How Strikes, Labor Disputes, and Capacity Constraints Affect The Supply Chain
Over the past several years, we’ve seen drastic changes in the labor market, including strikes, mass labor shortages, and more. All of these factors affect the global supply chain and can result in delays.
For organizations with a large international customer base, navigating these ups and downs is very challenging. While it’s very difficult to predict what will happen next, there are steps your company can take to get through these difficult times. At Unilog, we’ve helped our clients navigate these recent challenges with comprehensive supply chain management.
One of the ways we do this is by using our Logivice system. Logivice is a proprietary supply chain management solution that gives us end-to-end visibility. We’re able to identify and respond quickly to product shortages and other issues before they happen. While this doesn’t prevent all labor and product shortages, it does help reduce the number of late and delayed shipments. Logivice also helps us run the supply chain with fewer staff members to counteract the effects of labor shortages.
Strikes and other labor issues are likely to continue in the short-term as governments and labor unions work towards deals and the economy fluctuates. Here’s how these ups and downs will affect the global supply chain.
Causes of Strikes and Labor Disputes
There are a variety of factors that have caused strikes and labor disputes around the world. Over the past few years, these factors have all converged, creating the perfect storm for labor shortages and production issues. Rail workers in the United States have been on the verge of a strike for months as they’ve negotiated their working conditions. There have also been rail and dock worker strikes in the United Kingdom and Austria in 2022, with tense negotiations in many other countries. Additionally, there have been strikes in the manufacturing sector around the world.
Strikes are typically caused by disputes between labor unions and employers. Local labor laws (or lack thereof) can also contribute to labor disputes. Stressful working conditions, long hours, and low wages often trigger strikes as well, especially in physically demanding jobs like manufacturing.
Even a short strike can be devastating to the global supply chain. It often takes months for the economy to fully feel the effects of a strike or labor dispute. While countries are adjusting their labor laws and companies are improving their working conditions, it will take time for the labor market to find balance.
What are capacity constraints?
Capacity constraints have also dramatically affected the global supply chain over the past few years. Capacity constraints are anything that restricts production output or the flow of goods along your supply chain.
There are many different types of capacity constraints. Labor shortages have been one of the biggest capacity constraints over the last few years. Even without strikes and labor disputes, many companies have struggled to find workers to fill their positions. The COVID-19 pandemic resulted in many layoffs, and many workers took time off to manage illness as well.
In the two years since the onset of the pandemic, we’ve seen many workers reassess their careers, opting to take time off or move into a different field. This has caused global labor shortages that organizations are still trying to recover from.
Resource shortages are another form of capacity constraint. Natural resources exist in finite amounts, and both temporary and permanent shortages may happen, resulting in long-term supply chain problems. Labor shortages in the manufacturing sector can also lead to resource shortages. For example, labor shortages in recent years have resulted in a shortage of microchips, which are used in cars, electronics, and a variety of other products.
Finally, a lack of warehouse space and transportation are also common capacity constraints that can affect the supply chain. While these problems are easy to fix, it takes time to build new warehouses or invest in new vehicles, so temporary delays will happen.
Impact of Strikes and Labor Disputes
Strikes, labor disputes, and capacity constraints impact the global supply chain in many different ways. One of the biggest impacts is long-term shipping delays and even missed shipments. Even small changes to the labor market can affect the supply chain for months to come. Customers will have to find alternative products in the interim.
Labor disputes and changes can also result in price increases across the market. When supply goes down, prices typically go up, as manufacturers want to maintain profitability. On a large scale, this can make products less accessible to the average consumer and even have a negative effect on the economy. This impacts products across the market – for example, the prices of gas and food rose in part due to the threat of a rail strike in the US.
Not only do these labor disputes affect the end consumer, but they also have a negative effect on organizations themselves. Delays and missed shipments result in a loss of revenue, which makes it difficult for companies to continue to grow. Additionally, missed shipments can have a negative effect on your organization’s reputation, which leads to further loss of revenue.
It’s important for organizations to be prepared for strikes and labor disputes. While you cannot control these global events, you can control the way that your organization responds to them. Supply chain visibility is key in these situations – the more information you have about your suppliers and your shipping partners, the easier it is to fix problems when they arise.
Redundancy across the supply chain will also help you prepare for labor disputes. For example, working with multiple suppliers and having a stockpile of key materials and products will insulate you from temporary shortages. When possible, consider alternative materials that aren’t affected by shortages.
If you’re concerned about strikes affecting your supply chain, working with a 4PL partner can help. As a 4PL, Unilog coordinates with a wide variety of warehouses and shipping partners to create the most efficient routes for your organization. Contact us today to learn more about our services.