The logistics industry is an extremely dynamic world. External economic factors such as tariffs and inflation can significantly influence operational costs, particularly labor expenses. As tariffs alter trade flows and inflation escalates prices, logistics companies will face mounting financial pressures.
A refined labor model is the best way to navigate these challenges. It will help you scrutinize task-specific labor requirements and implement updated labor standards. In a dynamic world, you need dynamic tools.
The Impact of Tariffs on the Logistics Industry
Tariffs, serving as taxes on imported goods, directly affect supply chains—increasing the cost of goods and altering trade routes. For instance, the threat of U.S. tariffs on imports from Mexico and Canada have disrupted previously seamless cross-border operations.
The impacts will be felt by companies like Cesar-Scott, which relies on a workforce that commutes daily from Ciudad Juárez to El Paso. They face economic tensions due to the recently proposed 25% tariffs. These tensions could potentially lead to significant drops in trade flow and economic distress (WSJ).
Tariffs can also prompt shifts in import patterns. Think back to U.S. importers redirecting cargoes between coasts to circumvent disruptions at major ports. These adjustments, while necessary, often ratchet up operational costs and complexity (WSJ).
How Inflation Impacts Logistics
Just as tariffs are increasing operational requirements, inflation is driving up their costs.
We can see the huge impact inflation can have on economies right now. It erodes purchasing power, leading to higher prices for goods and services. In the logistics sector, this translates to increased costs for fuel, equipment, and labor.
Recent policies, including the previously mentioned tariffs on foreign goods, have exacerbated already strong inflationary pressures. The significant price increases in essential commodities like groceries, gas, and housing are a direct result (The Atlantic).
These rising costs compel logistics companies to reassess their operational budgets. And of course, labor expenses constitute a substantial portion of those budgets. If you haven’t optimized your operational efficiencies, the resulting pressure could seriously strain your organization’s finances.
Your Labor Model: the Strategic Response
For logistics companies, overhauling your labor model can help you mitigate the financial impacts of tariffs and inflation. But first, let’s talk a little about that labor model.
Your labor model is how you understand the labor you are going to need. It is made up of labor standards, which you develop by analyzing each task performed by your team day to day. Your goal is to determine the precise labor required, eliminating redundancies, and enhancing productivity.
Implementing new labor standards that accurately reflect your operations is an effective way to proof your organization against uncertainty. It can lead to more efficient workforce utilization, reducing unnecessary labor costs.
These labor standards can be housed in a system like Opus. From there, you can feed them to a Workforce Management system to more accurately forecast and schedule labor.
An updated labor model using accurate labor standards can also help you to incorporate advanced technologies into your workforce management approach. For example, artificial intelligence could use your updated labor model to help optimize supply chain visibility.
Of course, embracing flexible labor practices—such as cross-training and part-time or temporary employment during peak periods—can increase your agility. Adapting to fluctuating market conditions without incurring excessive labor costs can be a challenge. An up-to-date labor model is key to meeting it.
The Importance of Your Labor Model
We are entering a time of tariffs and inflation, posing substantial challenges to the logistics industry. Companies must proactively adapt their labor models to maintain financial stability.
Conducting detailed labor requirements assessments and implementing updated labor standards will be vital. Logistics firms can enhance operational efficiency, control labor costs, and better navigate the economic uncertainties of today’s global market.
Axsium can help you get your labor model ready to meet today’s uncertainties. Get in touch to find out more.
