The logistics industry has faced multiple new pressures over the last two years, beginning with the COVID-19 pandemic and snowballing into global supply chain issues. Unfortunately, logistics managers can expect issues with moving goods from A to B to persist in 2022.

The main contributing factor to supply chain issues is the “last mile(s)” – regardless of whether the goods arrived at a destination by air, land, or sea. Once goods enter the country, they must be stored in a warehouse before they can then continue their journey – but when the supply chain is already strained, goods often cannot make it to their final destination.

This issue is now being exacerbated by the lack of qualified labor. Goods usually travel this last mile by trucks or cars. But fuel cannot make it from a port to a gas station and car parts cannot move from the airport to repair shops without adequately licensed drivers. Even as countries continue their journey to post-pandemic economic recovery, there is no end in sight to this labor shortfall. In fact, the American Trucking Associations (ATA) reported a shortage of over 80,000 truck drivers in 2021, and that figure could surpass 160,000 in 2030 if current trends continue.

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.

Multiple factors have played a role in causing today’s supply chain issues. Some may suggest the situation is a natural response and inevitable component of the post-pandemic recovery. As countries and economies reopened following the pandemic, demand for goods inflated, and the supply chain has struggled to stay on pace. The rise of new COVID variants and an increasing number of employees falling ill has further highlighted the issue despite reduced quarantine requirements. The trucking industry was already struggling, and now with more employees out sick, goods simply cannot get where they need to be when they need to be there.

What can business leaders do today to mitigate the “last mile” issues?

Prioritize Supply Chain Resilience

Over the last year, we witnessed multiple events that demonstrated the importance of supply chain resilience. The ransomware attack on the Colonial Pipeline left millions without gas and the Suez Canal blockage caused significant shipping delays. Supply chain disruptions are becoming increasingly frequent, and the need for additional backup plans has never been greater. To prevent falling behind your competitors, the time is now to analyze your supply chain risk and implement solutions to avoid future disruption.

When properly utilized, supply chain data is a powerful tool for business leaders. Leaders can use this data to map where they fall in the global web of supply chains and identify possible points of vulnerability. Looking at a 360-degree view of how products make it from the factory to the consumer can provide a comprehensive picture of every plausible point of disruption – from operators to vendors – and leaders can use the data to drive real-time insights and decision-making. Suppose temperatures are about to drop, and production plants have no power, as we saw last year in Texas. In that case, data-driven insights can help your business make decisions which can help mitigate the impact.

Employees Are Critical

Truck drivers are critical to the “last mile” journey. Without them, goods cannot make it to their intended final location. According to a recent study published in the journal Research in Transportation Economics, the average salary of truck drivers who stayed on the job in 2018 was 6% higher than the average salary of drivers who left their job. While 6% may not seem excessive, the cost of wage increases would likely result in the consumer seeing a 6% higher price tag.

Increasing employee wages can present a solution to short-term shortages throughout 2022 – but it also raises questions regarding the sustainability of this strategy in the long term. This is where the power of technology and innovation come into play. Investing and integrating technological solutions can help businesses optimize workflows, increase productivity, and reduce costs to offset the increase in wages.

Aside from higher wages, the working conditions for employees must also be a top-line consideration. Drivers in the industry report subpar working conditions, including injury from decades of sustained work, and lack of time at home. Recruitment of young drivers has also presented a problem for the industry as many truck drivers are nearing retirement or retired during the pandemic. To attract young talent the industry must promote better working conditions and greater work life balance. If the lack of truck drivers is a chronic issue for your business, it’s time to reconsider truck driver pay and working conditions.

Consider Going Green

Over the last several years, new technologies have entered the market and new solutions have been created to manage the “last mile” of delivery. Artificial intelligence and machine learning power robots and drones without human intervention at the last mile. Recently, robots have taken over college campuses to solve “last mile” food delivery. While these environmentally conscious solutions like robots are not the only option, they are certainly one to consider.

There are many other solutions available for business leaders to mitigate “last mile” concerns. These include electric vehicles, solar-powered warehouses, increased fulfillment centers and heightened load optimization, each of which can help reduce your company’s carbon footprint. Increasingly, we see consumers choosing companies solely based on their environmental footprint and employees choosing to work for companies that prioritize environmental, social, and governance (ESG) principles. In turn, being seen as a cleaner company makes you more attractive to consumers, partners, and potential employees.

Looking Ahead – Change Is Near

The “last mile” is under immense pressure, suggesting change is on the horizon. Software will likely drive transformation to “last mile” delivery in the future. Analyzing data for efficient route planning and real-time supply chain monitoring will be core components of this shift.

It is no longer a question of if the logistics industry will change, it is when it will change. Business leaders must now analyze and prioritize their “last mile” strategy to prevent falling behind competitors and ensure their future success.

ABOUT THE AUTHOR

Charles Minutella

Charles Minutella is the head of enhanced due diligence at Risk Refinitiv.

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