Logistics

Throughout the past two years, supply chains have muscled through numerous challenges as the COVID-19 pandemic impacted industries all over the world. As Russia invades Ukraine, the world’s supply chains face more opposition. And while the problems are significant, new reports show they may worsen.

According to a Dun & Bradstreet report, 374,000 businesses worldwide use Russian suppliers, while approximately 241,000 businesses use Ukrainian suppliers. Out of all of those businesses, around 91.5% of them are based in the United States.

So how will this ongoing conflict continue to affect our supply chains? Which industries will be hit the hardest? And what can we anticipate going forward? We’ve got all the answers here.

What is the Russia-Ukraine Conflict?

On February 24, 2022, Russia initiated a full-scale military invasion of Ukraine. Since then, the death toll has reached well over 200, explosives have ravaged the country, and millions of Ukrainians have fled to neighboring countries. This growing conflict has spread well beyond Ukraine and thoroughly disrupted the world’s shipping and freight industries. 

Since the start of the invasion, Russian forces have caused shipping routes to be cut off, logistic firms to suspend services, and air freight rates to hit an all-time high. All of this has caused severe impacts on the global market, and many industries are feeling the overwhelming sting of this war.

Biggest impacts on the supply chain

The most affected industries include:

1. Fuel

At this point, we’ve all seen the astronomical prices at our local filling stations. As of March 11, the United State’s national average hit $4.33 per gallon, And in states like California, Hawaii, Nevada, and Oregon, people are paying more than $5 per gallon. These extreme prices have started to impact other parts of the economy as well. For instance, drive share and shipping companies have increased what they charge consumers to counteract fueling costs. Other industries that rely on fuel, like farming and construction, have also had to rethink their budgets, leading to higher prices at the grocery store and layoffs on job sites.

→ How the Gas Shortage has Affected the Trucking Industry

2. Raw Materials

Ukraine has slowly become one of the largest raw material suppliers in the world. They exported several materials, such as chemical products, minerals, transportation equipment, and other products. Since the invasion, Ukraine has been forced to increase the cost of its exports. This has caused many countries to slow down the manufacturing of electronics, homes, and vehicles. In some cases, companies have had to shut down production. Ukrainian allies have also ceased trade with Russia, thus losing access to large amounts of nickel, platinum, and 10% of the global copper reserves. These elements play essential roles in producing semiconductor chips, automobiles, jet engines, medicine, etc.

3. Shipping & Transportation

Another industry affected by the Russia-Ukraine conflict is shipping and transportation. Freight companies have started rerouting ground, ocean, and air shipping to avoid Russia and minimize fuel costs. This has led to longer transportation times and higher shipping costs for consumers.

For example, imports leaving Asia take approximately four hours longer to reach their destinations since the cargo jets can no longer fly over Russia. These jets use up to 20,000 pounds of fuel per hour of flight. And with fuel being more expensive, freight companies have no choice but to raise prices for consumers.

 4. Automotive

Since the start of the pandemic in 2020, the automotive industry has struggled with production and inventory shortages. Unfortunately, these troubles don’t seem to be subsiding anytime soon. The sudden increase in the price of fuel, steel, aluminum, and nickel has placed further pressure on the already fragile industry. The more expensive materials force automobile and automotive part manufacturers to slow down or cease production until prices stabilize. Meaning consumers will also continue to experience low inventory levels.

What can we expect moving forward?

As the conflict in Ukraine continues, trucking rates and other transportation costs could continue to increase as the price of oil rises. However, the overall outcome of this invasion is filled with a lot of uncertainty. For this reason, supply chains must prepare and improve their operations by “balancing investments in dedicated teams, processes, and technologies that will enable their organizations to implement end-to-end risk management,” says an analyst from Gartner.

More Like This:

→ How is the Microchip Shortage Affecting Truck Prices in 2022?

→ Where Did All of the Trucks Go?

→ How will the Trade War Between China and the U.S. Impact the Trucking Industry?

On December 16, 2021, the White House announced a comprehensive plan to recruit new truck drivers to help the supply chain recover from the current shortage while improving current working conditions to promote driver retention. This plan, coined the Trucking Action Plan, has been broken down into a series of steps, and the current administration hopes to institute it over the next 90 days.

Many owner operators have been left wondering what this plan is and how it will affect them and the industry they work for. This article will break it all down and explain what drivers can expect to come their way over the next 90 days.

What exactly is the Trucking Action Plan?

Officials describe the Trucking Action Plan as a way to “lay the foundation for a next-generation trucking workforce that will strengthen U.S. competitiveness and support millions of good driving jobs for years to come.” The plan also follows the lead of the recent infrastructure legislation, which passed in November of 2021 and aimed to address current industry concerns.

The current action plan, which will take effect through a series of steps over the next 30-, 60-, and 90- days, offers six key points, including:

1. Offering trucking industry jobs that appeal to military veterans.
2. Supporting pilot programs that train and license new drivers to deliver across state lines.
3. Offering women more professional industry positions.
4. Instituting more easy-to-install apprenticeship programs.
5. Funding/providing assistance to states for improving their CDL processes.
6. Implement sessions with drivers, carriers, and industry unions to discuss concerns and enhance the workforce.

In addition to the current driver shortage and supply chain struggles, the Trucking Action Plan directly responds to a recent poll from the Consumer Brand Association. This poll found that 90% of respondents feel the trucking capacity should be increased in the new year to assist the supply chain demand, and 80% of respondents think their senators should be responsible for fixing current and future trucking industry issues.

Many respondents also gave suggestions on how to solve the most common issues that the trucking industry faces. They include:

• Allowing reasonable increases to truck weight limits
• Creating systems that would send empty trucks to available loads
• Government funding driver recruitment and training programs
• Offering flexible hours and service requirements to drivers
• Government funding for the production of new heavy-duty trucks

What changes can we expect to see in the new year?

In the new year, truck drivers and fleet owners can anticipate quite a few changes in the industry. The main changes will affect the recruitment process for new drivers, but owners/operators can also expect significant changes to the workforce, hoping that driver retention will improve.

Recruitment of More Women and Veterans

During the Trucking Action Plan announcement, White House officials discussed that they intend to focus on the potential labor pool of over 70,000 military veterans when it comes to driver recruitment. Currently, veterans equate to more than 20% of the transportation industry. However, the White House plans to increase that number by working with the Veterans Employment and Training Service (VETS), the Department of Veterans Affairs (VA), and other veterans’ service organizations to match military veterans and their spouses with jobs in the trucking industry. A separate task force will also encourage more women to start careers in the trucking industry. 

Reformed Training Programs

Regarding training for these trucking positions, the DOL is working to establish Registered Apprenticeship programs that would allow new drivers to earn compensation as they go through training. The Department of Transportation (DOT) is also working to improve the CDL process by reducing the time between drivers passing their tests and receiving their licenses. On top of that, the DOT hopes to provide grants to states who improve their licensing process by updating their IT infrastructures. For now, the Federal Motor Carriers Safety Administration (FMCSA) will provide over $30 million to help states expedite their CDL process and send all states a “toolkit” on how to complete specific expedite actions. The White House also announced a new pilot program that will allow truck drivers under 21 years of age to drive on interstate highways.

Improved Driver Experience 

On top of recruiting new drivers, the Trucking Action Plan will aim to support the existing drivers by improving the quality of the jobs within the industry. Currently, America’s truck drivers move over 70% of the nation’s goods, but these same drivers lose up to 40% of their drive time due to delays, which means less income. To lessen these losses, the DOL and DOT plan to construct a compensation study to better understand how long drivers are on the road versus how long they spend waiting on loading and unloading processes. These transportation agencies will also begin regular listening sessions with drivers to use the collected feedback to push regulatory action and improve the overall quality of the various trucking industry positions.

Last updated: 12-21-21

Want more information like this? Check out these articles:

→ What Truckers Need to Know About the Vaccine Mandate

→ How Does Prop. 22 Affect App-Based Drivers?

→ How the Supply Chain Problem Will Affect the Holiday Season

Inventory Shortage Continues to Disrupt the Auto Industry

The COVID-19 pandemic has affected numerous industries and led to several issues, including a vehicle shortage that has rocked the automotive industry. To combat financial loss due to global shutdowns, dealers pushed incentives and financing offers to encourage buyers. Once government stimulus checks were distributed, consumers were more than happy to invest in new and used rigs. While this feeding frenzy helped dealers keep their heads above water during the stay-at-home orders, they didn’t anticipate a global microchip shortage that would cause significant production delays upon reopening. 

With this supply not keeping pace with demand, and manufacturers prioritizing smaller vehicles for individual buyers, commercial fleet operators are left feeling the sting from this shortage. So, what can we expect moving forward? Let’s find out. 

-> Used Truck Prices Continue to Skyrocket

What’s causing the vehicle shortage?

There are a few things responsible for the current state of the automotive industry. For starters, the microchips used in many vehicle components are manufactured overseas, with Taiwan contributing 63%, South Korea at 18%, and China at 6%. With the world being globally affected by the pandemic, many manufacturing plants ceased production until cases slowed down. Natural disasters have also impacted the domestic inventory. In February of 2021, Texas was forced to halt production and close a Samsung plant due to severe freezing.

Aside from the microchip insufficiency, dealers have also played a role in this vehicle shortage. At the start of the pandemic, many sellers struggled to move inventory due to quarantine restrictions and stay-at-home orders. Instead of losing their businesses, they chose to offer extreme incentives and too-good-to-be-true financing plans. Unfortunately, they kept these deals running for a little too long, and their inventory was cleared out or severely depleted. And before the stock was able to circulate back into the lots, the semiconductor shortage hit and took down new vehicle production with it. So, where do we go from here?

-> How the Gas Shortage has Affected the Trucking Industry

How is the auto industry responding?

As we navigate the lingering effects of the COVID-19 pandemic, manufacturers and the U.S. government are working to solve this shortage issue. Below, we will break down their plans.

• Automaker Action Plan: Currently, automakers are working to fulfill dealers’ needs and buyers’ wants by continuing to build out vehicles and forgoing the components that require the semiconductor microchip. Manufacturers are also allocating what they have in the way of microchips to high-demand vehicles and adjusting the availability of certain automobile features, packages, and options. While this action plan offers some much-needed relief, it is not enough to solve commercial fleet operators’ problems. 

• Government Action Plan: Fortunately, the U.S. government recognized the geopolitical nature of this scarcity and acted early in resolving the issue. With the majority of the microchips being produced in China and Korea, our government needed to invest in domestic semiconductor production to regain the upper hand in inventory levels, which is precisely what they did. The U.S. Senate passed a $190 billion legislation package to compete with foreign tech, with $54 billion allocated to domestic manufacturing of semiconductors and telecommunication equipment. While the bill still needs to survive the House of Representatives, President Biden has voiced his support for the bill.

When will fleet inventory return to normal?

Within the first half of 2021, auto sales have mostly recovered despite the technology shortage. Unfortunately, the sales of commercial vehicles have not responded in the same manner. So far, only 14% of vehicles were sold to fleet consumers. Now, automakers are having to prioritize microchip distribution to recuperate inventory levels. Many are allocating supplies to higher-end models and leaving commercial operators at the mercy of a waiting list.

Moving forward, it’s unlikely that we will ever surpass the industry’s previous standards or return to normal inventory levels. According to industry insiders, the microchip shortage could last another four months, and while recovery efforts are vast, they’re not enough to meet the ever-increasing demand. However, companies and manufacturers are predicting supply improvements by the first quarter of 2022. While there is no sure way of knowing the exact numbers, operators should be prepared to face this shortage until 2023. 

-> Owner Operator’s Guide to Financing During a Pandemic