Consumer good manufactures are facing a gloomy mix of challenges such as labor shortages, higher shipping costs and higher energy prices. All of which has led to higher prices at checkout for the average consumer. Below we will discuss these challenges and what you, as a consumer, can expect in the future.
Higher labor costs due to labor shortage
Labor shortages, caused by lockdowns and infections, were one of the first side effects of the COVID-19 pandemic. While lockdowns are not as severe as they were at the beginning of the pandemic, businesses are still having labor shortage issues due to a growing number of ex-employees changing to more attractive industries such as technology and health care. Meanwhile, manufacturing and supply chain jobs are in high demand and potential candidates for these positions are requesting more compensation which is hurting the bottom line of the employers looking to fill these roles.
Higher transportation costs
In addition to a lack of labor, the shipping industry is dealing with other fluctuations in supply and demand, as well as hostile threats from cyberattacks. For example, some cyberattacks came from malware targeting the supply chain, hitting huge companies such as TNT and Maersk. They not only disrupted the supply chains, thus costing the companies millions in lost revenue and restorations, but sometimes also involved ransoms. These financial burdens on the companies then get passed down to consumers.
As for supply and demand, consumer demand for goods is increasing to new highs even as the labor shortage slows down manufacturing and shipping. Consumers stuck at home, whether voluntarily or due to work from home orders, turned to online shopping rather than risk exposure by going to a physical store. As such, logistics companies are finding it exceedingly difficult to keep up, and ports are experiencing huge backlogs of ships waiting to unload.
Higher input costs
Another contributing factor to the higher prices is the higher energy costs. Due to several factors such as a rapidly rebounding economy, a long and cold winter, and a weak supply, numerous fuel costs are seeing significant price increases. Energy costs are affecting not only industrial production and transport but also consumers’ home heating, personal transport, and travel expenses. Meanwhile, prices for raw goods such as metals, minerals, and lumber have been on the rise for years, with the destabilizing force of the pandemic making it even harder to secure them, further pushing price volatility.
What can consumers expect?
As supply chain difficulties continue and demand refuses to let up, prices are unlikely to fall anytime soon. Additionally, the inflation rate is rising at an exceptionally high average rate of about 4% per quarter, and Unilever CEO Alan Jope said “We’re in for at least another 12 months of inflationary pressures,” on a Bloomberg Television interview.
The price increases stretch across the board from everyday consumer items to used cars, flights, and higher-end items. However, some of the inflation now is likely a rebound from deflation in some parts of the economy last year, making it appear worse than it is. In the longer term, the current inflated prices may be transitory and cool back down in a year.
Regardless of how things turn out, know that ClearFreight is here for you and your business. We have experts specialized in every sector of logistics ready to help guide your business through whatever the global supply chain throws at you. Call us today to tell us about your supply chain needs and hear how we can make logistics easier for you.