Global Supply Chain Issues: What does this mean for the transport industry?

Due to a plethora of issues the highways, transport and construction sector are currently facing supply chain shortages and cost increases, which undoubtedly is an issue that affects CIHT members. This blog explores the reasons for this and how to fortify global supply chains, by identifying how globally connected we are; and how Covid, changes to trading relationships, and inflationary pressures could lead to project delays. These issues could lead to stockpiling and even the need for mutual aid arrangements.

What are the main issues?

Recent global developments have compelled businesses to rethink their supply chains, as well as their stability and reliability in the face of an uncertain future. This is not just in relation to COVID-19, but to numerous other externalities and government actions occurring globally that have begun to impact supply chains, such as the increased risk of trade wars, Brexit, the Suez Canal blockage, environmental and human rights concerns. All of these are now compounded by the shipping backlog in China’s Pearl River Delta, with hundreds of container ships waiting for berths to become available. This blockage already surpasses that which occurred when the Ever Given got stuck in the Suez Canal earlier this year and is likely to lead to extended delays for electrotechnical products.
This year, the semiconductor sector has already been hit by a worldwide shortage of semiconductors, mostly from Asian vendors. The car industry consensus earlier this year was that the chip supply crisis will ease in the second half of 2021, but now some top executives are predicting that it would last until 2022. Consequently, companies have been thrown off balance as demand has rebounded across a variety of industries due to shortages in labour supply and capacity constraints in transportation networks.
It is worth mentioning that Minutes from TfL’s Finance Committee meeting held on 23 June 2021 add: “Failure to sufficiently identify and manage supply chain disruption could result in an increase in TfL's cost base, delays to project delivery and interruption to operational services”.

How do these issues affect CIHT members?

British ports are facing significantly higher container transportation prices than those on the continent as a result of Brexit and coronavirus-fuelled hoarding increases. On top of a demand for products and a scarcity of containers during the pandemic, UK importers were especially hard hit as they raced to bring shipments in before the end of the Brexit transition period on December 31. Congestion and other issues plaguing the nation's ports have also harmed British companies. Meanwhile, due to delays at Felixstowe, several shipping companies chose to divert containers to Southampton, causing prices to increase there as well. Moreover, ports have previously been delayed by containers with government-imported personal protective equipment, resulting in a twofold setback; personnel shortages and extraordinary increases in demand. Due to increasing shipping costs and port delays, several companies, many of which are experiencing a sales boom, have also had to increase their own prices.

Meanwhile, due to disruption and delays around the Channel ports, and in an attempt to manage traffic, Operation Stack was put in effect. This is a procedure where lorries park or "stack" on the M20 motorway when there is disruption to services at the crossings, including the Channel Tunnel or the Port of Dover. However, concerns about resulting disruption, have been on the rise. Lorry drivers and unions have claimed that there is a gap between required infrastructure and available facilities, forcing them to park dangerously or illegally. The problem has been a subject of contention since Brexit, when Kent County Council was given temporarily enhanced authority to clamp and fine HGVs parked illegally in order to avoid freight delays for local people. From a CIHT perspective, DfT ought to be closely monitoring what relevant authorities and the principal designers of lorry parks are undertaking, to ensure that surrounding roads will not be negatively impacted by increased HGV movement.

What can be done to fortify global supply chains?

Already a new £20 million UK-wide initiative led by Digital Catapult has been put in place to alleviate the challenges faced by manufacturing supply chains in the wake of the pandemic. Subsequently, over the next four years, a £10 million award from UK Research and Innovation and the Made Smarter Innovation programme will be combined with a £10 million private sector investment to accelerate the commercial integration of advanced and emerging digital technologies across manufacturing supply chains in the aerospace and defense, pharmaceutical, fabrication, and logistics sectors. The initiative seeks to assist businesses in integrating modern digital technologies, resulting in better data exchange and more informed analysis, allowing them to identify supply chain bottlenecks, eliminate waste, and increase efficiency.
Taking this into account, the future of transportation and logistics is bright. Companies in the sector will have to adjust to a variety of problems and trends in 2021 and beyond, fueled by broader events such as COVID's effect, Brexit, the rise of artificial intelligence, and the fast growth of ecommerce.

CIHT is interested in understanding how these global supply chain issues might have affected you or your company/organisation. Please share your views on Connect to help CIHT form policy views on this issue.