Decrease the Impact of Labor Shortages on the Supply Chain

This peak season, a new challenge is topping the list of concerns for supply chain leaders—labor shortages and worker unrest. Firms have struggled to fill record-high openings and retain workers throughout the sector. And disruptions in the form of strikes, closures, and delayed union negotiations are compounding supply chain labor shortages and further disrupting global trade. 

Staff shortages and worker unrest reared their heads during the acute phase of the pandemic and have reached a fever pitch over the summer as surging inflation combines with stagnating wages and a slow recovery. 

Since the start of peak season, truck drivers have gone on strike everywhere from California and France to South Korea. Walkouts by German dockworkers’ have disrupted cargo flows in Europe’s busy North Sea ports. And high-profile pilot and ground crew strikes across Europe and the US have led to thousands of canceled and delayed passenger flights, affecting air cargo capacity.  

Many firms are beginning to view supply chain labor shortages as a more significant threat to operations than inflation. Understanding the causes behind this shift will be crucial for developing effective coping strategies and minimizing the impact of labor shortages on operations and bottom lines. 

What’s driving the supply chain labor shortage?

Long-neglected issues, such as poor working conditions and new challenges arising from the pandemic’s aftermath are driving worker unrest throughout the supply chain sector. 

  • The Great Resignation. Hundreds of thousands of workers—particularly in the US and Europe—have quit their jobs in search of higher pay and better conditions. Occupations where conditions tend to be less than ideal, such as warehouses and distribution centers suffer the highest turnover rates. Workers who have to put in long hours, such as truck drivers are also showing major signs of discontent.  
  • Strikes and union negotiations. The pressures workers endured during the pandemic’s supply chain crisis and its aftermath have, in many cases, erupted in strikes and protests, which have further disrupted operations—especially at seaports, airports, and ground transport. Fueling many of the strikes and walkouts are drawn-out negotiations with workers’ unions. Right now, high-stakes talks for contract renewals covering workers at ports throughout the US Pacific coast—some of the nations’ busiest—have many fearing further disruptions in already overburdened operations. 
  • Poor planning. Firms that laid off or furloughed staff during the pandemic now have difficulties getting them to return. For example, airlines are still working through the challenges of reintegrating staff and resuming a regular flow of operations. 
  • Skills gaps. The labor market’s growing skills gap means that, in many cases, firms cannot find enough qualified candidates to fill open positions. Raytheon, an aerospace manufacturer and defense contractor, recently singled out the lack of skilled labor as their most substantial obstacle in meeting the soaring demand for defense equipment resulting from the war in Ukraine. 
  • Covid-19. While the acute phase of the pandemic may be over, Covid is still a big problem worldwide with new variants and recurring infection waves. The virus’ spread has been especially acute in the supply chain sector, where workers at almost every stage work in close contact with each other. High absenteeism has crippled productivity and increased firms’ operating costs. In addition, the increased operational hazard is hurting the supply chain sector’s ability to attract and retain talent.

What can shippers do to minimize risks from supply chain labor shortages?

As labor unrest continues to affect global supply chains, it’s crucial for firms to integrate risks associated with supply chain labor shortages into their contingency plans. 

  • Avoid affected points. Many firms choose alternate routes, carriers, and modes to avoid areas experiencing disruptions. For example, in February, automakers in Canada started diverting ground cargo via air to avoid the blockage at the US border by truckers protesting vaccine mandates.  
  • Choose carriers with better labor practices. Carriers offering fair compensation are more likely to attract higher quality talent and provide more reliable and efficient services. Firms with a history of poor labor practices or a demonstrated unwillingness to adjust their value propositions could become a liability in a job seeker’s market.
  • Integrate automation A transport management system (TMS) can help shippers with improved response times and enhanced risk mitigation capabilities in the event of a major disruption. Carrier selection features will be beneficial for finding vetted, trustworthy partners and ensuring optimal choices no matter the situation. 

Don’t let supply chain labor shortages put a dent in your operations. Contact CTSI-Global and get the expert support you need to navigate confidently through any challenge.