It has become a cliché for businesses to claim that "People are our most important asset". Looking after our human resources ought to be high up the priority list, not just from a moral perspective, but also as good business common sense.
There is now widespread global evidence that a labour shortage is having a profound impact on supply chains and, inevitably, on costs. In Europe, for example, labour shortages have been identified widely in the UK, France, Germany, Italy, the Netherlands and Scandinavia. There are also problems arising in the Far East, which are already having a serious knock-on effect for other regions. Some sectors are particular problem areas: hospitality, haulage, construction, health and social care, to name a few. The results are extremely serious. From chicken for fast food joints, to fuel for cars, to toys at Christmas, the things we take for granted are under threat.
Across the globe, we see lockdowns having had a serious effect on the availability of labour, but in many regions, this has been exacerbated by local issues. In the UK, for example, the process of "pinging" people who have been in contact with Covid has led to what is colloquially called the "pingdemic", which had some restaurateurs and bar owners metaphorically tearing their hair out.
As a result of Brexit, restrictions on the freedom of movement are starting to bite, and this has been exacerbated further by many non-British residents, who could have stayed, deciding to return home due to the pandemic. Distribution is a particular problem area, with one estimate suggesting that the UK is currently short of 100,000 heavy haulage drivers.
The response of the government is that UK drivers should take up the slack. If only life were so simple… It takes time to train up lorry drivers and there is currently a massive backlog at testing centres that examine would-be new recruits, due to the pandemic. This will not be resolved until well into 2022. By then, the shortage of Barbies or PlayStations will have bitten deep and hard!
The transport sector
Two parts of the transport sector have seen serious issues. The shortage of hauliers may not be new - it's been around since the mid-2000s – but its impact is now being felt acutely. From shortages on supermarket shelves to recent fuel supply issues, both in the UK and in the USA. Indeed, a shortage of drivers has been reported in USA, Central Asia and Australia as well as here in the UK.
Shipping is experiencing similar problems of its own. Partly due to pandemic restrictions, there is now a shortage of shipping in the right places, which is becoming urgent. Lockdowns might be also put in place at any time because of Covid flare-ups, a recent example being in Ningbo (China). The bounce back in oil prices since 2020 has also helped to push up shipping costs, which in some cases have risen by 1,000% over the last year.
Don't forget the human factor
A thought-provoking piece in the UK's Financial Times suggested that the major problem in the transport sector is the lousy way in which staff have been treated. There are reports of lorry drivers being forced to sleep in their cabs for two weeks, whilst waiting to cross borders. The International Labour Organization (ILO) recently found that governments have acted unlawfully when treating ship workers, often trapped aboard for months, thousands of miles from home. And, when priorities for vaccinations are discussed, transport workers are rarely high up the list, though they are vital to international trade. Even Pope Francis has warned that they are not being looked after properly.
There is a moral edge to all this, which should not be overlooked. There is a real risk that when society's focus is, understandably, on saving the planet from the effects of climate change, or containing a pandemic, that the issue of ensuring proper protection for workers is neglected. This has recently been recognised in China, where a court ruled against the 996 practice - whereby workers in some companies were expected to work from 9am to 9pm, six days a week. This is going back to the worst excesses of the early days of the Industrial Revolution, which we surely hoped were in the past.
There are economic consequences for businesses to be aware of, too. An increase in costs will push up prices somewhere, and there is a strategic decision to be made about whether to pass those on to the consumer. There is also an implication for procurement policy. Supply chains have long been predicated on a "just in time" philosophy. Existing models may have to be adjusted to take account of more uncertain lead times, so that just in time does not become just too late.
All of this needs to be taken into consideration. Accountants must factor cost increases into budgets, forecasts and pricing policy, and consider the effects of likely shortages and delays. Those employing or managing staff should also look at whether excessive demands are being made on their people. Treating employees shabbily will come back to haunt businesses in the future. Well-performing staff with the right attitude can quickly make themselves attractive to other prospective employers…
Wayne Bartlett is an author for accountingcpd. To see his courses, click here.
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