Inflationary pressures on the Supply Chain are increasing dramatically in the wake of COVID-19 and Brexit. There is plenty of comment in the news about the UK drivers’ shortage – earnings of £50k per annum for Class 1 drivers are being quoted and hauliers are refusing to take on work that doesn’t suit them. Sea freight rates from the Far East have quadrupled and shippers are now finding air freight to be a viable alternative with reduced transit times as a benefit.
Other areas that are less well reported are impacting on Supply chain costs: Warehouse labour rates are increasing with a lack of staff in some regions, and some companies are paying 20% increases in warehouse wage rates to retain staff. There is very limited availability of empty warehouses for companies leading to an increase in rental prices.
Some costs will be recouped through price rises but not all – and it will take time for the increases to cascade down so companies need to take immediate action to protect their own operations and profits.
Companies should:
- Review their supply chains to streamline operations and minimise resource requirements.
- Consider customer service levels – can delivery frequency be reduced or lead times increased? Should minimum order sizes be changed? Should product ranges/offerings be rationalised?
- Can existing supply chain facilities be made to work harder - can current facilities be expanded or life extended?
Davies & Robson can support Companies in re-examining their supply chains to reduce inflationary impacts.
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