Lately, the logistics industry and supply chains have been receiving more media attention than ever, unfortunately it’s not for the best reasons. With headlines in the media such as “Supply Chain Crisis Risks Taking Global Economy Down With It”, “No End in Sight for the COVID-Led Global Supply Chain Disruption” and “Truck driver Shortage Worsens Supply Chain Backlog” there’s no wonder consumers are concerned.
In this article, we will address why the logistics industry is seeing this history making backlog, the impact it is having, what is being done to address the issue and the implications on safety.
Why the backlog?
For decades, the logistics industry has operated quietly in the background of the global supply chain, ensuring goods are transported from manufacturers to consumers dodging the spotlight, their impact going unnoticed. Why has the logistics industry recently been brought to light and the spotlight intensified through the media’s lens?
Growth in Ecommerce
Ecommerce is growing at a rapid pace and manufacturers, warehouses, and logistic companies are trying to keep up with consumer’s demand. An article in Inside Intelligence forecasts US retail ecommerce sales will grow 13.7%, reaching $908.73 billion in 2021. This increase in ecommerce has resulted due to many reasons and does not look to be slowing anytime in the future.
Covid – 19
The global covid-19 pandemic played a large part in many issues that are affecting logistics and the global supply chain. Consumers have been slowly changing their purchasing habits over the last few years due to convenience and time savings. However, the shift in ecommerce grew significantly due to the pandemic. The Inside Intelligence article goes on to say, “prior to the pandemic, we expected sales would grow just 12.8%.” Due to social distancing guidelines and lockdowns many consumers couldn’t physically go to a store for months and in order for them to get what they needed it was necessary to begin shopping online. This increase in ecommerce is expected to continue with the global online retail volume predicted to grow at a rate of 15% until 2023, as stated in a Deloitte research article.
In addition to changing consumer behaviors fueled by the pandemic, entire work forces were contracting the virus resulting in whole facilities having to shut down operations, further intensifying the difficulty to meet consumer demands. Restrictions and guidelines differ across the globe on positive Covid -19 test protocol; these positive test results have a massive effect on the company, profits, and even the global supply chain. For example, China partly shut down the world’s third busiest port after a single port worker tested positive for the virus back in August. The Meidong Terminal , where the employee worked, processes 25% of the cargo that passes through the Ningbo-Zhoushan port. Even a partial shutdown of a terminal had a large impact on the global shipping line. While this shutdown may seem severe, it is a prime example of how the Covid-19 pandemic has affected the supply chain.
Decrease in International Air Traffic
With the global travel restrictions put in place during the pandemic, international air traffic became scarcer. Therefore, cargo typically stored in the cargo hold of passenger planes were halted in their travels, having a large impact in the transportation of international goods. This may not seem like it could have impacted the supply chain in a large way but in an article by the Global Economic Forum it states that 40% of annual global air cargo is typically transported in the cargo hold of passenger aircraft.” The article goes on to say, “The other 60% of annual global air cargo is usually moved around in dedicated freighter aircraft by freight forwarders and cargo operators. These cargo operations are primarily hub-focused and follow key trade routes, so are less comprehensive than passenger air networks.”
The labor shortage is visible throughout the entire global economy and is the result of several factors. A news article by CNBC looks at what factors are contributing to the shortage globally. In the US, they believe that families have built up savings buffers and don’t have urgency to return to work. Additionally, it is believed that “there is a more permanent loss of workers driven by a large number of older workers taking early retirement. The thought of returning to the office and the daily commute may seem unpalatable for many people and with surging equity markets having boosted 401k pension plans, early retirement may seem a very attractive option.”
The article goes on to say that in the UK the labor shortage has been “exacerbated by Brexit, with many foreign workers that the country relied on going back home during the pandemic.”
In Europe the labor shortage can be seen as well: “while concerns about labor shortages have started later than in the U.S. and are less pressing than in the U.K., they are increasingly mentioned as a concern for businesses.”
The shortage of labor is impacting various industries such as agriculture, warehousing, and logistics. Farmers are having to let food go to waste because they do not have the help they need to process it in a timely manner. In an episode of The Guardian podcast, Today in Focus, they discuss a UK pig farmer who was not able to process his hogs at the correct age due to a lack of workforce. Unfortunately, this has been seen at meat processing plants throughout the globe and has contributed to meat shortages. Additionally, with agriculture margins so tight, farmers not only aren’t profiting off of their hard work, but they are losing money.
Warehouses are struggling to operate with reduced staff, adding to the supply chain backlog issue. There are simply not enough workforce resources to operate at their normal pace resulting in increased loading/unloading times at loading bays and trailers having to wait to be unloaded/loaded.
Not only are delays present at the warehouses but often delays are likely when transporting goods to the warehouse facilities due to the global driver shortage. Without the drivers, goods are not able to be transported to their end users further intensifying the backlog. “There are several reasons for the shortage” explains The Guardian podcast, “this has been an existing issue with an older workforce, and we’ve seen a lack of younger drivers entering this field.” In France too they are experiencing similar issues. A BFM Business article states, “In France there is a shortage of transportation professionals amounting to 50,000 people.” Making an existing issue worse, long training times, less than comfortable accommodations, extended periods away from family, and a global pandemic does not help recruit the new drivers needed to alleviate the issue. The BFM Business article continues, “Salaries and working conditions are making these trades are no longer attractive.”
The impact and what is being done about it
Unfortunately, the backlogs, shipping delays and supply chain constraints have had and will continue to have massive effects on consumers. Efforts have been made to address some of the effects, but will it be enough? Only time will tell.
Take a drive through town and you’re bound to see several “We’re Hiring” signs posted on billboards and storefront windows in an effort combat the labor shortage that so many are experiencing.
Due to the difficulty of finding skilled workers, companies are often willing to hire workers with little or no experience. Hiring these new staff members may alleviate their labor issues for the time being but could potentially be creating another issue around workplace safety.
High levels of demand, labor shortages, and a lack of transportation means have resulted in low stock levels of goods throughout the globe. Food, supplies, metals and lumbar shortages have been present the last several months, at times worse than others, and very noticeable to consumers.
To resolve this issue government agencies have extended port operating hours around the clock to help elevate the backlog, for example in the US, the Biden administration has recently announced that two major shipping ports on the west coast will operate 24/7 to alleviate some of the bottleneck. The Los Angeles and Long Beach California ports account for about 40% of the US cargo container imports, according to an article in United Press International. In addition, the decreased HGV driver training time and other incentives are part of the effort to attract new drivers to the industry to transport goods to consumers. Wage increases have also been seen throughout the globe to attract individuals to work to kickstart the supply chain and ensure the goods arriving at the ports reach the consumers shelves.
Not only have items been hard to come by on the shelves but when consumers do happen to find what they are looking for, they will have to pay a higher price than what they used to.
A large reason for this is the increase in wages to help attract workers. However, when companies do raise wages, they are not able to absorb the costs within the company. Therefore, they need to raise prices for consumers to stay afloat.
A variety of other issues have led to increasing prices as well. An article from CNN states, “A growing list of crises on the supply side has exacerbated the commodities crunch. The Suez Canal blockage delayed goods shipments in March. Drought in South America has weighed on corn and sugar output. A deep freeze in Texas and the Colonial Pipeline ransomware attack tightened the market for plastic and fuel, while India’s Covid-19 outbreak disrupted ports and supply chains.” “It’s really been a perfect storm” says Warren Patterson, head of commodities strategy at ING.
Long Lead Times
As you can imagine, all the issues previously discussed are causing in long lead times around the globe. “The time it takes to ship an item from Asia to the United States has roughly doubled — 15 days by air, 90 by sea — during the pandemic” states Neel Jones Shah, global head of airfreight for Flexport, a logistics technology company. “The backlog, coupled with labor shortages and pandemic-related shutdowns at every point in the process, has led to months-long waits for electronics, furniture and other imports. Shippers are scrambling to figure out how to get their goods to market in time for the Christmas selling season.”
If children are asking for that special gift for the upcoming holidays, now is the time to purchase. Lead times are increasing, and experts suggest that holiday shopping should happen earlier this year than ever. “There’s no logical way that everyone is going to find what they want in time for Christmas,” said Isaac Larian, chief executive of MGA Entertainment, the toy giant behind Rainbow High and such popular lines as L.O.L. Surprise and Little Tikes. “Everything is up the air.”
Implications on Safety
As you can see, the impact of the supply chain backlog and driver shortage is having a large effect on consumers. While governments and companies have made steps to try to address these issues, such as decreasing the time it takes to train HGV drivers and increasing the number of hours they can drive on the road before requiring a break, they could be creating an additional issue while trying to address another.
The labor shortage, particularly with truck drivers and warehouses personnel, coupled with the increase in the demand for ecommerce, could have massive implications on safety. With new drivers on the road being trained in a shorter amount of time, the number of risks increase for both the driver and people sharing the road. While the shorter training time opens up additional testing spots for individuals to take the test needed to become an HGV drive, it also means that learning crucial skills have been removed from the test. A BBC article states “The Road Haulage Association (RHA) is concerned that changes like removing the reversing maneuver from the test – which makes it shorter – and assessing it separately is a step backwards when it comes to safety.” Further in the article Andrew Malcom, chief executive of the UK based logistics company The Malcolm Group, states “In principle, I can understand what they’ve done, to try to unlock test dates. However, I am seriously concerned about the safety aspect. I think they’ve cut far too much out the process of the test – that’s my biggest worry.”
With limited labor resources and increased demand, coupled with the pressure facilities are continuously faced with to perform at high levels of throughput, safety risks emerge. To meet daily quotas, warehouse personnel need to work at a high speed which often results in shortcuts being made. The pressure to work more quickly, combined with drivers working long hours with less experience will have an impact on safety, especially at the loading dock. An article from Industrial Safety & Hygiene News (ISHN) states “Twenty-five percent of all industrial accidents occur at the loading dock. And for each accident that occurs, there are about 600 near-misses.” That statistic is prior to the increase in ecommerce demand, supply chain backlog, pandemic, and labor shortage, one can only imagine that statistic has increased since. To mitigate the risk of accidents at warehouse facilities between new HGV drivers and forklift operators, loading dock safety systems are strongly recommended to ensure clear communication during the loading and unloading process.
The supply chain backlog we are experiencing is the result of an increase in demand, a global pandemic, lack of transportation means, and a labor shortage all present at the same time. These issues have resulted in new staff, low stocked items, higher prices, and long lead times all which have implications on safety. While effort has been made by government leaders, agencies, companies, and individuals to reduce the effect these issues are having on the global economy, we may be seeing lasting safety implications as well as numerous other effects from the history making supply chain backlog and driver shortage of 2021 for years to come.