Supply chain execs predict chaotic holiday peak as crisis continue

Supply chain executives are bracing for a chaotic holiday peak as massive e-commerce volume becomes the new normal and persistent lack of truck drivers and other fulfillment workers continue to hurt the supply chain.

Last year, the peak holiday season showed U.S. carriers posting similar or slightly better on-time delivery rates compared to the 2019 peak – but that was largely because there wasn’t much of a peak in 2020.

Consumers at the time were still adjusting to the e-commerce explosion. Despite sales reaching record heights, they weren’t too far off from the levels retailers saw in April and May when the Wuhan coronavirus (COVID-19) pandemic started started to spread across the globe.

Carriers already struggling with driver shortages pre-pandemic

While the shortage of truck drivers already existed pre-pandemic, the pandemic definitely exacerbated the issue. (Related: Shortage of truck drivers in the US forces companies to look overseas.)

Bill Thayer, co-founder and co-CEO of logistics-as-a-service company Fillogic, said that lack of drivers was always a problem before the pandemic because they are aging out. “It has just become more acute, because those folks that were driving during the pandemic, in many cases they just aged out, and nobody’s been able to replace them.”

When the pandemic happened, drivers and other workers left their jobs in search of better pay and working conditions. Thayer said the pandemic made hiring drivers more difficult because carriers have been limited in their ability to train and recruit them face-to-face.

Chris Kane, CEO of Florida-based courier service Drivv and a member of the Customized Logistics and Delivery Association (CLDA), believes that the enhanced unemployment benefits from the government have played a role in the lack of drivers entering the workforce.

As the unemployment benefits ended, the industry is coming back as well. However, Kane said that the checks changed the drivers’ expectations for wages, which led to greater competition from local carriers who are offering increased pay. The U.S. unemployment benefits helped people be less desperate to accept mediocre offers while giving people the ability to feed themselves.

Shortages in other fulfillment roles were also old problems, and retailers took in seasonal hiring to fill gaps in their warehouses. While companies like Walmart, Target, Amazon and UPS are doing the same this year, they may get different results.

“I think brands and retailers are quite accustomed to being able to hire seasonal labor to ramp up staff around the holidays. And of course, that would be both younger employees as well as people who didn’t regularly participate in the labor force. But in these last few years, and certainly this holiday, we see that sort of ancillary labor participation significantly impacted,” said Brian Walker, chief strategy officer of commerce platform at Bloomreach.

Walker noted that the shortages are more acute this year as retailers are not only trying to staff their warehouses but their physical stores as well. Meanwhile, workers are also fed up with working conditions when they have other choices.

Better wages and benefits waiting

Many carriers are now informing clients of raising prices due to the lack of drivers. Others are even firing clients because they can no longer afford to do business.

Steve Howard, board president of the CLDA, explained that the lack of drivers also negatively impacted master contractors – those who hire independent contractors such as drivers to work for them and supply the carriers with drivers and trucks. They are also struggling to bring in drivers.

Howard believes the crisis will resolve itself as local companies are providing higher wages and better benefits. In some ways, Howard said, driver shortages require people to charge a little bit more and pass that along – so wages are better.

Kane agreed, noting that treating drivers better is crucial in attracting and retaining them in the post-pandemic landscape.

Read more about the supply chain problems during the COVID-19 pandemic at Bubble.news and Pandemic.news.

Sources include:

FreightWaves.com

Bloomberg.com