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icon21 Oct, 2022

Supply Chain Bottlenecks are Costing Companies and Consumers Big

Supply chain woes have been a common theme throughout the global Covid-19 pandemic, and many supply chain experts have predicted that, at some point, the combined weight of these issues would cause transportation and logistics operations to hit a wall. Backlogs are having a major impact on supply chains in Toronto and beyond, causing delays and increased costs on everything from air and ocean freight to warehousing services to white glove delivery.

Supply Chain Issues are Compounding Across Canada

When one part of the supply chain falters, it often affects many others. We’re seeing supply chain bottlenecks Canadian logistics operations and throughout the rest of the world still, even as the pandemic itself isn’t impacting daily life as severely as it was a couple of years ago. Freight isn’t moving smoothly from one part of the supply chain to the next, and that’s due to several different issues.

Port Congestion

Cargo ships are still having a difficult time getting into ports across the world. Ships coming into Vancouver in July sat at anchor for nearly 10 days on average before being allowed to dock.

Despite container volumes in the Port of Vancouver being down 7% over the first half of 2022 from the same period in 2021, those containers are sitting longer. The average time each container is sitting in port is nearly 6 days, up 41% from last year and nearly 100% longer than the average in 2019. July’s average time sitting was over 6.5 days. Wait times in Montreal are four times longer than wait times in 2019, showing that this issue isn’t being caused by issues at a single major Canadian port, and longer-than-normal wait times at countless other ports paint a picture of global supply chain bottlenecks.

When containers sit in ports (or rail yards), demurrage fees are common, increasing the overall cost of transportation.

Rail Terminal Backups

Grain is both major Canadian railroads’ biggest source of commodities revenue. Despite that last year’s grain yield was smaller than average due to a drought, the railroads still struggled to find the rail capacity to keep up. With a more typical harvest rolling in this year and increased demand for other Canadian commodities due to Russia’s invasion of Ukraine, rail capacity is even more overrun this year.

Commodities exporters are concerned about not only the capacity in the here and now, but the ripples rail backups will create in the supply chain.

Labor and Equipment Shortages

In Canada and elsewhere, shortages in both manpower and equipment have added to the supply chain bottlenecks.

More than 25,000 trucking jobs have gone unfilled in Canada in the first quarter of 2022 according to TruckingHR Canada. A combination of an aging workforce, increased regulation in the industry, difficult job conditions, and an increased amount of freight to move have led to the shortage. Warehouses are experiencing a similar shortage.

A chassis and container shortage has also affected the transportation industry on a global scale. Though manufacturers have ramped up production to try to account for the shortages, they’re having a difficult time catching up, due in large part to the same issues listed here that are plaguing the entire supply chain.

Warehousing Space is Limited

The above issues combined with companies keeping larger supplies on hand to cope with the inherent risks of just-in-time supply chain management methods mean that warehouse space is in short supply. In and around all the major shipping hubs in Canada, warehouses simply don’t have space, which compounds the port and rail congestion issues. Warehouse labor shortages mean that getting freight in and out of warehouses is more difficult, creating further warehouse space issues.

Companies and Consumers Alike Pay the Price

Supply chain issues create a kind of self-fulfilling prophecy. It’s easy to see how each of these issues bleed into one another and muddy the supply chain even further.

When there’s nowhere for freight to go, it sits in rail terminals and ports, creating issues getting freight into those terminals and ports. Laborers and truck drivers left their respective industries when the risk was no longer worth the reward during the pandemic, creating further backups in getting products into the hands of consumers. The inability to get freight in when they needed it led to importers bringing in more product to help prevent shortages down the line, but that simply compounds the congestion and lack of storage.

The result? Overall logistics costs have gone up and continue to rise. While many retailers have done their best to absorb some of cost increases, every company has their breaking point. Consumers are bearing more and more of the burden for these increased costs.

What Can Companies Do to Better Navigate the Bottlenecked Supply Chain?

We’ve seen supply chain issues compound over the past couple of years so we all know that real issues exist, but how can companies cope with these issues to keep their supply chains moving? Here are a few ideas.

Avoid Overcorrecting

In times like these, lean supply chains can be high risk. When companies struggled to get products into consumers’ hands due to the major supply chain disruption caused by the pandemic, many decided to increase their inventories. Others waited and waited on seasonal products that came in too late to sell, leaving them either storing inventory or selling it at rock-bottom prices.

Instead of overcorrecting, companies can cope with disruption by turning to suppliers closer to home to keep the supply chain moving without overstocking. Be flexible when it comes to suppliers and be willing to diversify.

Consider Alternative Logistics Tactics Like Crossdocking

When your supply chain is clogged up, consider going around the issue rather than through. For example, if you don’t have enough warehouse space, consider crossdocking warehouse services to send freight directly to your receivers rather than storing it.

Maintain Visibility

When times are tough, visibility is more important than ever.

You can help ensure visibility into your entire supply chain by contracting logistics service providers that offer real-time, easy-to-read inventory dashboards that offer insight into where your inventory is, how much of it you have, and when it can get to where it needs to go.

Think About Managed Logistics

By handing off your logistics operations, your company can gain access to the power of scale and networking. Plus, you can reduce the headaches involved in maneuvering the supply chain during complicated, frustrating times.

If you’re considering managed logistics services, reach out to Newell’s Express Worldwide Logistics to see how we can help. We are equipped to manage logistics in the Greater Toronto area, nationally, and internationally.