Port congestion, capacity constraints and fluctuating transportation prices are putting increasing stress on supply chains. As we enter peak season, these issues are unlikely to go away.
Experts have mixed opinions about whether sustainability remains a focus during peak season stress, but they agree on one thing: Capacity is king.
As people try to navigate difficult supply chain challenges, sustainability “may not be front and center for everybody,” AxleHire founder and President Daniel Sokolovksky told FreightWaves. He recognized the importance of securing the necessary capacity to get goods in the hands of consumers.
“We’ve got a hierarchy of needs. No. 1 is, can I get my product to my customer? Sustainability is always going to fall second to that. … Every company’s first job is survival,” Aaron Rubin, co-founder and CEO of e-commerce fulfillment company ShipHero, told FreightWaves.
Once the capacity constraints and shipping delays started impacting supply chains, people stopped talking about sustainability, Rubin said.
Sokolovksky said, “Capacity is No. 1, and second is capability to perform on their promise, but somewhere between one and 10 is sustainability.”
Both AxleHire and ShipHero’s operating models hold environmental sustainability at their core. ShipHero aims to provide two-day or faster shipping without using air transportation, saving emissions that are usually associated with fast shipping. AxleHire provides same-day shipping in urban environments, relying on software to inform the company about the best routes to use electric vehicles.
Rubin said that ShipHero shifted its messaging to focus on the reliability of its services instead of the sustainability aspect because it wasn’t gaining traction. Sokolovksky, on the other hand, said that sustainability is a major factor that companies are considering when it comes to finding new vendors.
Among AxleHire customers, European companies and Fortune 500 companies in the U.S. are showing more interest in sustainability, Sokolovksky said. “In Europe this stuff is front and center. … To be honest, I think now it’s even more important to become sustainable.”
While speaking from his office in Emeryville, California, Sokolovksk noted that he could see smoke from wildfires. He said the global environmental crisis is becoming more evident every year as droughts, floods, fires and global warming get progressively worse.
Tyler Cole, director of carbon intelligence at FreightWaves, said, “Beneath the umbrella of sustainability, it’s so easy to focus on emissions and environmental issues. It’s sexy to focus on the newest technology promising to reduce emissions. But we can’t overlook the equally important topics relating to human capital and social well-being.”
Rethinking labor and wages
With the high numbers of unemployed people and job openings at supply chain companies, many are left wondering why the positions aren’t being filled.
“You see a lot of companies right now trying to figure out ways to improve their labor models. Right now I’d say the No. 1 issue in the supply chain is labor. And what’s the problem with labor? No one wants to work for less than $20 an hour now,” Sokolovksky said.
Sustainability, said Sokolovsky, is about more than just environmental impacts; it’s also about social sustainability and living life beyond making deliveries. He said AxleHire’s focus from the beginning has been to pay employees a livable wage, value work-life balance and treat vendors well.
“When discussing the impacts of peak-season shipping this year, we must recognize that fair wages and safe working conditions are just as impactful as absolute emissions. Our collective North Star should be sustainable enterprise for both present and future workers,” Cole said.
Announcements about sustainability metrics and reports are growing in the supply chain, and people are talking about it more and more, according to Sokolovksky.
“I don’t think that sustainability is off the table in any way,” he said.