Disruption to global supply chains looks set to continue in 2022, requiring a radical move away from a reliance on just-in-time to the use of greater storage capacity, Logistics UK’s annual report is warning.
The report notes that both global and local factors have caused issues for all elements of the supply chain, with issues such as disruption to the supply of shipping containers, a shortage of HGV drivers and a lack of semi-conductor microchips are all having an impact on the way that goods are moved around the world.
David Wells, Logistics UK chief executive said: “It is clear that, following the impacts of Covid-19 supply chains will need to change the way they work. Cost effective and efficient shipping is no longer guaranteed under the previous working model and the industry’s reliance on just-in-time management systems will need to shift to using greater storage capacity.“
He praised the resilience of workers across the supply chain for dealing with the challenges of the past two years, from the displacement of shipping containers to the driver shortage crisis, whilst still keeping the supply chain largely intact.
“At the same time, our members have been facing significant increases in fuel and freight costs. Diesel prices rose by 22% in the year to 31 December 2021, while freight rates have also increased as demand returns following the pandemic, accompanied by wage inflation.
“With average fuel prices reaching the highest level on record, and rising inflation, there has been an unsustainable burden on logistics businesses which operate traditionally on very narrow margins of around 1%,” he added.
Wells said there were reasons for optimism. He pointed to the government’s move to cut fuel duty in the March 2022 Spring Statement by 5ppl, but warned this cost saving could be lost to operators in the short to medium term as inflationary pressures and continued fuel price rises drive up other operational costs.
He also hailed the increased test availability for vocational drivers, which he said is beginning to ease the worst of the driver shortage problem, pointing to data which shows that the number of people undertaking practical HGV tests has grown by 53.5% in Q4 2021 compared with Q4 2019. He also noted a rise in the logistics industry’s commitment to provide more training and testing for new and existing staff.
Wells said: “The signs of recovery are there, as the Logistics Report indicates, but there is still much work to be done and ongoing economic pressures could easily stall any significant growth forecast.”
He added: “However, having seen how far we have come, in just two years, I am confident that the logistics sector is set to lead the economic recovery in the months ahead.”