Disruption to global supply chains, which began at the start of the pandemic and had a significant knock-on effect on businesses around the globe, looks set to continue throughout 2022 – yet the way the logistics industry has reacted should offer cause for hope, says Logistics UK’s CEO, David Wells …
The past two years have been a period like no other for our supply chain, with disruptions forcing constant changes in the ways goods move both domestically and internationally.
It is testament to the dedication of staff right across the supply chain that solutions have been provided for problem after problem, with minimal disruption – from the displacement of shipping containers to a lack of HGV drivers to move goods – and our highly interconnected supply chain has remined 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 31st 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%.
However, there are some signs for optimism that the industry is starting to recover. The Government’s decision to cut fuel duty in the March 2022 Spring Statement by 5p/l will result in an average saving of over £2000 per year per 44-tonne truck. However, with other operational costs rising sharply thanks to rising inflation, and the cost at the pumps still rising, this cost saving could be lost to operators in the short to medium term.
In addition, following an acute shortage of skilled drivers, increased test availability for vocational drivers, as identified by DfT, is beginning to relieve the worst of the problem and ensure that a lack of drivers is no barrier to business growth and recovery. The data shows that the number of people undertaking practical HGV tests has grown by +53.5% in Q4 2021 compared with Q4 2019, and the industry is committed to providing more access to training and testing for all those keen to join the profession and to retain existing staff.
The signs of recovery are there, as our latest annual Logistics Report indicates – but there is still much work to be done, and ongoing economic pressures could easily stall any significant growth forecast.
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 JIT management systems will need to shift to using greater storage capacity.
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.