‘People are gonna be pulling their hair out’: Supply chain execs predict chaotic holiday peak

Old problems reach new heights

The problems we’re seeing today are nothing new. The shortage of drivers existed even before COVID-19 hit, but the onset of the pandemic exacerbated the issue.

“It was always a problem before the pandemic because those drivers are aging out,” explained Bill Thayer, co-founder and co-CEO of logistics-as-a-service company Fillogic. “It’s just become more acute, because those folks that were driving during the pandemic, in many cases they just aged out, and nobody’s been able to replace them.”

When COVID-19 arrived, drivers began departing from their jobs in search of better pay and working conditions, and they’ve still yet to fully return. According to Thayer, the pandemic has made bringing on drivers a pain because carriers have been limited in their ability to train and recruit them face-to-face.

Kane thinks that enhanced unemployment benefits from the U.S. government also may have played a role in the lack of drivers entering the workforce: “I mean, wouldn’t you rather sit home and get a paycheck versus driving, which is a hard job?”

Kane says that COVID-19 unemployment checks sent carriers for a loop, but that the industry is coming back from them. Still, the checks changed drivers’ expectations for wages, which has led to greater competition from local carriers, who are offering increased pay.

Shortages in other fulfillment roles were problems before too. Last year, retailers such as Walmart (NYSE: WMT), Target (NYSE: TGT) and Amazon (NASDAQ: AMZN) and carriers like UPS (NYSE: UPS) partook in seasonal hiring to successfully fill gaps in their warehouses. This year, all four companies are doing it again, but they may get different results.

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“I think brands and retailers are quite accustomed to being able to hire seasonal labor to ramp up staff around the holidays,” said Brian Walker, chief strategy officer of Bloomreach. “And of course, that would be both younger employees as well as people who didn’t regularly participate in the labor force. But in these last few years, and certainly this holiday, we see that sort of ancillary labor participation significantly impacted.”

According to Walker, the shortages are more acute this year. Retailers are not only trying to staff their warehouses but their physical stores as well, and on the other side of the equation, potential hires are fed up with working conditions.

“There also seems to be a shift that’s happened in the culture that has made those roles even more challenging,” Walker explained. “And, you know, employees are not necessarily interested in having to deal with that when they have other choices.”

Absurd levels of e-commerce sales are also nothing new –– carriers have been contending with sky-high volume since the pandemic started. As Steve Howard, president of Esquire Express and Esquire Logistics and board president of the CLDA, puts it: “We’ve been in a professional peak season since around late April or May of last year. I mean, it’s been record numbers every month since then.”

The great slowdown

COVID-19 brought one of Howard’s businesses to a complete halt. Founded in 1990, Esquire Express is a small courier company that covers the three main counties in southeast Florida, but Howard said the service was forced to stop doing business entirely during the pandemic. Currently, the company is a mere third of the size it was in 2017.

“It’s just that that world has changed tremendously. But the other side, the e-commerce side, has just absolutely exploded. I mean, it’s no secret that there’s a shortage of people looking for work, and people are buying online in record numbers right now. And so those two dynamics make it very challenging at the moment to keep up with the pace.”

According to Howard, many other CLDA members, almost all of whom are last-mile providers and range from multistate carriers to individual drivers, are experiencing similar issues. For the most part, he said, they have the technology, the business wherewithal and the warehouse space to match peak season volume –– they just don’t have the people. And it isn’t just drivers that are in short supply.

We’ve been in a professional peak season since around late April or May of last year.

Steve Howard, President, Esquire Express

“I’ve had an open customer service position, for which I’m paying 20% more to start than I was a year and a half ago, and it’s been open for two months,” Howard said. “I’ve had 29 interviewees not show up — 29. I haven’t had a single one show up.”

Howard explained that he hasn’t seen anything like this since Esquire Express was founded and that it’s taken about a year to get his warehouse back in order.

“I’ve always been able to attract good drivers and good people. And when all of a sudden you can’t, no business owner wants to shrink or stop their growth,” he said. “Since my very first hire 32 years ago, I’ve relied on people to help me grow my business, and when those people just disappear, as a business owner, you’re shut down.”

Kane, a CLDA member, and his company Drivv tell a similar story. Kane’s business, which connects couriers with drivers, has seen a 300% increase in courier companies placing ads in search of drivers. But they still aren’t finding them.

“People are so busy that they can’t respond to the warm business leads we send them, because courier companies tell us, ‘Chris, you know, I’d love to respond to these things. But I’m turning away business because I don’t have drivers.’”

A frequent attendee of industry trade shows and events, Kane told Modern Shipper that many carriers are informing their clients that they’re raising prices due to a lack of drivers. Some are even going so far as to fire clients because they simply can’t afford to do business.

“No one’s ever seen this volume before. With the pandemic, you’ve just never seen anything like this.”

Howard explained that the lack of drivers has also negatively impacted master contractors. A master contractor hires independent contractors, such as drivers, to work for them and supplies carriers with drivers and trucks. But they too are struggling to bring in drivers.

No one’s ever seen this volume before. With the pandemic, you’ve just never seen anything like this.

Chris Kane, CEO, Drivv

“We are back to hiring only individuals right now because the master contractors don’t have the ability in this market to hire the truck driver and the helper,” he said. “And some of our trucks run three or four men, so to have a job book that requires four men and then two of them don’t show up is a real challenge.”

As a result, he and other carriers have been forced to take on much of the hiring process themselves, conducting background checks, recruiting and placing ads.

The departure of drivers has also contributed indirectly to the problem of stockpiling, or bulk ordering, of a specific product. According to Krish Iyer, head of industry relations and strategic partnerships for e-commerce fulfillment company ShipStation, his company’s research revealed that stockpiling for the holidays began as early as July.

“All of us are stockpiling for different reasons,” he said. “But the common denominator is a fear of inventory shortage, and it translates to just about everybody, in every buying habit.”

For example, Iyer explained, he often orders his favorite coffee in bulk so that he doesn’t run out of it due to delivery delays brought on by the shortage of drivers. A perceived lack of inventory due to delays can spark the same behavior, he explained: “You have inventory and delivery as two heads of an ugly monster.”

The road ahead

So how does one solve a problem this big? Howard thinks the crisis will at least partially resolve itself because the high wages and benefits that local companies are providing for their drivers are, in his view, untenable.

“I’m starting to see a lot of those drivers coming back, so my hope is that this is a short-lived problem,” Howard explained. “And I think in some ways, the good news is that the driver shortage has required a lot of us to charge a little bit more and pass that along to the drivers, so the drivers’ wages are better.”

Kane agreed. He also emphasized that treating drivers better is crucial to attracting and retaining them in the shook-up, post-pandemic landscape.

“What we tell companies to do is totally flip your model upside down and treat these people the best way you could possibly treat them,” Kane said. “They are the lifeline of your company, and they all know how expensive it is to turn over drivers. So [carriers are] all treating these guys a lot better than they’ve been treated historically. They’re in the driver’s seat, no pun intended.”

Walker explained that some companies are trying to mitigate the situation by altering consumer demand. According to him, retailers are changing consumer shopping habits by not-so-subtly telling them to order early, spreading out deals and discounts and tweaking their promised delivery dates to give themselves more flexibility. They’re also pushing options like shopping in-store and buy online, pick up in store.

“It’s about leveraging the web to drive and capture the demand, and then servicing it through stores in a more controlled way,” explained Walker. “As we get closer to peak holiday, we may see more and more retailers turning to deploy that, which gives them an opportunity to fulfill orders in a more organized way.”

Another potential solution is bringing in outside help. As Thayer explained, “There’s 250,000 trucking companies with less than 20 drivers that have capacity, but they’re not part of larger networks. And so there’s a big scramble from folks like us where we’re trying to bring that capacity into the network.

“There’s been a massive shift to going to 3PL providers for support in omnichannel functionality because these folks just don’t have the infrastructure to be able to support it,” he continued. “Whereas before it was, ‘Hey, we have to own the brand. We have to own the transaction, everything has to be run by us,’ there’s much more openness to say, ‘Hey, what are the options?’”

Kane echoed Thayer’s point, explaining that working with other couriers can be a great way to mitigate the shortages. Iyer also agreed, revealing that the shortages have led his company to be more willing to work with smaller or newer players in the carrier space.

Carriers can’t hire drivers fast enough. But they also can’t hire other operational folks, you know, package handlers, things like that.

Krish Iyer, Head of Industry Relations and Strategic Partnerships, ShipStation

Iyer also added that automation can serve as yet another workaround to the dearth of workers: “Carriers can’t hire drivers fast enough. But they also can’t hire other operational folks, you know, package handlers, things like that. So if you look at major carriers, they have a challenge with that, and investing a lot more in automation and sortation becomes pretty critical.”

Thayer too notes that brands are scrambling to bring in technology that can at least partially replace some of the human labor they’ve lost.

“Every retailer is fumbling to try to get better technology to reduce touches,” he explained. “So if you reduce touches, you increase productivity, which, of course, means that you don’t need as much labor. The only problem is that it takes a lot longer to be able to put that into play.”

The good news is that, according to Thayer, there will be plenty of time for retailers to do that. He predicts that couriers and retailers will still be struggling to bring on drivers and workers well into 2023. When Modern Shipper asked Kane for his prediction on how long the shortages would last, his answer was just as bleak.

“For the foreseeable future. I mean, definitely past the holidays. No question,” he asserted. “I don’t think it’s going to be turned off –– there’s too much backlog of everything.”

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