With COVID-19 infection and death rates dropping, it seems we are on our way out of a pandemic that has rattled nearly every industry (especially the logistics industry). While the impact of the pandemic is lessening, several key issues still remain for shippers and manufacturers. Labor shortages are disrupting supply chains; capacity is tightening to a point where shipping costs are on the rise; fuel prices are increasing and further driving up rates. While this all seems like bad news for many industries, not all hope is lost, and there are many things businesses can do to limit the impact these issues have on their supply chains.
A look at the issues at hand: looming labor shortages
The most recent (April) jobs report from the Bureau of Labor Statistics failed to meet its lofty expectations. Only 266,000 jobs were added in the month of April, far off the mark of the one million jobs that were projected to be added. Labor shortages, especially in the manufacturing sector, are impacting global and domestic supply chains. There is a shortage of skilled workers actively seeking employment, and while innovation is helping to fill some of the gaps, it’s also creating new job skills that many people lack.
This is causing several issues across many other industries:
- Price increases: employers are having to increase wages, which increases the prices of goods.
- Increased lead times: demand is still high, but there aren’t enough workers to fill orders.
- Decreased revenue: businesses aren’t able to grow if they cannot fulfil orders or get the products they need.
According to GlobalEdge, the manufacturing labor shortage is expected to be 8 million people by 2030.
Capacity is also tightening
While tightening capacity has long been an issue for shippers, it has accelerated in recent months because of the combination of labor shortages and increased demand for products.
Although spot load posts were up in Q1 of this year, driver shortages continue to be an issue. The over the road (OTR) driver count has reached its lowest point since 2012, and there are nearly 200,000 fewer drivers on the road today. This is leading to several issues in freight delivery, particularly in the LTL shipping space:
- Operations disruptions due to challenges presented in meeting on-time delivery demands
- Changing networks for LTL carriers and shippers: as demand increases for direct-to-customer shipments, shippers must alter their distribution networks to fulfill these orders from multiple locations. Otherwise, they will have to move inventory closer to their customers
- Market consolidation: shippers are being forced to revamp their LTL networks to increase efficiency, reduce their costs, and maintain high levels of customer service
- Increased expectations for last-mile delivery and more rapid placement of inventory. This has increased the demand for LTL services that move small, palletized freight orders
Rising diesel fuel prices
After dropping for so many months, fuel prices are beginning to trend upwards, quickly, causing carriers to further increase shipping prices to cover the increased costs of moving freight. Due to domestic and global policies and regulations, these prices are not expected to drop or level off anytime soon, causing prices for goods and services to rise across the board.
What can shippers do to shield their supply chain?
Adapting to changing industry landscapes and new logistics challenges is not only beneficial to businesses, it can also be essential to maintain supply chains that rely on so many moving parts. With capacity tightening, labor numbers struggling, and prices rising, there are many things shippers can do to improve efficiency and better serve their customers:
- Consolidate for efficiency: even as LTL challenges appear, freight consolidation is one of the most affordable ways to store and ship freight. Maintaining a supply chain of manageable size is often more efficient than expanding to new suppliers, warehouses, and shipments. Implementing a combination of LTL and PTL shipments for speed and cost efficiency can help shippers mitigate their shipping costs while keeping their shipments moving. Read more about how to consolidate supply chains efficiently here.
- Keep and maintain carrier relationships: with carriers being limited, it is now more important than ever to maintain healthy carrier relationships, allowing shippers to find freight opportunities quickly and negotiate rates that fit into their budget.
- Route and shipping planning: if over the road freight is proving to be too costly or time consuming, or both, there are other freight options. Air freight can decrease shipping times for time-sensitive freight and rail freight can often be slower but more cost effective depending on the size and quantity of the freight. Employing a mix of shipping options is a powerful tool in times of tightening capacity and increasing costs.
Rely on a 3PL to help
Third-party logistics providers are on the cutting edge of new technology, are most knowledgeable about new regulations and changing logistics strategies, and employ the best range of shipping options across a vast network of reliable carriers. As you continue to plan for the future of your supply chain, consult with a 3PL provider to see how they can increase efficiency and keep costs in check moving forward. At King, we’re ready to confront your shipping challenges. Get in touch with us today to talk about solutions that are right for your business.