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How the Russia-Ukraine Conflict Affects the Supply Chain

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?

Trucking Action Plan: What You Need to Know

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

What Truckers Need to Know About the Vaccine Mandate

On November 4, the Department of Labor’s Occupational Safety and Health Administration announced that employers with 100 or more employees must either ensure the complete vaccination of their staff, or obtain negative COVID-19 test results weekly. This ETS (Emergency Temporary Standard) requires full vaccination for all employees and paid time off for those needing to get vaccinated during their workday. And while the vaccination mandate goes for all covered employers, it does offer the exception for those willing to establish and enforce weekly COVID-19 testing along with mandatory face coverings while at the workplace. However, this alternative still upset those working in the trucking industry and the supply chains, which are currently fragile, leading to several legal challenges.

So, what does this ETS mean for drivers and others in the trucking industry moving forward?

How does the vaccine mandate affect businesses?

When the Biden Administration announced their latest vaccine and testing requirements, many private businesses, including travel-dependent industries, were left worried about the effect the mandates could have on their businesses. Specifically for the trucking industry, many drivers threatened walkouts and resignations to disrupt further the strained supply chains that have been suffering since early this year. However, as previously mentioned, there are a few exceptions to the requirements.

The current ETS regarding COVID-19 requirements for workplaces with over 100 employees include:

  • Businesses must ensure total vaccination for all employees come January 4, 2022.
  • Employers must provide paid time off to their employees obtaining the COVID-19 vaccine(s).
  • On January 5, 2022, all unvaccinated employees must wear proper face coverings while at their place of work, as well as provide weekly COVID-19 tests with negative results.
  • These rulings will supersede any and all state or local laws, including “laws that ban or limit an employer’s authority to require vaccination, masks, or testing.”

Who is exempt from the vaccine mandate?

With the trucking industry facing a severe driver shortage of approximately 80,000 drivers, White House and OSHA officials knew they would need to offer some exceptions. With hopes to avoid further driver depletion and supply chain disruption, which is responsible for things like food, fuel, medicine, and even the COVID-19 vaccine, they developed a shortlist of exemptions. 

These exemptions include:

  • Workers who do not report to a workplace where other people, including employees, clients, and/or patrons, are present.
  • Those who do not interact with persons at their point of departure or destinations.
  • Workers who operate alone (aka drivers who are alone in their cabs)
  • Remote employees
  • Exclusively outdoor workers

To the American Trucking Association’s delight, these exemptions apply to a large portion of the commercial truck driver population and provide a sense of security to the industry as a whole. Overall, the mandate would only apply to drivers operating in teams or those required to interact with others at their loading or unloading stations.  

What about international and cross-border truckers?

For drivers who cross borders to deliver goods, the mandate requirements are different. As of right now, both the U.S. and Canadian governments are requiring non-citizens to be fully vaccinated, regardless of their reasons for entry. And come January of 2022, the Department of Homeland Security will require all foreign travelers coming into the country to provide proof of total vaccination, an extension to the non-essential traveler requirement, which started in November of 2021. To meet this requirement, one must be fully vaccinated with any vaccine, including Pfizer, Moderna, Janssen/Johnson & Johnson, AstraZeneca, Covaxin, Covishield, Sinopharm, or Sinovac. However, if the vaccine requires two doses, the last dose must be administered within 14 days before entry.

Want more information like this? Check out these articles:

→ Are Truckers Included in the Third Vaccination Group?

→ How Truckers Can Prepare for the Holiday Season Amid COVID-19

→ How the Supply Chain Problem Will Affect the Holiday Season

How Does Prop. 22 Affect App-Based Drivers?

Rideshare Employees vs Independent Contractors

In November of 2020, California passed Proposition 22, an initiative that would allow certain rideshare and delivery companies to classify their drivers as independent contractors. The statute overruled California’s Assembly Bill 5 (AB 5), which was signed over a year prior in September of 2019. AB 5 instituted a three-factor test for acquiring independent contractor status. 

To be categorized as an independent contractor, the bill requires the person/employee to be: 

  • Free from a hiring entity’s control in regards to their performance and work completion
  • Performing tasks/work outside of the hiring entity’s usual course of operations
  • Engaged in an established trade, occupation, or business of the same nature as the work performed

The passing of AB5 and its test led to an abundance of gig economy workers being labeled as employees instead of independent contractors. This classification change took a toll on benefits, wages, and other occupational aspects. So, what does Proposition 22 mean for rideshare and delivery employees?

→ What’s the Difference Between an Owner/Operator and an Independent Contractor?

How does Proposition 22 affect app-based drivers?

Proposition 22 was a California ballot initiative that responded to the state’s recently passed Assembly Bill 5. AB 5 codified the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles that required employers to classify workers as employees unless they met the qualifications of an independent contractor according to the bill’s “ABC test.” And while AB 5 included exemptions from the Dynamex test for certain occupations, app-based rideshare drivers were not among the list. Since the bill’s passing, rideshare companies and delivery services have faced numerous legal suits disputing driver classification. With Proposition 22, companies like DoorDash, Uber, and Lyft could continue classifying their California drivers as contractors. 

More specifically, the proposition allows these companies to label their drivers as independent contractors so long as they don’t:

  • Provide specific dates, times, or a minimum number of hours a driver must work
  • Require drivers to accept specific delivery requests
  • Prevent drivers from taking employment with other rideshares and/or delivery services or any other lawful business

In exchange for this allowance, the proposition requires these rideshare and delivery businesses to offer specific compensation and benefits for their drivers. The initiatives’ statement of purpose declares that it intends to enact labor policies specific to California rideshare companies and drivers. These policies will protect the legal rights of rideshare drivers and ensure that they are afforded employment protections and benefits, including minimum wage, healthcare subsidies, automobile accident insurance, and more.

Proposition 22 also states:

  1. Rideshare drivers are entitled to 120% of California’s mandated minimum wage for their engaged time (i.e., the time between accepting a service request and fulfilling/completing said request) in addition to 30¢ per engaged mile.
  2. Rideshare companies will provide drivers who average a minimum of 15 hours per week with a healthcare subsidy that is consistent with the requirements stated in the Affordable Care Act.
  3. Rideshare companies will provide occupational accident insurance (with at least $1 million in coverage) to drivers for medical expenses and lost income resulting from an injury sustained while active on the company’s app.
  4. Rideshare companies must obtain automobile liability insurance (with at least $1 million in coverage) to protect and compensate third parties that sustain any injuries and/or losses caused by a driver during their engaged time.

→ How the PRO Act Could Affect Owner/Operators

Why was Proposition 22 declared unconstitutional?

While companies like Uber, Lyft, and DoorDash praised the passing of the ballot, others were not so enthused. Some even saw the proposition as unconstitutional, including Alameda County Superior Court Judge Frank Roesch. In August of 2021, he ruled in favor of a lawsuit filed by the Service Employees International Union, calling the initiative “unenforceable.” He stated that multiple sections negated specific California laws, including a stipulation that required a seven-eighths majority for amendment approval, making any attempt at change nearly impossible. The judge also agreed that the proposition’s ban on workers’ rights to collective bargaining violated California ballot measures that limit single subject provisions.

Despite the judge’s ruling, the proposition remains in effect. The Protect App-Based Drivers & Services Coalition (PADS) and other committees and companies in favor of Proposition 22 plan to appeal the ruling to keep it in effect. However, other organizations, like the “No On Proposition 22” coalition, are fighting against those in favor and working to have copycat bills in other states overruled.

What are the pros and cons of Prop 22?

As previously mentioned, Proposition 22 would give rideshare companies the right to classify their employees/drivers as independent contractors and guarantee things like minimum wage, occupational benefits, and more. However, there are some concerns in regards to the effect this initiative could have on would-be employees.

The pros and cons of Proposition 22 include:

PRO: Drivers will have guaranteed minimum earnings, calculated at 120% of minimum wage.

CON: Earnings are based on a driver’s engaged time and do not cover the time spent waiting for a service request.

PRO: Drivers will receive a 30¢ reimbursement for engaged miles.

CON: Reimbursements will not be given for gas, maintenance, cleaning, or necessary PPE (i.e., disposable face masks, sanitizer, etc.).

PRO: Employers will subsidize 41% of healthcare at a weekly average of 15 hours (engaged time). At 25 hours or more, employers will subsidize 82%.

CON: On average, ⅓ of a driver’s time is spent waiting for a service request, meaning it could take at least 20 hours to reach the 15-hour requirement.

PRO: Rideshare companies are required to provide occupational accident insurance (with coverage equaling at least $1 million), automobile liability insurance (with coverage equaling at least $1 million), and disability payments. Accidental death insurance will also be made available to the driver’s spouse, children, and/or other dependents.

CON: Insurance coverage and disability payments will be dependent on a driver’s engaged time. For instance, if an accident occurs while the driver is awaiting a service request, the coverage may lapse. Regarding disability payments, the driver will only receive 66% of their average weekly earnings (calculated from the month before the sustained injury).

In addition, rideshare workers would not have access to paid paternal/family leave, paid sick leave, or unemployment compensation or benefits with Proposition 22. However, there is no way of knowing whether or not this will become an amendment in the foreseeable future. The Legislative Analyst’s Office also said that with the passing of Proposition 22, app-based companies wouldn’t be forced to pay their employees as much, which would keep fares and fees low for customers.

Where Did All of the Trucks Go?

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

How the Gas Shortage has Affected the Trucking Industry

In mid-May, a cyber attack on the Colonial Pipeline shut down fuel delivery to a large part of the Eastern United States. Gas stations across that particular part of the country reported greatly reduced supplies and, in some cases, complete outages of fuel. This shortage resulted in long lines at those gas stations that still had fuel, along with limitations on how much gas consumers could purchase at one time. While the cyberattack was an isolated incident and resolved in about a week, the outage had an undeniable effect on consumers. 

In particular, it raised and re-raised ongoing concerns about how the trucking industry’s struggle to transport fuel—due to a lack of drivers and a rise in insurance premiums—has impaired the industry’s capabilities.

The Colonial Pipeline shutdown received national attention, but many areas already suffer from gas shortages that can raise prices for all consumers. This shortage has nothing to do with consumers but more about the lack of available truck drivers who can haul fuel combined with irrational consumer behavior. Let’s look at this challenge to try to figure out some possible solutions.

Understanding Fuel Challenges

The nation relies on truckers to keep gas stations regularly filled, but the ability for truckers to do so has decreased due to several reasons. The COVID-19 pandemic accelerated several of these trends. 

With more people no longer commuting to work and a drop in vehicle use for things like vacations, the demand for gasoline was cut in half in April 2020. This lack of demand forced some drivers in the fuel-hauling sector to either change to more stable routes or leave the industry altogether.

The U.S. Bureau of Labor Statistics estimated that the trucking industry lost 88,300 jobs during this time, adding to the tens of thousands of driver vacancies already in place. The driver shortage created a difficult dynamic. While trucking companies surely utilized fewer drivers during the pandemic, they now find themselves struggling to refill those voids as fuel needs again increase. After all, it is not like there are drivers simply sitting at home waiting for an assignment. The fuel-hauling fleet finds itself desperately in need of drivers without enough interested applicants.

Additionally, a Truckload Carriers Association poll found that insurance premiums skyrocketed an average of 15% for members last year. For some smaller carriers, this increase forced them to shut down, further lowering the available driver pool.

Potential Help on the Way?

The DRIVE-Safe Act, a piece of proposed legislation that if passed would incorporate more safety technology into driving, has brought hope to some in the industry. 

The act includes several mandates that would improve the overall safety of truck driving—and experts believe this could entice potential drivers. Some of these mandates include apprentice programs for commercial driver’s license holders under the age of 21, active braking collision mitigation systems, forward-facing cameras, adaptive cruise control, and speed governors.

These technologies not only make driving easier, they exonerate drivers during accidents. Young people are more accustomed to devices tracking their activity and may be intrigued by the “gamified” experience fleets can create.

The act will also help put to bed the notion that truckers work incredibly long hours on the road without rest. Instead, prospective employees will know they can expect to work in a highly regulated and safe environment that puts them and their safety first. This will help alleviate some of the problems truckers face.

Supply & Demand of Gasoline

The price of gas traditionally increases at the beginning of summer as fuel companies provide a different blend that produces less smog. This change, combined with more motorists on the road taking vacations, reduces the overall supply and can cause prices to increase. The price of fuel stayed relatively low and stable last year as drivers largely remained at home during the summer months. Historically, though, this time of year has featured higher prices. 

As some states like Colorado complain of shortages now, the reason comes more from consumers than supply. While there are fewer truckers on the road, there is still enough gas for those wanting to fill-up. The problem occurs when drivers anticipate a shortage and fuel up before their tank is empty, leading to a rush at the pumps.

Until more truck drivers return to the road, this will be an ongoing problem. For motorists, the key is to only fill up when necessary and avoid purchasing unnecessary fuel that will not be immediately used.

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