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Global supply chains have faced immense challenges during the height of the pandemic, with record delays caused by grounding traffic, labor shortage and many others. What is lying ahead for supply chain management today? Watch our interview with Todd Tranausky, Vice President of Rail and Intermodal at FTR Transport Intelligence or read the summary below.
Supply chain challenges are certainly showing signs of abating, but we are in the very early innings of that process. Once the supply chain gets backed up, there’s only one way out of it – one carload, or one truckload, at a time. It is not going to be an easy or quick process and we are a long way from being back to a ‘normal supply chain experience’.
We are not anticipating the situation to normalize in the supply chain, particularly on the rail side, until the second quarter of 2023.
At the same time, there are a lot of things between now and then that can alter that calculus and make the process take longer or shorter. For example, the economy going into a deeper recession sooner could help the supply chain normalize. But using the analogy ‘losing weight by getting food poisoning’, while you are grateful for the weight loss, you would have wished to do it another way. Assuming that the economy stays on the current path, we will unlikely see real stabilization until the middle of next year.
The top priority with regard to high transport costs is to consider how to lower these costs and prioritize what you value.
For example, a forest products rail shipper that values consistency in deliveries will need to consider where to spend their capital to stay on rail, whether it is making some modal choices or facility changes. Capital investments will be needed to either make facility improvements to fit the new 60-foot cars from the national box car fleet, or to purchase a new fleet of 50-foot cars that better suit your needs and have more control over them.
Labor is the biggest challenge across all modes. We are facing problems getting and retaining enough employees to effectively move a freight network.
On the rail side, the number of operating employees, such as conductors and engineers that are moving the freight on a day-to-day basis, has not changed since October 2020. This means the carrier companies are just about keeping pace with the number of employees they lose.
This is not a good sign for three reasons:
1. The carriers do not have the manpower to keep up with freight demand, which has grown coming out of the pandemic. The lag in getting qualified employees into the system is affecting their ability to deliver supplies and finished goods effectively. There is currently no sign that the carriers are moving out of this anytime soon.
2. We are going into a seasonally difficult period due to winter weather disruptions. The natural headwinds will make it problematic for the carriers to maintain, let alone improve the current service levels. Even if the carriers managed to add headcount, this may not translate into better service.
3. Recruitment is difficult for supply chain roles. The lifestyle challenges of supply chain jobs make them unattractive for college graduates, so the industry must come up with ways to deal with these so we are not perennially talking about labor issues as a constraint to how much volume can be moved through the American freight system.
Learn more about the wider impacts of supply chain challenges here, or take a look at our short- and long-term forecasts to uncover how these challenges are impacting different grades within the industry and how this can affect the inventory and price.