2020 has finally arrived and with it, the start of two new laws which have the potential to disrupt and greatly change the supply chain industry as we know it. In this blog, we will be unpacking two of the biggest stories of January so far and considering how they impact the entire supply chain ecosystem.
IMO 2020 Has Begun
At the start of the year, IMO 2020 sent ripples throughout the supply chain as the much anticipated low-sulphur fuel oil mandates went into effect. IMO 2020 was frequently discussed in 2019, with industry experts certain that these measures would lead to price volatility and service disruptions. In its first week, a surprising outcome has been that ships with scrubbers — emission-cleaning technology which remove pollutants from ships’ exhausts — are mostly paying the same on fuel as they did a year prior or much more. Yet, the use of scrubbers can now mean the difference between a profit and loss, with non-scrubber equipped Capesizes — ships with a capacity of 100,000 deadweight tons — making about half as much in profit.
As the economy changes and demand rises, prices will likely be more unpredictable and continue to put a strain on ships without scrubbers. To account for the loss, these ships can onboard a digitized supply chain to optimize their operations, minimizing empty miles and improving their agility.
AB5 Put on Hold
California’s Assembly Bill 5 law was set to take into effect on January 1st with the intent of reclassifying contract workers — who work full-time hours or contribute similarly to a full-time worker — as employees. In turning these workers into employees, the employees would then be eligible to receive overtime pay and benefits. However, AB5 has been temporarily blocked from being enforced in the trucking industry, following a restraining order filed by the California Trucking Association (CTA).
Leading up to the ruling, industry stakeholders were concerned that the state did not fully consider the impact that AB5 would have on the freight industry, with the potential to constrain capacity and drive prices higher. Demand is continuing to grow, given that the ‘Amazon’ effect has made instant gratification and one-day delivery a norm. AB5’s implications could negatively impact consumers and businesses who will both be faced with higher costs to ensure that demand is met.
In addition, in the case that AB5 is passed, motor carriers may be forced to convert all their drivers into full-time employees, which would also significantly increase their operating costs. Similarly to ships without scrubbers, while awaiting a final decision, motor carriers can cut down costs in other areas by automating once manual processes and digitizing their operations to achieve efficiency.
Only time will tell how these two policies will affect the supply chain ecosystem as a whole. To continue to stay up-to-date with the latest supply chain news, trends and best practices, subscribe to our learning center articles here.