Transportation Insight executives assess logistics and supply chain challenges in 2022

While the rush of holiday gifts appears to have made it to their final destinations to end 2021 through myriad delivery networks, amid some unique challenges, 2022 has kicked off with its own new set of challenges, ones with familiar themes—winter storms on both U.S. coasts and the ongoing COVID-19 pandemic, specifically the Omicron variant—which are both creating issues for freight transportation and logistics services providers and shippers alike.

As an example, Memphis-based FedEx said on January 4 it suspended its Express on-call pickups across the U.S. today due to the strain put on its operations by both the storms and Omicron, as they continue to impact staffing.

There are other companies, of different sizes and reaches, also dealing with these same issues, of course. But when large as it gets player like FedEx has to take steps like this, it really does put the current state of (logistics) affairs into clearer perspective.

That was made clear in a conversation I had with executives at Transportation Insight, John Haber president of TI’s parcel business unit, and Cathy Roberson, TI Director of Thought Leadership.

“We are seeing these challenges across the logistics industry,” said Haber. “There are massive driver shortages to start 2022, with a lot of it due to Omicron and obviously the weather is wreaking havoc. And you combine the labor situation with the weather, and it is not a great start to the year logistics-wise.”

What’s more, with the high number of returns stemming from the holiday shopping, or peak, season, Haber observed that on a general basis peak season surcharges levied by FedEx, UPS, and others are intact through around January 15, with the caveat that “those charges never really end,” according to Haber.

And with peak already extended into January, due to the high level of returns volumes, the suspension of air on-call pickups, which he said are often critical packages, are faced with the issue of a lack of people to pick up and deliver packages now, for different reasons, whether they be weather, Omicron, or labor, or something else.

To be sure, these issues are apparent globally, too, with Roberson pointing to the Ningbo port in China, which has myriad restrictions in place.

“It is just literally a domino effect across the entire supply chain,” she explained. “When you get a slowdown [in goods movement] there, then by the time goods arrive at the port, it is already late or is sitting in a 100 vessel-plus line waiting to come into a port. It just escalates from there, and you have the pandemic still and now Omicron just impacting the whole thing. One person gets it, and it spreads like wildfire, so you are going to get sporadic delays. The all of the sudden you are going to get this massive volume, and it is going to continue for quite a while.”

Haber continued on that theme, noting that when manufacturing output eventually catches up, it will subsequently lead to an onslaught of distribution activity occurring, which will further impact logistics operations.  

And at a time when we are looking for some optimism, with the mindset (partially based on comments from large retailers) that things would clear up within the first half of 2022, these ongoing flare-ups, said Roberson, are going to continue and remain a significant issue for the entire supply chain.

When asked what types of lessons, or best practices, supply chain stakeholders may have learned over the now nearly (gulp) two years of living in a pandemic-based world, Haber said it still remains the case that no entity is prepared for anything that may come up. Instead, he said, if anything, people are now more well-conditioned, in the form of things like better contingency plans, while, at the same time, stressing things are by no means fixed.

“The [logistics] infrastructure and labor situations are not fixed,” he said. “In my opinion, we are better shape than we were when Covid hit almost two years ago. But the supply chain is still broken.”   

While the supply chain may very well be broken, as Haber noted, Roberson said that, in looking back at the 2021 holiday shipping season, various things went well, which made it possible for items to be delivered on time.

“I think the biggest plus for 2021 was the fact that stores were open, and people were more willing to go into a store to shop,” she said. “It is really when you saw the retailers take advantage of their omnichannel strategies by saying ‘if you are concerned about not getting your packages on time, use curbside pickup or buy online and pick up in store (BOPIS).’ That approach was successful for a number of retailers, and I think it was the major difference we saw compared to a year ago, when nobody went to stores. And more people are vaccinated now so there was a slightly higher comfort level…at least compared to the year before.”

Haber agreed in that those approaches had a big impact, coupled with holiday shopping starting much earlier in 2021 than 2020, with inventories brought in earlier, and people were conditioned to buy earlier.

“You saw purchasing habits change, due to people shopping earlier than they had before and not waiting until the last minute,” he said. “Things were more spread out than they were in the past. Stores being opened, and the weather being pretty good leading up to the holidays were helpful. “Consumers heard the message more than they had ever heard it before.”

With 2022 being an open book, in a sense, much of the outline appears to have been written, at least in the short-term, in the form of the trio of challenges related to weather, Omicron, and labor. To be sure, there is no magic elixir to alleviate these challenges, but, at the same time, the supply chain, while still broken, as Haber noted, has the potential to get stronger. Lessons will continue to be learned, and things will continue to change and evolve along the way, too. Here is to seeing supply chain success in 2022 while navigating whatever gets in the way next.