Logistics sector nears 2008 financial crisis level

By James Ridler contact

- Last updated on GMT

The logistics industry has been hit by a perfect storm of challenges that have driven up costs
The logistics industry has been hit by a perfect storm of challenges that have driven up costs

Related tags: Supply chain

The supply chain and logistics industry is approaching pre-financial crisis levels thanks to shortages in drivers and shipping capacity, as the food industry continues to grapple with the effects of COVID-19 and Brexit.

That’s the verdict of one operator, Stolt Tank Containers. Global trucking and shipping costs would stay high for a while as changing trade patterns, increased supply chain volatility and current low delivery books for ships pushed up prices, the business claimed.

Its president Michael Kramer warned that the last time the industry saw conditions even close to resembling the current market was just before the 2008 financial crisis.

“However, it is becoming increasingly clear that the conditions we face today are unprecedented in nature, with multiple issues occurring simultaneously,”​ Kramer added.

Challenges pile up

The outbreak of COVID-19, the fallout of Brexit and events such as the blocking of the Suez Canal had created a challenging market and increased operators’ overheads.

“Unfortunately, like many logistics companies, producers and even customers, we have no choice but to increase our prices to offset these cost increases and to ensure supply chain stability,”​ Kramer continued.

“We have also increased our demurrage tariff rates and reduced free time included in our contracts.

“Forecasts indicate the blank sailings, rolled bookings from carriers in all markets, port congestion and high demand, will continue well into the future. As a logistics provider we are not be able to absorb these, so they will be passed on to shippers.”

While there has been talk that the decrease in drivers has piled pressure on to the food and drink supply chain, it has not been the main issue for the logistics industry.

Perfect storm

The issue has only come to light now that activity in the UK has begun to rise, thanks to the easing of lockdowns. As Scala executive director Dave Howarth explained, it had been the perfect storm of challenges detailed above that could cripple supply operations if left unchecked.

“Throughout the industries in which we work we have been hearing reports of service interruption due to lack of driver availability, meaning volumes aren’t being transported or delivered to required schedules and lead times,” ​Howarth continued.

“This is largely due to a reduction in the number of available EU drivers due to Brexit, drivers returning to their home country due to COVID and changes to foreign exchange rates making the UK a less desirable place to live and work for some.

“This, alongside the recent need to manage IR35 tax changes, has led to significant inflation in driver and transport costs.”

COVID-19 complications have led to a lack of HGV driver tests in the last 12 months, meaning an expected 6,000–7,000 new drivers will not be added to the labour pool.

“With the return of the hospitality sector we understand that this is a significant challenge with, for instance, order delivery lead times being extended,”​ Howarth concluded.

Related topics: Supply Chain, People & Skills

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