The coronavirus pandemic, changing consumer demands, and the disparity between global supply and demand have caused serious pressure on businesses struggling to keep their supply chains running smoothly. With elevated freight costs due to capacity issues in both ground shipping and airfreight, additional surcharges tacked onto certain services by carriers, as well as an ongoing labor shortage leading to backlogs in rail loading facilities — even during peak seasons — companies are feeling the stress of higher operating costs while attempting to select reliable elements in meeting customer expectations. In this blog post, Benjamin Gordon looks at how businesses can work towards streamlining their operations and cost mitigation strategies despite current challenges within their supply chains.
Elevated Freight And Labor Costs Remain Issues For Stressed Out Supply Chains, Says Benjamin Gordon
The elevated freight and labor costs remain an ongoing issue for supply chains globally, says Benjamin Gordon. Supply chain managers face the challenge of finding cost-effective solutions to keep their businesses running efficiently and profitably.
According to Benjamin Gordon, freight costs have become increasingly expensive as companies struggle to find ways of moving goods from one location to another with limited resources. This is compounded by a lack of available drivers and the need for more experienced personnel, which raises labor costs substantially. One example is the cost of shipping across international borders, which can be up to double what it would cost domestically due to increased regulations, documentation requirements, and taxes that must be factored into the equation.
According to Supply Chain Dive’s 3rd Annual State of Logistics Report, global logistics costs have risen by 4.4 percent from the previous year and are now estimated at $2.17 trillion dollars or 10.5 percent of global GDP. This is due in part to increased demand for shipping goods as well as rising fuel prices and labor costs.
The report also found that average wages for supply chain workers have risen 3-8 percent over the last year and continue to grow, making it difficult for companies to keep up with the increase in costs while still ensuring competitive wages. Supply chains around the world are struggling to find ways of streamlining their operations while containing labor expenses, often resulting in layoffs or reductions in hours worked by employees.
One example of a company trying to find cost-effective solutions to the issue is Amazon. The company recently announced a plan to expand its delivery network, using third-party carriers and hiring more drivers in order to reduce costs and increase efficiency across its supply chain. By utilizing existing resources and expanding partnerships with other companies, Amazon hopes to find ways of reducing labor costs while still providing reliable service.
Benjamin Gordon’s Concluding Thoughts
Elevated freight and labor costs remain issues for already strained supply chains around the world. Supply chain managers must look for innovative solutions that will not only reduce costs but also help maintain competitive wages for workers while ensuring efficient operations. Companies like Amazon are setting an example by exploring new strategies and expanding partnerships in order to cut down on costly resources such as fuel and labor, allowing them to operate profitably despite rising costs. According to Benjamin Gordon, with the right strategies in place, supply chains can navigate their way through these challenging times and emerge stronger than before.