Aurelia Butler

Restrictions on movement to contain a surge in new coronavirus cases across the EU are expected to have a milder impact on growth than during previous waves because they target a smaller section of the population: the unvaccinated.Last winter, the eurozone was plunged back into recession when output contracted for two consecutive quarters after a wave of infections prompted authorities to reimpose strict rules limiting people’s movement. In recent weeks, Covid-19 cases in Europe have risen to their highest 14-day rolling average for nine months and in some countries — including Germany, Austria and the Netherlands — have hit record levels. This has cast doubts over the region’s economic recovery.But economists say a return to strict lockdowns is unlikely now that almost two-thirds of the EU population has been fully vaccinated, which has meant death rates and intensive care occupancy levels have not increased at the same rate as infections.By focusing many of the latest restrictions on unvaccinated people, they believe authorities can avoid crippling the economy again, while also encouraging those who are hesitant to finally get the jab. On Sunday, Alexander Schallenberg, Austria’s chancellor, confirmed that the federal government was imposing a nationwide lockdown on those who have not been jabbed, effective from Monday, adding: “We must raise the vaccination rate. It is shamefully low.”Katharina Utermöhl, economist at Allianz, said of the likely economic impact of the new Covid-19 wave on Europe’s economy: “At this stage we expect a dent in consumption but not a derailment.“It will be a terrible year again for [in-store] Christmas retail sales, but a lot of that will move online and we think restaurants, travel and accommodation will continue to do better.”Shops, eateries and leisure venues have experienced a fall in customers since the latest Covid-19 surge. Footfall in eurozone retail and recreation recently fell back below pre-pandemic levels, while remaining well above the last winter’s lows, according to Google Mobility data. This has contributed to an overall downgrading of short-term growth expectations for the eurozone economy in the final months of 2021. But most economists predict the economy will slow rather than contract. The European Commission last week forecast eurozone growth would dip from 2.3 per cent in the third quarter to 0.8 per cent in the final quarter.Economists believe the main causes of the slowdown are the supply chain bottlenecks that are throttling manufacturing output and a sharp rise in inflation that is eroding people’s disposable income. Eurozone inflation hit a 13-year high of 4.1 per cent in October.“I don’t think restaurants will be half-empty again, as the virus is only going to have a modest impact,” said Holger Schmieding, chief economist at Berenberg. “The biggest downside risk to growth is the supply chain.”He said the surge in new virus cases — and rules being introduced in some countries restricting unvaccinated people’s access to many venues and activities — could have a “self-correcting” effect by encouraging more people to get inoculated.Parts of Austria and Germany have limited access to restaurants, gyms, cinemas and sports arenas to people who have been vaccinated or who have immunity after recovering from the virus — excluding those with a recent negative test who had previously been granted access.A person showing the QR code for the online registration for the Hellbrunn Advent Magic Christmas Market in Salzburg © Barbara Gindl/APA/AFP via Getty ImagesThe Netherlands plans to adopt a similar “2G regime” after a three-week limited lockdown in which many public events and leisure venues are forced to close and restaurants and non-essential shops are made to shut by early evening. “Tonight we are bringing a very unpleasant message with very unpleasant and far-reaching measures,” said Mark Rutte, the Dutch prime minister, on Friday. “The virus is everywhere again, and must therefore be fought everywhere.”Austria’s Schallenberg said the restrictions meant that the third of the country’s population who had held out against being inoculated could expect Christmas to be “uncomfortable”. “I don’t see why two-thirds of the population should lose their freedom because another third hesitates,” he added.After new coronavirus cases in Europe hit a record high of 2m last week, German chancellor Angela Merkel said she was “very worried” and urged the third of Germany’s population who had not been vaccinated to “think again”. Merkel and regional leaders will discuss potential nationwide measures to tackle the virus on Thursday.In France, coronavirus cases jumped 40 per cent last week — described as a “warning sign” by President Emmanuel Macron. But Anne-Sophie Alsif, chief economist at the BDO France consultancy, said the recovery would “stay very strong this year and in 2022 because household consumption remains so high, and investment and exports are doing well”.Denmark, which in September became one of the first EU countries to lift all coronavirus curbs, on Friday reintroduced its Covid-19 passport for entry to many indoor spaces and events.But Helge Pedersen, chief economist at Nordea, said he did not expect this would have a “big impact” because most of the population was vaccinated and Denmark had a large testing capacity. Christian Fürtjes, economist at HSBC, said a recent stabilisation of infection numbers at high levels in the UK, where the latest wave of the virus started earlier than in most of Europe, suggested a similar stabilisation could occur in the continent soon.“If that happens then most governments will be very cautious about reimposing strict lockdowns, because they fear the harsh economic impact and they know most people are sick of these restrictions.” .Additional reporting by Richard Milne in Oslo, Eir Nolsoe in Paris and Sam Jones in Zurich More

Joe Biden will meet the leaders of Mexico and Canada this week as his plans to encourage Americans to buy electric cars made in the US have sparked furious opposition from two of America’s biggest trading partners.The so-called three amigos summit, to be held at the White House, will take place for the first time since 2016, and comes as senior officials in Mexico City and Ottawa have complained that Biden’s plans to kickstart EV manufacturing in the US break international trade rules. The opposition of some of the US’s closest allies to a flagship climate policy poses a political and diplomatic dilemma for Biden. The president has pledged to both lower tensions with trading partners following the tumultuous tenure of Donald Trump, and to use industrial policy to boost green industries like electric car manufacturing. Although not yet passed into law, Biden’s broader $1.75tn legislative package contains proposals to offer a tax credit of $7,500 for electric vehicles made only in the US from 2026. Another $4,500 of tax credits are available for purchasing electric cars made with union labour. On Friday, Mélanie Joly, Canada’s foreign minister, said she had raised the issue in a meeting with Antony Blinken, US secretary of state. Mary Ng, Canada’s trade minister, has previously written to the Democratic and Republican leaders and to Katherine Tai, US trade representative, and Gina Raimondo, US commerce secretary, to convey Ottawa’s “very serious concerns” about the EV credits.Ng’s office said that Washington’s proposed measures were “inconsistent” both with its obligations under USMCA, the updated North American trade deal struck between the three countries under Donald Trump, and with the rules of the World Trade Organization. Tatiana Clouthier, Mexico’s economy minister, has sent her own letters to US legislators to ask that the proposals be altered to be brought in line with USMCA. “It’s contradictory,” Clouthier said. “They would set off more [migration] with this kind of measure.”Tai refused to be drawn this week on whether the US proposals contravened the USMCA trade agreement that she helped broker as the Democrats’ chief trade counsel in the House of Representatives.“I’m aware of concerns that our trading partners have raised, and we care about these concerns,” she said.Edward Alden, senior fellow at the Council on Foreign Relations, said the growing dispute between the three nations was “a big deal”.“Everybody is moving at warp speed towards electric vehicles, and auto companies are now deciding where to locate their electric vehicle factories,” Alden said.“This tax credit gives pretty strong incentives to locate final assembly in the United States so, not surprisingly, the Canadians and Mexicans are deeply worried about it.” At present, the North American motor industry supply chain is scattered across all three countries. According to a recent report by the Congressional Research Service, some car parts cross the US, Mexican and Canadian borders “seven or eight times” before they are assembled into the final vehicle. The US imports $29.4bn of car parts from Mexico and exports $5.9bn of parts to Canada, while exporting $11.7bn of completed vehicles to Canada and $67.5bn to Mexico. The CRS says that vehicle parts exported to Canada and Mexico often return to the US to be incorporated into the finished vehicles. “It’s important to remember that the auto industry is the most quintessential North American, USMCA or Nafta industry,” said Tony Wayne, a former US ambassador to Mexico, referring to USMCA’s predecessor trade deal. “It’s more integrated than any other industry.” 

Canada has suggested that US threats to rupture the motor industry’s integration at this time might backfire on the US. Ng’s letter reminded US officials that Canada was “the only country” in the western hemisphere to have stores of all of the critical minerals needed to build an electric vehicle battery, and that Canada was therefore “necessary for the United States to achieve its electric vehicle objectives in the future”.Mexico’s lower labour costs have long attracted carmakers, but sector leaders are already worried that it may not be able to attract a renewed investment boom in the shift to EVs.The plans have sparked some domestic political opposition, too. Joe Manchin, the moderate Democratic senator from West Virginia, has opposed the part of the proposal to offer an extra $4,500 in tax credits for cars made in a US plant where workers are unionised. Manchin, who holds a crucial swing vote in a Senate that is divided 50-50 between Democrats and Republicans, said while visiting a non-unionised Toyota plant in Buffalo, West Virginia, that the extra credits were “wrong”, and “not who we are”. Biden is scheduled to visit a General Motors plant making electric vehicles in Detroit, Michigan, later this week to sell to workers how his infrastructure bill will help expand electric vehicle supply chains and create “good-paying, union jobs across the country”. More

What do mules, yaks, 4x4s, walkers, motorcycles, banana boats and drones have in common? They are all used to deliver Covid-19 vaccines to hard-to-reach areas across the globe.After devastating floods hit western Nepal in October, Budhi Setiawan, Unicef’s health chief in the country, had to come up with a solution to get Covid-19 shots into patients’ arms quickly.The floods cut “a lot of access road”, and the shots needed to be airlifted, posing a “huge logistical challenge,” he says. The solution ended up involving yaks, mules, and transporting on foot, even though it could take them days to reach the area.The efforts to get shots to hard-to-reach areas are part of the problem that much of the world faces in delivering life-saving vaccines to populations who often have not received their first shot. And, while the underlying lack of vaccine supply for much of the world is challenging in its own right, the logistics of the process can prove just as thorny.

Setiawan says much smaller vehicles also had to be used to deploy the shots, with smaller vaccine carriers on top, though Nepal had very “good experience with these issues” and an extensive network of highly committed health workers.Last year, global health observers were mainly worried about countries’ ability to develop the appropriate “cold chain” of refrigeration facilities to ensure vaccines remained viable after delivery.But in Nepal, the opposite may be the issue, says Setiawan: vaccines currently used in the country, mostly from China, should be kept at conventional fridge temperatures. In freezing conditions, the challenge is to keep them from becoming too cold. He says Unicef had deployed freeze-preventing carriers just for that.Still, an underlying lack of shots is holding back vaccination rates, not just in Nepal. For comparison, the landlocked country will begin to use the BioNTech/Pfizer shot on November 14, while the EU, the UK, the US and other richer regions in the world started administering it last December. About 25 per cent of its population have received two doses of any vaccine, and about 30 per cent one.

In poor countries, less than 2.5 per cent have received two shots — while in richer nations, that proportion comfortably exceeds three quarters of the population. Rich nations have, in three months, given more booster shots than poor countries have given primary doses — in all of 2021. Some observers call the divide “vaccine apartheid”.To aid delivery to areas that are hard to reach, Setiawan says Unicef is also discussing using drones, which are already used in the Pacific region. However, the average altitude of Nepal terrain complicates matters significantly.Security considerations — at the border with China, for example — must also be taken into account.Still, he argues that Nepal’s previous successes with routine vaccination have helped to prepare the way for progress this time round. “If we were given supply, then we could have done better and reached the target for coverage of population faster,” he says.

The most difficult challenge has been that demand had surged simultaneously for parts of the cold chain, creating bottlenecks in supply and complicating logistics even further. He notes that Nepal’s dependence on India for trade was also a significant stumbling block on the vaccine rollout at the height of the Delta surge earlier this year.But it is not just geography complicating the rollout of vaccines. Benjamin Schreiber, Unicef’s global co-ordinator for Covax, the vaccine access programme, says Haiti and Papua New Guinea are extreme examples of violence and mistrust complicating matters significantly beyond simple logistics.“People have to take banana boats to get to remote islands, and people are really dedicated to do this,” he says.But in Haiti, Schreiber explains, six drivers were abducted as they planned to go out to deliver vaccines. “There’s carjacking, kidnapping, real fears for the drivers,” he says.

In Papua New Guinea, a healthcare worker setting up a vaccination site was verbally harassed and then pelted with stones. Some other workers, deployed to deliver routine childhood immunisations, were also stoned because the villagers thought they were bringing Covid vaccines. Another vaccination tent was torched, he says. In the country, a vaccine outreach trip can take three to four days, Schreiber says.“There’s a lot of community engagement issues that need to be addressed . . . This goes beyond hesitancy,” he says. “We cannot just assume that people are going to show up and get the vaccines. People want to be informed, engaged — we have some tools in place to address these issues, but it will take time.”Earlier investment a year ago would have smoothed out some of these problems and ensured there were enough healthcare workers in complex settings, he argues. “In some of these fragile settings . . . we need to really invest even more,” Schreiber says. “And that’s something that we really need to work together on to support the rollout.” More

Amazon warehouse workers may soon have new recruits among their ranks: “Bert” and “Ernie”.Named after the pair of muppets in US educational TV series Sesame Street, Ernie is a system with a robotic arm that delivers containers to staff, reducing strenuous reaching and bending, while Bert is an autonomous mobile robot that can be summoned to carry items.They underline how the US retail and logistics colossus has taken a head-and-shoulders lead in warehouse automation — a market that is set to almost double by 2025 to $68bn, according to consultancy Interact Analysis.Analysts say chronic labour shortages and the complexity of ecommerce have accelerated the uptake of automation since the onset of the pandemic, transforming a cost-saving exercise into a critical issue for competitiveness.

Tom Bianculli, chief technology officer of Zebra Technologies — an Illinois-based company that produces wearable computers, rugged scanners and industrial printers for warehouses — says the labour crunch has prompted a shift in thinking in company boardrooms about automation in recent months.“Automation is not about return on investment, it’s about the continuity of business,” he says, recalling recent conversations with executives. “I can’t realise my revenue unless I close my labour shortage.”Supply chain managers now have their eyes on maturing technologies to take the pressure off their workforce.One of those technologies is automated forklift trucks, says Markus Voss, global chief information officer and chief operating officer of DHL Supply Chain, the logistics contracting arm of the international courier group, which is aiming to automate a third of its 20,000 machines globally.“We have a huge shortage of labour right now in all of our markets,” he says. “I believe this problem is not going to disappear.”

Automated warehouse robots, manufactured by AutoStore © Bloomberg

Adhish Luitel, an analyst at ABI Research, says another area of huge growth is in micro-fulfilment centres that use robots on rails, like those used by online retailer Ocado or AutoStore, its Norwegian competitor, which was recently listed in Oslo.Supply chain managers are also turning their attention to integrating all the different robotics and automation technologies with data to better predict demand and optimise the use of robots and humans on the most urgent tasks.To help achieve that aim, Dwight Klappich, an analyst at Gartner, says that customers are likely to encourage a shift towards a common software platform for robots that many vendors can plug into — much as Android became the underlying operating system for many smartphones.“A lot of smart people are looking at what the robot platform looks like,” he says. “I don’t know what happens here. It depends if one of the big tech companies wants to make a robot operating system.”But while robots speed goods through warehouses, external problems — such as truck driver shortages — have been putting the logistics industry under strain.

With self-driving lorries still years away, an essential factor in making sure that automation is productive is pairing warehouse automation with other links in the supply chain.Thomas Evans, Honeywell Robotics’ chief technology officer, says technologies such as 5G, connected cities and vehicle-to-vehicle communications could help “orchestrate” the higher throughput of automated warehouses with the arrival of trucks to bring and take the goods away.However, despite this excitement about deploying robots, there are other barriers to progress.For one, the sector is, by and large, stuck in the Victorian era with an estimated three-quarters of warehouses worldwide having no automation at all because large conveyor belts and fixed infrastructure proved too expensive.

Robots can be much cheaper, but Rueben Scriven, senior analyst at Interact Analysis, points out that Amazon’s purchase of Kiva Systems in 2012 shook the market — because the Massachusetts-based group stopped selling its robots to new customers or servicing those already in operation.“Many fear that a large company like Amazon could acquire a mobile robot company, making customers a little hesitant to invest whilst the market is in such a nascent state,” he says.The sheer velocity of growth in ecommerce has also given retailerslittle downtime to integrate new systems into their facilities, says Evans.Joe Daft, head of robotics at Wise Robotics, a British manufacturer targeting smaller businesses, says the view that automation is priced prohibitively remains an obstacle.“It’s a mindset thing,” he says, adding that business owners are intimidated at the prospect of automation. “There isn’t a single company who knows what they want.”

But he believes the pandemic has spurred change. “Over the past 18 months, I’ve seen a generational change at [smaller businesses],” he says.That tailwind comes at a time when few predict any let-up in the labour pressures that are driving automation.Ageing populations in advanced economies, tighter immigration rules, growing demand for flexible working arrangements, and the march of the on-demand economy all make it hard to see how worker shortages will ease off.“Covid put a spike in it — the genie in the bottle is not going back any time soon,” says Rick Faulk, chief executive of Massachusetts-based Locus Robotics, which makes robots that bring and take goods away from people and plans an initial public offering in the next 12 to 18 months. “The gig economy is sucking labour out of the logistics business.” More

The ageing electric passenger train that pulled into London’s Euston station on the evening of July 7 initially looked unremarkable. But, when the doors slid open, the new arrival’s revolutionary potential became evident.The interior of the train, operated by Orion High Speed Logistics, had been stripped of seats and fitted with metal floors and equipment to hold wheeled cages full of retailers’ stock. Minutes after arriving, the cages were being hauled out of the station and into central London on bikes powered by a mixture of human and battery power.These events illustrate the possibilities presented by Orion, part of a company called Rail Operations Group. It hopes that a fleet of converted, 100mph passenger trains can exploit the trend towards decarbonisation to compete in new markets for UK rail.The trains have converted from passenger service by having small diesel engines and batteries fitted to enable them to negotiate short stretches of unelectrified line. But they mostly run on live overhead wires and produce no direct emissions.Paul Orchard, managing director of Orion High Speed Logistics, says the company is receiving growing interest in its service from logistics providers in light of the rising cost of fuel in the UK and the shortage of truck drivers.“It will deliver a greener end-to-end transport solution and, of course, a lot of these companies now are a lot more focused on the environment and their own decarbonisation targets,” he says.Orion’s planned launch is part of a worldwide revival in the use of rail for logistics, including the use of trains to move goods such as maritime shipping containers in large volumes, replacing trucks or even ships on some routes.In the UK, in the three months to June this year, volumes of intermodal traffic — containers carried on rail — were 22.5 per cent up on the same quarter in 2020. Volumes were still 3.8 per cent behind the same quarter of 2019, but the UK’s Office of Road and Rail attributed that fall to a worldwide shortage of shipping containers.

Aymeric Chandavoine, global head of logistics and services for AP Moller-Maersk, the container shipping and logistics group, says interest in using rail is accelerating worldwide.“It’s a green, efficient transportation mode,” he explains.John Smith, managing director of GB Railfreight, the UK’s third-biggest railfreight operator by traffic volumes, says three of its biggest customers now are companies that were traditionally solely truck operators. The company expects to add four daily round-trips of container — or intermodal — trains next year, on top of the 24 it currently runs on most weekdays.According to Smith, the shift has created more attractive roles for truck drivers, who now make multiple short delivery trips daily, from a railfreight terminal to customers, rather than long-haul end-to-end trips.The UK currently has a shortage of 100,000 qualified truck drivers, according to estimates.

“They’re contracting us on the trunk haulage, heavy volume leg, which means they then can get better efficient use out of lorry drivers,” Smith says of his customers.For Orchard, Orion’s attraction is that the company’s converted passenger trains can run directly into city centre stations, reaching markets that are currently served almost exclusively by trucks and vans.He points out that many trucks driving into London’s Ultra Low Emissions Zone — which since October 25 has covered parts of the city inside the north and south circular roads — now have to pay £300 a day.“It’s perfect timing for rail,” Orchard says of the charge’s expansion. “The whole idea of the train [going into Euston] was just to highlight how easy it is to open the gate at the end of the platform and go straight out.”

Because its train nearly matches the speed of the fastest passenger trains, Orion should be able to outpace the trucks that traditionally carry express parcels and other premium express freight.Orion expects its main market to be in replacing trucks on trunk routes between England’s south and midlands and Scotland’s central belt. The challenge, so far, has been to find enough southbound traffic from Scotland back to England to make the service economic.The company nevertheless expects to start operations during November this year with a launch customer that has substantial volumes to move and a number of suitable facilities for handling the traffic.“The amount of interest shown has just increased, almost month by month,” Orchard says. “The problem we have is the train needs to be filled in both directions.”

GB Railfreight’s Smith expects continued growth in long-established forms of railfreight.As well as its traditional market of moving shipping containers from ports to distant inland terminals, the company now has some business hauling containers between two inland terminals — a business where rail freight operators previously struggled to be competitive.The dynamic of everything is now favouring rail”, Smith believes. “People are beginning to see us as the solution,” he says.According to Maersk’s Chandavoine, such stories of enhanced competitiveness for rail are common. Maersk Logistics, for example, now charters trains for 250 round trips annually between Asia and Europe — a market where the mode of transport has been competing only in the last 15 years.

Trains fill a gap in speed and price between high-cost, carbon-intensive air freight and lower-cost, far slower ships, according to Chandavoine.“It’s what we have to really look at when we see the challenges we’re facing today across the industry,” Chandavoine says, noting rail’s ability to help overcome such problems as truck driver shortages and decarbonisation.“We’re really seeing many, many advantages for the customer,” he adds.“We’ll never replace trucking — but this option of rail, air, ocean, truck brings different alternatives for the customers.” More

When a package thuds on to a doorstep, customers glimpse only the final few metres of its long and complex journey through the global supply chain.Most consumer goods delivered across the developed world are manufactured thousands of miles away before being shipped or flown to ports, moved to warehouses or regional fulfilment centres by road or rail, and then driven to a customer’s door.As a result, every stage of the process has an impact on the environment. International trade-related freight transport is now responsible for 7 per cent of global carbon emissions, according to the International Transport Forum. And this global freight transport activity is only forecast to grow: by 2050, it will be 2.5 times its 2015 level, based on ITF projections released this year. The body also warned that freight’s absolute carbon emissions will be more than 20 per cent higher by 2050 compared with 2015, even under current decarbonisation policies, which it labelled as “insufficient”.Among the possible solutions to decarbonise the sector are greater efficiencies to help shrink inventories and the number of deliveries, as well as switching to more sustainable fuel and energy supplies.

But the industry is particularly complex to decarbonise. Whether it contains a sofa or an iPhone, a package’s journey will usually involve several independent businesses, from huge shipping companies to freight forwarders, warehousing groups, and last-mile delivery couriers.Given this fragmentation of the industry, there is no single body or organisation that will be able to lead decarbonisation, points out Céline Hourcade, managing director at Change Horizon, a logistics consultancy. “I think you need to be pragmatic and see how individual companies and stakeholders are going to contribute,” she says.The biggest companies in the sector have all begun to act, by issuing a blizzard of sustainability commitments.Shipping group Maersk is aiming to reach net zero emissions by 2050, and have the first carbon-neutral vessel on the water by 2023. Meanwhile, some of the most ambitious pledges on the use of sustainable aviation fuels have come from the air freight industry.

Delivery pledge: Jeff Bezos at COP26 © Bloomberg

Amazon founder Jeff Bezos has pledged to use his ecommerce group’s “size and scale to make a difference”. The company has said it will make 50 per cent of all shipments net zero in emission terms by 2030 and hit overall net zero emissions 10 years later.Amazon has already launched a venture capital fund to invest in companies pioneering new technologies to help decarbonise logistics, with an initial $2bn in funding.

This has invested in start-ups including a company building small, electric aircraft for use in package deliveries, a sustainable-fuel manufacturer, and an electric vehicle maker. The fund, and its futuristic investments, underline how logistics companies are hoping that new technologies will emerge to offer a ‘silver bullet’ to help them decarbonise their energy-intensive industry.Among the biggest challenges will be making changes to intricately planned supply chains without increasing costs for consumers, who have come to expect rapid, cheap deliveries as a part of everyday life in the western world.For now, the new technologies tend to be more expensive than older, more carbon-intensive solutions. Sustainable fuels to power cargo aircraft, for example, are up to five times as expensive as traditional jet fuel.

However, some of the most significant pressure to move on climate change is coming not from consumers but from the big corporations. They all rely on the logistics industry to get their products to market, but are also increasingly mindful of tackling their broader “scope 3” emissions, which include those emitted during transportation and distribution of their goods and services.Ikea, Unilever and Michelin are among nine leading companies that last month pledged to use only ships powered by zero carbon fuels by 2040.“Companies have the opportunity to make a huge impact in the fight against climate change by also decarbonising their supply chains,” says Dominic Waughray, a managing director at the World Economic Forum. “The interaction between governments and companies to seize this opportunity is an important one.”

So far, though, even leading companies have struggled to find the data they need and set clear targets for their suppliers, according to a report by the WEF in conjunction with Boston Consulting Group, co-authored by Waughray.Consumer multinationals, for example, have tens of thousands of businesses in their supply chain to monitor, while fashion companies often use small manufacturers to make their clothes.Still, amid the obstacles, there are opportunities. “One of our big challenges is how to get a view on the hundreds of thousands of farmers in our supply chains, but we see that as an opportunity for more and more direct farmer engagement,” said Greg Downing, an executive at US food giant Cargill, in the WEF/BCG report.Change Horizon’s Hourcade says: “It will take time, but I think we have the right momentum right now, where so many players at every level [within the industry] know they have no choice.” More

People tend to react with shock when Robert explains that lorry drivers like him often do 12-hour shifts.“While most people do 9am to 5pm, we can do 4 in the afternoon to 4 in the morning,” says Robert, who asked the FT to change his name, so as not to upset his employer, UK delivery service Yodel.Longer shifts, which can stretch up to 15 hours, have become far more common since the pandemic struck, according to Robert, as social distancing rules have led to a massive shift towards online shopping.Brexit has exacerbated the situation, with the Road Haulage Association estimating that about 20,000 drivers have left the UK for their home countries in recent months.

But while Brexit and Covid-19 have contributed to the labour market squeeze — which recently led the UK government to call in the military to help deliver petrol — stagnant pay and poor work conditions have also dissuaded young people from choosing one of society’s essential occupations.“Go into a school with 16 year-olds today and offer them a job driving a lorry for 12 hours a day — they are going to run for the hills,” Robert says.Delivery companies in the UK have scrambled to secure supply chains by offering higher pay. In October, Yodel agreed to raise some drivers’ pay by almost 20 per cent after they threatened strike action, which could have affected deliveries to supermarkets such as Marks and Spencer and Aldi.Paul Day, the managing director of trucking company Turners Soham, which operates 2,300 lorries, estimates that wages for UK drivers have jumped by up to a fifth this year. “Haulage companies have to react to retain their workforce . . . and somebody will have to absorb that cost,” he says, adding that consumers should expect higher prices.“It is impossible to sustain current consumer expectations,” Day adds.

Yodel chief executive Mike Hancox agrees that the “incredible” growth of ecommerce during the pandemic has forced many to adapt their business models. He does not, however, expect further pressure on work conditions. Although Yodel would always need to adapt to market conditions, Hancox does not see “any drastic changes needed to respond to the acute challenges of the current labour market”.British citizens have been slow to fill the roles of the many eastern Europeans who worked as lorry drivers and warehouse packers but headed home following Brexit. “A lot of this work has been at minimum wage or low wages and there is some reluctance among British people to fill these jobs at what markets have historically paid,” Day says.The squeeze on labour reserves to supply chains extends beyond the UK’s borders. Tommy Wreeth, president of the Swedish Transport Workers’ Union, says the industry has long spoken of “divorce schedules” — the evening and weekend shifts that make it nearly impossible for drivers to spend time with friends and family.While he acknowledges that societies will always need goods transported at inconvenient hours, Wreeth argues that the boom in ecommerce has brought about an unsustainable shift to shorter and faster retail supply chains, where smaller numbers of goods are moved more frequently.

“I think the only way is to go back to the time where we would have to wait a couple of days for something we ordered to be delivered,” he says, adding that many consumers have become oblivious to the work required to maintain smoothly running supply chains.“Many people who shop online think they are doing something good for the environment, because they don’t see the trucks that are delivering five pairs of shoes and then returning four to the warehouse,” Wreeth adds.The shortage of drivers comes amid a rush for automation. Companies are already developing driverless trucks, such as California-based company TuSimple, which is preparing to test its vehicles this year on public roads without a human in the cabin. But the idea of autonomous trucks weighing dozens of tonnes rumbling down roads without a qualified driver in the cabin is still distant, and certainly too far away to alleviate the current crisis.

“People don’t understand and see what manual labourers do — we are all looking at the tech, but forget that we will always have some kind of manual handling,” says Robert.Andy Prendergast, national secretary at UK trade union GMB, says labour shortages are likely to loom over British supply chains for “a couple of years, assuming that wages increase and more people come into the industry”.Paying more to get goods transported to us will be essential, he says, to supply supermarkets and people with food. “We have to recognise that we have tried to do this on the cheap and we will have to have either higher consumer prices or lower company profits.” More

Keep the wheels turning: Will Butler-Adams of Brompton Bicycles has resorted to airfreight delivery of parts © Charlie Bibby/Financial TimesLimited supply of a small, innovative metal tube made in Taiwan, priced at just a few pounds, has threatened to bring the factory of London-based Brompton Bicycle to a halt.“It’s amazing — the smallest thing could trip you up,” says Will Butler-Adams, managing director of the company, which has resorted to flying in parts to keep production lines going.And the bicycle maker’s problems underscore the widely experienced chaos that the pandemic has wreaked on complex, globalised supply chains. Rising costs, delayed deliveries and economic uncertainty have pushed companies towards an extensive overhaul of their suppliers, with ramifications for the logistics industry.In response to shocks ranging from clogged up ports to semiconductor shortages, manufacturers and retailers are looking to boost stockholding, increase supplier numbers, diversify their geographical footprints and substitute parts.

“Supply chains are having to reshape themselves to focus on resilience, flexibility and robustness,” says Richard Wilding, professor of supply chain strategy at the UK’s Cranfield School of Management.The pandemic has transformed logistics from an aspect of procurement into a competitive advantage driving success for certain companies, says Lars Jensen, an analyst of container shipping and chief executive at consultancy Vespucci Maritime. Footwear maker Crocs, for one, has benefited from how the simple design of its rubber clogs allows it to shift production around the world.“All companies compete on a range of parameters,” Jensen says. “One thing they have not been competing on for the last decade has been logistics. The companies good at logistics now have a competitive advantage.”A boom in online shopping during Covid lockdowns has only amplified the importance of logistics, since the delivery of goods to many consumers’ doors is far more complex than delivering goods to a warehouse for distribution in bulk to stores.Wilding says supply chains have been going through “birth pangs” as they try to modernise and catch up with the pandemic-induced leap in demand for logistics networks.

Consumers increasingly turned to online shopping during the pandemic © SOPA Images/LightRocket via Gett

“Supermarkets said ‘people don’t want to come to our stores’ so did a massive online offering,” he notes. “What they used was their existing infrastructure and processes to deliver that. The problem is that is incredibly inefficient.”As multinationals reconfigure their distribution networks, Kamala Raman, an analyst at consultancy Gartner, says the logistics industry — sprawling across everything from third-party contractors to shipping, rail and haulage firms — has opportunities to expand its services beyond merely moving goods “from A to B”.For larger groups, such as DHL Supply Chain and DB Schenker, this can include adding analytics, visibility tools and network design, says Raman — almost making them competitors to management consultancies. Logistics groups’ abilities to secure manpower against a backdrop of widespread labour shortages is also an increasing pull for outsourcing work to them, she adds.

Larger companies such as DHL have used analytics to better ensure delivery during the pandemic © Bloomberg

“Logistics players, contract manufacturers and large service delivery companies stand in a position to pool the risk [of investment in resilience] across a number of their customers, to offer some capabilities for a better price than they can get alone,” she says.But Raman warns of a downside to relying on logistics contractors, which many discovered during the pandemic: “You are at the mercy of somebody else’s prioritisation list.”For that reason, Steve Feniger, a veteran at sourcing goods from Asia and operating partner at US private equity firm Blackford Capital, says his main advice to companies is “become a better customer of your factories and freight forwarders”. He is telling his portfolio companies, such as Aqua Leisure — which makes swimming accessories including 12m goggles a year at 45 factories globally — to provide longer demand forecasts and to ensure suppliers and logistics groups get a fair slice of the profits.

In most cases, the recent supply chain disruptions can be traced back to decisions to close factories at the start of lockdowns early last year, based on a false expectation of cratering demand.But many believe the groundwork for these crises had already been laid by the decades-long focus on driving logistic costs down.“Over the past 30 years, supply chains have been globalised with a combination of low-cost freight, simpler trade barriers and a focus on cost reduction,” says Emile Naus, partner at consultancy BearingPoint. This led them to become “longer, more fragmented and more fragile than ever before,” he points out.US corporate spending on transport was more than double that on inventory holdings in 2020; the two had been equivalent in 1980. According to the UN Conference on Trade and Development, the reason is simply that moving goods has become so cheap.Jan Hoffmann, chief of trade logistics at the UN agency, expects shipping costs, which have rocketed during the pandemic, to stay elevated for some years.This is because environmental legislation will cause ships to go slower and, therefore, constrict capacity. Together with the pandemic supply snags, that would likely reshape trade flows, Hoffmann adds. “Manufacturers and retailers want to diversify and have a little less deep supply chain,” he says. “But it will still be cheaper to get cargo moved from China to the EU than Lagos to Europe.”Some argue that some of the forecast changes are over-egged. Jensen says that additional stockholding will fade as the pandemic recedes.“Over time, these buffers will disappear,” he argues. “A buffer is a nice word for overcapacity” — a development important to future demand for warehousing run by the likes of Seko or GXO Logistics.

Doug Sheppard, operations director at Parvalux, a British maker of geared motors used in robots and stairlifts, agrees, saying the company initially needed extra stock to ensure continuity but “we’re at an unsustainable level”.Even so, many say that supply chains are becoming more regional by sourcing more goods closer to consumers in order to reduce the future risk of freight bottlenecks and long lead times, as well as emissions.Lynn Torrel, chief procurement and supply chain officer at Flex, one of the world’s largest electronics contract manufacturers, says many companies “are looking at what parts of their supply chain and manufacturing they can move closer to their end customer”.

The assembly of final goods is often easier to relocate but parts manufacturing and raw materials can be harder.“The average product consumers buy has components that have come from 10 different countries — I don’t see that fundamentally changing,” says Jeremy Nixon, chief executive of Ocean Network Express, one of the world’s largest container shipping companies.However, Parag Khanna, managing partner of advisory FutureMap, says that a psychological shift has taken place to diversify the geographical production of some vital parts such as semiconductors.“This time is different because of the geopolitics,” he says. “There’s a genuine strategic momentum to regionalise access to critical components.”Even though the advantage of holding a global digital platform to track and verify cargo will only grow, he says: “The logistics industry is going to have to think less global and more regional”. More