As the pandemic has progressed, shipping, freight, and small parcels have been a major topic of discussion. Businesses of all sizes, as well as consumers, are affected by the shipping crisis. In March 2021, after a year of major supply chain issues began, thousands of shipments got stuck in the Suez Canal, resulting in aisles of empty shelves in local grocery stores. War and economic crises have unfortunately contributed to the problem and have made it more difficult for us to return to normal. It is still evident that companies are experiencing supply chain problems, and with the holiday season quickly approaching, everyone is wondering when, or if, it will ever end. So, how do experts predict the shipping industry will evolve in the coming year?
How Did We Get Here?
Over the past two years, any person who has walked into a grocery store has experienced the effects of the shipping crisis. The crisis began with COVID 19 when foreign ports and factories were quarantined, shutting down deliveries. As a result of panic buying, major shortages became the norm. Warehouses and ports scrambled to get restock items out after the quarantine was lifted, but, despite investments and government orders attempting to clear up blocked ports, the Russian-Ukrainian war began, which greatly exacerbated inflation and supply chain issues. Inflation rates in the United States have reached record levels of 8.5% and gas prices have exploded, adding further stressors to shipping and delivery logistics.
On top of shortages, labor issues have also played a significant role in the shipping crisis. Roughly 47 million people quit their jobs in 2021. In December of 2021 alone around 4.3 million American workers according to the Labor Department's latest report. There was a widespread belief that the massive turnover was due to the COVID-19 pandemic, but now that the pandemic restrictions have been lifted, companies are experiencing difficulty filling vacant positions, and employees are still not returning to work. In the U.S., these numbers represent a voluntary leave seeking a better work-life balance, better pay, or better benefits and are known as the great resignation. These open positions have forced companies to raise wages and provide better benefits to attract qualified candidates.
In April 2022, according to a report by BLS Data on the U.S. Chamber of Commerce, it was predicted that the durable goods manufacturing sector will have the greatest difficulty filling positions, with 60% of unfilled positions falling in this category. While this has created concerns for the shipping industry, various experts do not expect it to continue for too much longer.
Change Is In The Air
According to Soren Skou, CEO of Maersk, after a "strong first half of 2022," they expect a "normalization" to occur in the second half of 2022. As people return to their normal spending habits, the hope is that bottlenecks open up and a lot of the capacity tied up today at ports gets released. Even though problems are likely to persist into 2023 in some capacity, small parcel shipping companies are working diligently to resolve them now. When it comes to the shipping process, most are looking to rely on a core of standard goals to reduce costs — the fulfillment process can be rife with inefficiencies, all of which can sap your bottom line; improve efficiency — looking at how improvements can be made to the way orders are being processed, labels printed, and goods delivered; and lastly increase sales — ultimately, online stores strive to increase the number of conversions.
Carriers are in the process of expanding services, implementing surcharges and price adjustments, and hiring additional employees, while retailers and manufacturers are investing in their shipping infrastructures and are already planning to reroute cargo from backed-up ports around the holiday season to avoid delays. It’s expected in the next year that more e-commerce shippers will shop and adopt stackable technology, such as shipping software, and reduce costs while increasing order accuracy and fulfillment speed as they focus on stackable technology.
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To combat increases in gas prices, there has been a large shift in leveraging unique or experimental shipping options to keep shipping costs lower and consumers happy with their order delivery experience. While there are many challenges to overcome, companies like Amazon are determined on delivering packages via drones in the near future. USPS, FedEx, and UPS have all committed to investing in electric delivery vehicles. Others are looking into options to lower delivery costs by allowing deliveries to be made to a central location, rather than individual homes of consumers. Amazon lockers and carrier locations are an excellent way for customers to pick up their packages. All of these investment examples will work to reduce the cost of delivery in the next year.
Lastly, in accordance with Capital Economics' data, the labor crisis in the United States is improving. While retention of jobs in certain industries is still low, the hiring rate is higher. Stable jobs in higher-paying industries have lower numbers of employees quitting. The rise in remote work has also impacted the labor crisis, with less reshuffling of businesses. With added perks, employees are more likely to remain. By next year, shipping will not be without issues, but with improving labor conditions and technology to support employees, shipping will continue its growth in the e-commerce industry.
Despite the uncertainty of the future, it is still possible to prepare for situations that might arise. The best way to prepare is to listen to experts, of course, and to look at your data above all else. How have you done during the more challenging periods? What have you done when opportunities arose? Does your company still feel that it is unable to keep its head above water despite all this preparation?