There Will Be Blood - On the Supply Chain
Contributor: Peter Boyd, COO, Carbon War Room
Fuel price increases, passed on by the ship owners through surcharges or increased operating costs, have laid waste to transport budgets, at the same time as media, consumers, shareholders and regulators apply pressure on organizations to measure and lower their carbon emissions. This combination has forced companies to look for steps to become more fuel-efficient.
There is already plenty of work going on to reduce emissions in the shipping industry, which annually emits more than a billion tons of CO2. The UN’s International Maritime Organization (IMO) has put significant time into developing methodologies to improve vessel efficiency. Meanwhile, high-profile companies including Coca-Cola, Nike and Wal-Mart, have joined container lines to create a container-specific index, under the banner of the Clean Cargo Working Group (CCWG).
Creative approaches from supply chain managers can lead to an increase in fuel efficiency and an increase in shipment density. Ships can also be designed more efficiently, with better hull shapes, built-in speed reductions and waste heat recovery systems, while many fuel-saving technologies can be retrofitted: air lubrication systems, hull coatings, propeller ‘Boss Cap Fins’ can be installed, advanced propeller and thrusters introduced, and there are a multitude of alternative power arrangements, including LNG, fuel cells, hybrid, solar and even wind power systems. New fuel additives, catalysts, engine lubricants and biofuels have been developed, while advanced hull coatings can reduce friction between the ship and the waves.
Why are these measures not being taken up more readily, when they would cut fuel bills and reduce carbon emissions?
One reason is – until recently – bunker fuel, the heavy fuel oil used to power ships, has been cheap and plentiful. While ships consume large amounts of fuel, a ship laden with cargo is extremely profitable so methods to reduce fuel costs by a few percentage points will be easily missed.
Furthermore, the industry is divided into owners and owner-operators. There is little incentive for owners to make large-scale investments to improve the efficiency of their ships, when the shipper/charterer of the vessel will benefit from the savings.
Carbon War Room has identified two solutions: Firstly, to give supply chain managers and vessel users access to vessel efficiency data, so that decisions in vessel use can be made with fuel efficiency in mind. Secondly, to encourage efficiency to be factored into contracts between charterers and owners/operators, and between operators and ports, to encourage investment in money-saving efficiency technologies.
There is appetite across the globe in shipping for a revolution in the way efficiency data is used, clean technologies and measures are financed and the way that contracts are written-up. Carbon War Room is working with the world’s largest ports, shippers and charterers to trigger a market shift. For businesses that depend on shipping for their trade, this is a great opportunity to exploit the supply chain efficiencies latent in maritime.
Driver shortages: Why the industry needs to be worried
While driver shortages are a global problem, with a recent survey from the International Road Transport Union suggesting that driver shortages are expected to increase by 25% year-on-year across its 23 member countries, the issue has very much made itself felt for UK businesses in recent weeks.
A perfect storm of factors, which many within the industry have been wary of, and warning about, for months, have led to a situation wherein businesses are suddenly facing significant difficulties around transporting goods to shelves on time, as well as inflated operating costs for doing so.
What’s more, the public may also see price rises as a result due to demand outmatching supply for certain product lines, which in turn brings with it the risk of customer dissatisfaction and a hit to brand and stakeholder reputation. Given that this price inflation has been speculated to hit in October, when the extended grace period on Brexit customs checks comes to an end, the worst may be yet to come.
"Steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole"
That said, we have already been hearing reports of service interruption due to lack of driver availability, meaning that volumes aren’t being transported, or delivered, to required schedules and lead times. A real-world example of this occurred on the weekend of 4-6 June with convenience retailer Nisa, with deliveries to Nisa outlets across the UK affected by driver shortages to its logistics provider DHL.
But where has this skills shortage stemmed from?
Supply is the primary issue. Specifically, the number of available EU drivers has decreased by up to 15,000 drivers due to Brexit alone, and this has been further exacerbated by drivers returning to their home country during the COVID-19 pandemic, as well as changes to foreign exchange rates making UK a less desirable place to live and work. This, alongside the recent need to manage IR35 tax changes, has also led to significant inflation in driver and transport costs.
COVID-19 complications have also meant that there have been no HGV driver tests over the past year, meaning the expected 6,000-7,000 new drivers over the past year have not appeared. With the return of the hospitality sector we understand that this is a significant challenge with, for instance, order delivery lead times being extended.
It is little surprise, therefore, that the Road Haulage Association (RHA) earlier this month became the latest in a long line of industry spokespeople to write to the government about the driver shortage for trucks. The letter echoed the view held by much of the industry, that the cause of this issue is both multi-faceted and, at least in some aspects, long-standing.
So, many in the industry are in agreement as to the driving factors behind this crisis. But what can be done?
Simply enough, outside of businesses completely reorganising their supply chain network, external support is needed. In the short-term, the government should consider providing the industry with financial aid, and this can also be supported more widely with legislative change.
Specifically, immigration policy could be updated to place drivers on the shortage occupations list, which would go some way towards easing the burden created by foreign drivers returning to their home countries. Looking elsewhere, government should also look for ways to increase the availability of HGV driver tests after the blockage created by the coronavirus lockdowns.
Looking more long-term, steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole. As it stands, multiple sources suggest that the average age of truck drivers in the UK is 48, with only one in every hundred drivers under the age of 25. We must therefore do more to increase the talent pipeline coming into the industry if we are to offset more significant skills shortages further down the line.
On the back of a turbulent year for the supply chain industry, it has become increasingly clear that the long-foretold shortage of drivers is now having a tangible and, in places, crippling effect on supply chains.
Drivers, and the wider supply chain industry, have rightly been recognised for the seismic role they played in keeping the nation moving and fed over the past year under unprecedented strain. If this level of service is to continue, we must now see Government answer calls to provide the support the sector needs, and work hand-in-hand with the industry to find a solution. If we do not see concrete action to this effect soon, we are likely to be in for a turbulent few months.
Rob Wright is executive director at SCALA, a leading provider of management services for the supply chain and logistics sector