,' it might be that the total annual supply and demand is sufficient. However, the problem is the high volatility in demand. It's a fact that when demand peaks, trucks can't be found, and prices skyrocket. Whether that actually reaches the wages of the actual transport workers is another matter, but the money shippers pay is increasing.

Therefore, we shouldn't think about this tightness issue in a flattened way; we must consider it within the relationship between peaks and bottoms.

It's a question of how to eliminate the unevenness, isn't it?

Exactly. There's a term often used called 'peak shaving.' If we can reduce peaks as much as possible, we might be able to manage with current resources. If logistics can be leveled out, supply and demand won't be that tight.

Does that mean a change in mindset for the shippers?

Yes. To level out logistics, we have to intervene on the commercial side. In other words, the problem is that ordering is not being done with logistics in mind on the commercial side.

For example, if we could provide even a little input that 'ordering this way costs this much in logistics and affects the delivery price,' the way orders are placed would change and peaks would be shaved. I think the key is how to feed logistics issues back to the commercial side.

It's the idea that it would be great if shipping and delivery plans were set three days in advance. When it's 'order today, ship tomorrow,' the logistics company doesn't know how many trucks are needed and is forced to maintain a buffer. If they told us three days or a week in advance, peak shaving would be easy.

Let's change the subject slightly. In the context of carbon offsets and the environment, I'd like to talk about modal shift (switching to rail or sea transport with lower environmental impact). How much of an impact will the environment have on changing the shape of logistics?

Europe is certainly the leader in carbon neutrality, but in Japan, global companies are the ones most sensitive to CO2 reduction measures that include logistics and supply chains.

Companies that sell products or raise funds in Europe are starting to emerge in Japan with an awareness of the environment, including logistics. Some logistics companies are moving forward with efforts such as providing CO2 visualization services or obtaining international certifications like EcoVadis.

However, looking at the flip side, for companies that operate only domestically or for small and medium-sized enterprises, the reality is that not many have the awareness that they must achieve carbon neutrality up to Scope 3.

In reality, even in Europe, the fastest move for environmental measures is modal shift, so shifting from trucks and planes to ships and rail is the standard approach. However, since logistics only accounts for 5% or 10% of CO2 emissions even in Europe, there aren't many industries that have completely stopped using planes.

Is there a trend in Japan of moving from trucks to ships or trucks to rail?

As for whether everything can be moved to rail in Japan, rail capacity is already quite tight. The 'Logistics Innovation Emergency Package' released recently sets a plan to double the transport volume of ships and rail over 10 years, but doubling it with rail alone is quite tough.

Rail capacity has been at its limit for a long time. During the day, they squeeze through gaps in passenger schedules, and at night they do track maintenance, so they can't increase the number of trips beyond what they have now.

However, one thing can be done through deregulation. If passenger and freight transport can be combined, cargo can be loaded into passenger spaces. Even in taxis, the trunks are mostly empty, so they could do deliveries. I think we can go quite far with deregulation even without a full modal shift.

Also, at our facilities, many of the companies coming in are environmentally conscious, and some are already electrifying their light trucks, so we are significantly increasing the number of charging stations. Furthermore, since electricity is meaningless if it's originally made from fossil fuels, we are putting effort into developing facilities that charge with renewable energy.

Since trucks are overwhelmingly more convenient than trains for delivery, if they start running on the same electricity, I think trucks can sufficiently contribute to environmental protection.

As Japan's population continues to decline, there is the question of how to support transportation and logistics in rural areas. Also, on a global level, globalization has progressed for the last 30 years, and the way goods flow is changing significantly.

In addition to the discussion of how effectively we can perform the same logistics as yesterday, what kind of vision should we draw for logistics as economic activity changes greatly in the future?

Especially in rural areas, a world is coming where the old ways of doing things won't work. Whether it's mixed passenger-freight rail or Japan Post carrying Yamato and Sagawa items—which would have been unthinkable in the past—things won't be sustainable unless we move toward a situation where people are also transported together.

That is the basic premise, but things could change dramatically once the era of autonomous driving truly arrives. Regarding the driver shortage, there is an argument that we should realize autonomous driving as soon as possible.

We are helping with logistics reform for agriculture in Akita Prefecture, and the topic of whether we can use the Shinkansen to transport fresh produce to Tokyo often comes up.

However, while regulations have been relaxed enough to allow transport by Shinkansen and we are currently doing a PoC (Proof of Concept) using an entire carriage for cargo, the facilities to bring the goods in aren't ready. That infrastructure development is quite difficult; it's fine for expensive cherries, but it doesn't pay off for leafy greens like lettuce.

Since developing infrastructure for modes other than trucks seems quite difficult, I also think implementing autonomous driving might be faster at this point.

Are you talking about things like truck platooning on the Shin-Tomei Expressway?

Platooning is one part, and the level of autonomous driving in China is quite high. Also, it seems autonomous driving will take off all at once in the U.S. in the next two or three years. I used to think 2030 would be the earliest for autonomous driving service levels on highways, but I think there's a possibility it will be a bit sooner. Global technology is developing that fast.

Japan is very far behind in automation and robotics within logistics facilities. The reason for this is actually quite sad: it's because the quality of Japanese workers is too high and their wages are too low. I've heard that there's simply not much point in automating.

In places like the U.S., human workers only do what is specified. But Japanese people, if told 'do this too,' will push themselves to do it even for low wages. Businesses are built on the burden of such workers, and because that is too convenient, there is no motivation to introduce machines that can only do fixed tasks.

It's probably the same for drivers; U.S. drivers don't load or unload cargo, right? But Japanese drivers, if told 'the previous guy did it for me,' will end up doing it. That won't be possible with autonomous driving. I feel like the reason autonomous driving isn't spreading isn't just about regulations.

It's a case of 'excessive frontline capability.' Regarding logistics warehouses, one factor is that the multi-skilled nature of Japanese workers is so incredible it can't be imitated.

While automation is progressing in various areas, driver wages have actually decreased compared to the past.

Looking at social trends over the last year or two, automation has increased, such as self-checkouts in supermarkets and touch-panel ordering in restaurants. When you automate, the work for essential workers decreases, and while there are many people who want to work or must work to live, the number of jobs decreases, so the value of labor relatively drops due to the supply-demand balance. Earlier, it was mentioned that people aren't gathering due to a driver shortage, but against that background, people from various industries come to my company saying they want to be drivers. Driver wages are still better. I think that's the current state of low driver pay. I fear it will drop even further if autonomous driving is realized.

Historically, there have been several industrial revolutions, and I think there was conflict as existing occupations were wiped out in the process. It's said that 49% of jobs will be replaced by AI, and the process of whether workers become poorer or richer is an important theme even from an academic perspective.

Statistically, the number of truck drivers is decreasing by 2% every year. That's assuming the statistics are correct; while the number might be increasing around Mr. Nagano, as a whole, it's decreasing.

Also, Yamato is currently in a dispute because they decided to outsource mail services to Japan Post and terminate contracts with those who were delivering mail. That was essentially joint distribution. The logic was: Japan Post's main business is delivering letters, so they should carry our mail too, which improves loading efficiency.

However, when you do joint distribution, that many drivers become unnecessary, which became a problem. Despite it being an effort to improve transport efficiency, the media tends to say, 'Yamato cut people.'

Improving efficiency means the number of required people decreases. In the long run, there will definitely be a labor shortage, but at the exact moment you implement a measure, you end up with a surplus. From those people's perspective, it's an issue of their jobs being taken away.

But from my position, I believe we must do it anyway. Japan is open to the world, and technology is evolving globally. In other countries, tasks that can be replaced by robots are being replaced, and those people are shifting to jobs that only humans can do. If Japan continues to work as it always has, which country will be more productive 100 years from now? Unless we undertake reforms that involve pain, Japan's productivity will only continue to fall.

Mr. Nagano's point is certainly true, but if we think beyond that, a future where the absolute amount of required labor becomes overwhelmingly small is possible. If that happens, the economic model of working a lot to earn money will cease to exist in the first place.

That might be why discussions like basic income are emerging. The model itself, where people accumulate wealth through labor, could change due to automation from a long-term perspective. We will likely manage the transition period by shifting jobs, and that might be what happens in the world of truck drivers.

In theory, we want to depict a scenario where we increase productivity while improving working conditions, and reduce working hours while increasing the distribution rate. The overall thinking of current policy is theoretically aligned with that.

However, when you look at the front lines, friction is occurring in various places. If that isn't properly addressed, there's a risk that things will collapse due to social resistance.

On the other hand, I feel that jobs that only humans can do are still lacking in Japan. I think the era when ordinary people had money and were vibrant was the Showa era. Now, life should actually be improving more, but compared to the Showa era, I feel that not just essential workers, but people working normally have less leeway.

Also, regarding productivity, the trailer I drive is probably the same size as those driving in the U.S. This type has increased quite a bit in the last five years, so productivity should be up. However, if you can load 1.5 times more, does the salary go up 1.5 times? It hardly goes up at all.

In the end, transport companies have surplus capacity, and there are even people from other occupations who want to join, so wages don't rise due to the supply-demand relationship. If we truly became unable to transport 30% of goods, freight rates would rise more, and so would wages.

Presidents of small transport companies often drive very nice cars, don't they? So I wonder if they wouldn't distribute the money even if freight rates went up.

Small companies actually distribute quite a bit.

Really? Are the salaries high there too?

Yes. The reason people go to small operators is that the distribution rate is high. Some operators get work from fixed clients, so they get jobs without having to do much sales.

Since they don't need salespeople, they can distribute that money to the truck drivers instead.

In extreme cases, they can give away about half. The president drives a foreign car with the remaining half. The employees are satisfied and work there because, although the conditions are tougher than at large companies, they can hope for a high income if they push themselves. Large companies use them because it's convenient. That's the structure.

Because the presidents of small and medium-sized transport companies are satisfied with that structure, they have no motivation to pursue DX (Digital Transformation).

However, Japan does not recognize sole proprietor truck drivers. Vans are an exception, but you need five or more vehicles. In China, 80% to 90% are sole proprietors.

But that actually advances digitalization. Because everyone wants work, they put apps on their smartphones and get jobs themselves. People with vans work hard using their smartphones for sales because the more they transport, the more they earn. I think things might actually change if everyone became a sole proprietor.

There is currently a debate about whether to allow 'white-plate' (private) taxis, but there are also 'white-plate' trucks, and it's said that if these were allowed, many assets might actually be found to be surplus. I think we need to consider such deregulation as well.

Currently, white-plate trucks have loose operation and vehicle management, so it would be much better to have them managed properly like 'green-plate' (commercial) trucks and allow them to do business in exchange.

Current white-plate trucks do carry a company's own goods, but there are almost no trucks taking on work freely.

White-plate trucks are basically not allowed to do that. However, wholesalers can transport their own goods with white plates. So, there might be a way to break the structure by using a 'workaround' where a transport company technically buys the inventory.

Mr. Chosa, you mentioned that mechanization hasn't progressed in Japanese distribution centers because the level of the people is high compared to overseas. If we were to introduce the world's most advanced systems to Japan, what would become possible?

Even if autonomous driving and mechanization do not progress immediately, it is a matter of a few years, and I believe there is no doubt that we will move in that direction in the long run. Therefore, I feel that a warehouse where no one works and everything is robotized will be created in the not-too-distant future.

Although the working environment in current logistics facilities has improved considerably, I think the level of comfort is still low compared to working in an office building.

I half-deprecatingly call our logistics facilities 'Galapagos.' They are wonderful warehouses that get a lot of media coverage, impress visitors, and where the employees seem happy to work, but if I were to consider expanding this overseas, I think it would be absolutely impossible; it's over-engineered.

Logistics facilities that consider the workers in such detail and are so well-equipped strike a chord with the Japanese people. However, if you go overseas, people would wonder how much it costs and say they don't need it. I think these will be the mainstream for a while, but in the medium to long term, I think a stage will come where things change significantly again.

The reason we are building such high-spec warehouses now is that we want to change the perception of working in logistics companies and the logistics industry itself, as well as the awareness of the people working there. It's called a '3K' industry (kitsui, kitanai, kiken—demanding, dirty, dangerous) and it's an industry where it's hard to get a raise, but since they are responsible for a very important social infrastructure and are doing work that deserves more respect, I believe they should be evaluated appropriately.

I think we have covered most of the points, so finally, I would like to ask if there are any policies or business practices that you think we should change.

One thing is that we need to increase the buffer for cargo. For example, at a cup noodle company where loading is done, trucks from various vendors are coming in one after another.

However, for a company that loads several trucks' worth of goods, I think it is necessary to have a dedicated loading driver stationed there and to have a system where trucks that have finished loading are parked over here. Then, a dedicated driver for long-distance hauling arrives, gets into the loaded truck, and drives. I think that kind of buffer is necessary.

Marine containers have that. Ferries using ships also go to the customer's location at their own timing, load the cargo, leave the trailer at the port, and return. However, with trucks that cannot be detached, there is no buffer.

Recently, there are also trucks called swap body containers where the cargo bed can be detached. As soon as they arrive at the delivery destination, the cargo bed is separated, and the vehicle body takes the cargo bed that was left behind during the previous arrival. That way, the driver can spend their time only on driving.

Containers were originally based on that concept, weren't they?

Exactly.

Regarding the modal shift, the items in the government's Emergency Package for Logistics Innovation stand out for measures in fields with small volumes from the perspective of logistics as a whole, and only major companies can use them. Even for ships, the number of trailers that can be carried is only a few hundred or a few thousand. Since tens of thousands of trucks move every night, it only solves a fraction of the problem. I think it is important to reform the large-volume part where subcontracting companies are doing the actual transportation.

With the 2024 problem, working hours and binding hours will be reduced, and because they cannot work as much, the drivers' take-home pay will decrease. This 2024 problem should actually make drivers happy because their free time at home will increase, but it seems like no one is going to be happy.

For example, at highway parking areas at night, the law requires drivers to stop driving for 30 minutes every 4 hours, but there is no place to park the trucks, and they are overflowing onto the road, occasionally causing fatal rear-end collisions. We need to do things that actually make drivers happy, such as saying, "We will double the number of parking spaces in parking areas in 10 years."

Also, in 2023, it was decided that overtime pay for more than 60 hours a month would be 1.5 times, but that has hardly been implemented, and the media hardly mentions it.

If that functions properly, salaries should not change even if working hours decrease.

Mr. Chosa, what do you think?

Regarding the issue of waiting time, for example, places like Oi Wharf get terribly congested. In short, there are many small warehouses, and warehouses with only two or three truck berths continue endlessly. But no one tries to redevelop them. A major reason for this is that these are warehouses with divided ownership, and they cannot raise the funds for rebuilding, or they don't have the idea of doing it together with the neighboring landowners.

For example, our very large warehouse in Sagamihara, which is over 100,000 tsubo in one building, can have many parking spaces on a very large rooftop. If that's the case, body swapping is very easy to do.

If we use such a spacious design, we can significantly improve the efficiency of waiting time, but old and small warehouses are lined up, and only one or two trucks can park at each. Then, the circulation stops. Therefore, I think it would be good if we could have a policy where if individual landowners of warehouses offer their land and four plots are gathered, the value of your land will increase by this much.

To increase the land value, you just need to increase the floor area ratio. For example, industrial zones usually only have a floor area ratio of 200%, but if we say we will make it 300% if four or more plots are gathered, the price of the real estate should theoretically increase by about 1.5 times. For developers who develop large facilities, we should make the mandatory provision of parking lots stricter. I think this is something that can be realized.

Looking overseas at the situation of autonomous trucks in China, I wonder when Japan stopped being an 'admired country' and became a country that 'admires' others. Especially in the field of logistics, we are just admiring them. Probably when the Shinkansen was built, there was no such wonderful railway in the world. During the period of high economic growth, Japan was a very admired country for a certain period. However, now, unfortunately, even if you go to China, you are not taken seriously. Is this okay?

Japan is the most aging society in the world. Therefore, if we can create a society that can function even with a small working-age population, we should be able to lead the world's cutting edge, and in that sense, I think logistics is a great opportunity.

Logistics is one of the most labor-intensive industries in Japan, but it is now about to break down at a tremendous pace. Autonomous driving can completely overturn this. A society where labor productivity changes drastically will arrive. The point is the impact that technology brings.

Another thing is that logistics is connected to all kinds of industries. It is also called the lifeblood of the economy, and almost all industries transport goods. Therefore, if logistics changes, the entire Japanese industry will change.

Japan as a country has matured, and the society itself is elderly. Therefore, logistics is suffering from hardening of the arteries, but if the blood vessels are reborn, the organs should also be reborn. So, why not innovate? I hope the government and the private sector will invest in evolution, and I hope Keio University will produce such people.

I have been working on optimizing transportation for about eight and a half years, and the bedrock of the industry is very thick. In order to invest in the evolution that Mr. Onozuka mentioned, I believe we must change the way we think about return on investment.

For example, in digital investment and robotics investment, the focus is on how many people can be reduced or how much labor can be reduced by it, and labor costs are used as the 'R' in ROI (Return on Investment). As a result, it is often the case that effects cannot be easily demonstrated, and the proposal does not pass and is not approved.

In response to that, Japanese digital and robotics people lower their prices. Then they don't make a profit and can't keep going, so they fall into a vicious cycle where they can't make good things.

In order to evolve, investment must come from companies, but within the logic of a company, it inevitably gets stuck. We must break through this.

Recently, one thing I think might be a ray of light is to reframe investment in logistics as sustainability investment. Companies must manage from a medium- to long-term perspective. I wonder if we can create a policy framework for investment in logistics from such a perspective. I think it is important to devise a way of thinking that investing in logistics will improve the PL (Profit and Loss) by this much in the medium to long term.

We have really had various points raised. From a macro perspective, we heard that if you add up all the supply and demand for 2024, it might be sufficient, but when you think at a micro level, there is time spent unevenly or wastefully, and a tight situation is expected.

In that context, there was talk of changing the situation by considering using parking spaces and data as buffers instead of drivers, consolidating small and medium-sized warehouses, and securing things like parking spaces.

While technology is progressing dramatically, we should actually be able to do many future-oriented things. By actively doing that, while the whole of Asia is facing a declining birthrate and environmental issues like carbon offset are being emphasized, not only logistics but the entire Japanese economic system will create something optimal. If we do that, is it possible for Japan, which can gain a competitive status, to become an admired country once again? Thank you very much for today.