April 25, 2022 Supply Chain Disruption, Management and Transformation

Business leaders must prepare to navigate a more complex supply chain network.

Supply chain issues hit the headlines across the globe in 2021, from the Suez Canal blockage to the bottleneck of ships docked off the coast of California. As business leaders realize these disruptions are here to stay in 2022 and beyond, they must prepare themselves to navigate a more complex supply chain network.

The great resignation – lasting effects

As we progress through the new normal and economies begin to recover, the decreasing number of qualified transportation workers has already significantly impacted the global supply chain.

In the United States, the Chamber of Commerce believes there are nearly 30,000 available transportation jobs. If current trends continue, The American Trucking Association (ATA) predicts the United States could face a shortage of over 160,000 drivers by 2030.

Across the pond, the Road Haulage association noted a shortfall of 100,000 truck drivers. Not only that, but with the Brexit effect, 20,000 former drivers have left the UK due to UK-EU split.

Both the US and the UK are attempting government intervention measures to mitigate the shortages. In the US, the Biden administration has outlined a plan to strengthen America’s trucking workforce, including new recruitment strategies. In the UK, visas are offered to foreign truck drivers to combat the driver shortage.

The shortage of workers is a serious cause for concern as a huge contributor to current supply chain issues is the “last mile(s).” This refers to moving products such as food, gasoline, and manufactured goods from their entry point to their destination. Essentially, there are not enough workers to move goods from ports, warehouses, and production sites to the end consumer. For example, in the United States, truck drivers move 71% of the US economy’s goods.

Government is proposing action to incentivize new potential trucking candidates to join the profession. The Strengthening Supply Chains Through Truck Driver Incentives Act proposes the creation of a refundable tax credit for truck drivers holding a valid commercial driver’s license who drive a minimum number of hours per year and creates a new refundable tax credit for new truck drivers registered as trucking apprentices.

Put simply, there are too many open jobs in transportation and not enough applicants and job seekers. Despite numerous new corporate recruitment campaigns, prospective workers are reluctant to join the trucking industry.  Beyond COVID-19 fears, job seekers also mention childcare concerns as motivation to explore career paths other than trucking, as school systems pivot between opening and closing. Until this is remedied, the demand for drivers and long delivery times can be expected to continue.

Prioritize employee working conditions

The demand for workers has become a growing concern across all industries, forcing business leaders to create a differentiated employee environment to find talent – starting with offering competitive wages. In recent years, truck drivers have slipped down the wage ladder. Wages have not increased in tandem with the market, possibly causing the profession to become less attractive to young workers – a serious issue as the truck driver workforce becomes older.

Beyond pay, new drivers will be attracted by better overall working conditions. Therefore, business leaders must ensure they have a comprehensive plan to identify and retain key resources, provide employee development and advancement opportunities, and focus on inclusion and work/life balance. Lorry drivers in the UK have long cited poor conditions on the road, lack of adequate facilities and prolonged waits at depots to unload. As the world establishes what the “new normal” looks like, the workforce is beginning to look beyond pay and take more significant considerations such as working conditions and work-life balance.

Rethink supply chain management

The past year showed us that overreliance on one single route, vendor or technology provider can be detrimental. The world watched as the Ever Given was stuck in the Suez Canal, causing a significant backup in the passageway, hindering the movement of other goods relying on the same route – and impacting the entire global supply chain. If your business relies solely on any singular location to import products, you need to understand how disruptions can hinder your business’s ability to deliver on your customer promise.

As a business leader, you must invest in supply chain resiliency. Ensure suitable and available alternatives across all supply chain segments, including distribution, that can be dynamically deployed. Having a strong Supplier Risk program is a key component to resilience that allows you to identify operational or financial risk factors that impact your ability to meet demand.

No business exists in a vacuum. Many external factors can disrupt the supply chain – including third party vendors. Although your company may have a stable supply of goods, an unforeseen environmental disaster can crumble operations. What happens if there is a shutdown on your cardboard supplier, or icy conditions affect truckers’ ability to move products? Leaders must understand the risk profile of operations using data and have adequate plans in place for when business as usual is disrupted so they can quickly resume regular operations.

Industry transformation is near

Transformation to supply chains and trucking can come in many forms. Business leaders may opt for green, environmentally conscious alternatives which require less human intervention to achieve “last mile” deliveries. Many businesses are now looking into fully automated supply chains powered by solar-powered batteries and operated by robots. We are also beginning to see increasing investment in environmentally conscious fleets to meet Environmental Social and Governance (ESG) goals.

The increase in machine learning and AI options for business leaders also continues to grow. Drones and battery-operated autonomously driving cars can help with the “last mile” delivery. AI-powered software can also help business leaders make data-driven decisions regarding their risk tolerances and optimize aspects of the supply chain to reduce costs.

The current issues facing supply chains and trucking shortages do not have a simple fix. The issues will likely continue well into 2022 and beyond unless business leaders make considerable changes, quickly. The time to act is now to stay ahead of the competition and ensure your business has the resiliency in place to operate even in the face of daunting supply chain disruptions.

Charles Minutella leads Refinitiv’s Enhanced Due Diligence business and is responsible for the design and adoption of solutions supporting customer and third-party risk assessment.

He has a deep knowledge of legal and compliance processes aimed at understanding the underlying risk of customer and business relationships.

Prior to his current role, he led client and industry adoptions efforts for Refinitiv’s KYC as a Service, which at the time was the industry’s largest KYC utility.

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