Labor Shortages in the Warehouse

There’s a perception that computers and robots are going to take over the labor force one day with driverless vehicles, automated storage and retrieval systems, and other human-replacing robots. Those familiar with the current state of the supply chain labor force, however, know that automation often doesn’t replace humans. Most automation technologies are filling vacancies that businesses are unable to fill with skilled human labor.


The Labor Pool is Shrinking

According to a study conducted by the Council of Supply Chain Management Professionals (CSCMP) and Capgemini Consulting, the warehouse and logistics sectors are faced with a serious labor shortage. Seventy-nine percent of 3PL providers report they are unprepared for the shortage, and additional sources suggest this year may get worse – especially during the 2017 end of year holidays.

There has been significant growth in the supply chain and manufacturing industries over the past several years. The result is that the number of new positions being created to accommodate this expansion is outpacing the growth of the respective labor pool by 6:1, per research from Datex, making the task of finding experienced staff significantly more challenging. Compounding the problem is that the overall labor pool is shrinking.

One of the myths often perpetuated about the labor force decline is that Baby Boomers (those born between 1946 and 1964), which comprise approximately 75 million Americans, are retiring. This reasoning was posited last year in the Washington Post, stating:

The labor force peaked at 67.3 percent of the population in 2000 and has been drifting downward ever since. The biggest driver has been the retirement of Baby Boomers, who are turning 65 at the rate of 10,000 each day. Young people are also staying in school longer and less likely to work during their studies.

A follow-up article from the Center for Economic and Policy Research (CEPR) shed light on the real reason for the declining workforce population:

The main reason the labor force participation rate (LFPR) has fallen has been a drop in the LFPR among prime age workers (ages 25–54). This peaked in 2000 at 82.8 percent in early 2000. In September of 2015, it bottomed out at 79.2 percent, 3.6 percentage points below its 2000 peak. The drop in LFPR in the recession and weak recovery has been primarily a story of workers in their prime working years leaving the labor force, not baby boomers retiring or young people staying in school longer.

The Shortage of Skilled Labor is the Bigger Issue

In addition to the decline in prime age workers seeking employment, there’s been an exponential increase in the need for skilled labor within warehouses, distribution centers, and throughout the entire supply chain. And, yes, technology plays a role in this shift in job skill requirements. However, when various automation technologies are implemented in the workplace, workers aren’t replaced; rather, they’re displaced. To illustrate this point, consider the banking industry. ATMs enable bank branches to operate with fewer tellers, but they didn’t eliminate the need for bank tellers. Instead, most banks opened more branches, which actually led to an increase in the total number of tellers. Furthermore, today’s bank tellers are required to perform job duties well beyond pre-ATM bank tellers. They now need marketing skills and the ability to engage clients and present a wide range of products and services. Similarly, as automated picking, packing, and sorting technologies reduce entry level human labor positions in the warehouse, skilled workers are needed who understand procurement as well issues like trade, taxation, and customs.

The current demand-to-supply ratio of jobs to qualified individuals is six to one but, in a few years, that could be as high as nine to one. Most of the openings exist in middle management positions, in which there is a current shortage of 54 percent. While this is a problem, solutions are available.

Consider Modular Warehouse Automation Solutions

As the 2017 Christmas holiday approaches, many retailers’ concerns about future talent shortages are eclipsed by the reality that seasonal demand spikes bring.  This problem is best resolved by investing strategically in automation solutions. Although the automation trend is partly responsible for creating a need for more skilled labor, it plays an invaluable role in solving labor shortage challenges. Modular automation solutions are advantageous for small and large businesses alike, and allow retailers the flexibility for the goods-to-person system to grow incrementally, at the rate a retailer’s e-commerce business is growing.

Use Short-Term Labor Savings to Invest in Recruiting and Training Supply Chain Talent

By making strategic investments in automation solutions that offer a short return on investment, retailers can use these cost savings to invest in initiatives that help mitigate their long-term skills shortage. Here are a couple of examples to consider.

  1. Partner with supply-chain-centric universities. One of the known challenges within supply chain is its image problem. While the buying and selling of goods is something we see and experience every day, the movement of those goods from place to place isn’t nearly as visible. Higher learning institutions play a key role in increasing supply chain awareness, and retailers and 3PL companies can speed-up the process by partnering with these institutions. For example, schools like MIT and Michigan State offer programs that help students study supply chain and logistics, and they even make it easier to complete their programs. MIT, for instance, offers a micro-masters course in which students can take five courses online, followed by an examination, which (if passed) leads to a certification. Those attaining the certification can then qualify to earn a full master’s degree in one semester at MIT. MIT Professor Yossi Sheffi said in a Supply & Demand Chain Executive article that the program encourages a more diverse student body because the entrance criteria are based solely off of performance in the course, rather than standardized testing. Retailers and other companies with supply chain talent concerns should find ways to partner with universities like these and bring awareness of supply chain training and education programs to their local communities and workforce.
  2. Create knowledge transfer programs. A 2015 DHL white paper, titled “Solving The Talent Crisis: Five Alternatives Every Supply Chain Executive Must Consider,” offers useful advice on the talent shortage topic. One point, in particular, I’d like to reiterate is for retailers to develop formal job rotation programs. According to Ken Cottrill, a global communications consultant at MIT, “Rotating supply chain professionals through different departments and functions enriches their skills and gives them a broader perspective of the business. A global services company calls its job rotation program a ‘talent exchange’ and uses these placements to promote cross-functional development. In one program, employees – who include new recruits from universities as well as those with more experience – complete a two-year rotation that involves six-month stints in different functions.” With so many supply chain and logistics companies dealing with aging workforces, adding formal job rotation programs to their supply chain positions is a smart way to retain knowledge that’s about to walk out the door (literally) while attracting new talent and giving younger workers and new hires a path to success.

As the talent shortage gap grows, the competition for talent increases, too. Rather than waiting for things to get worse and being forced to spend a lot of money to fix the problem later, why not start investing in employee education now and give your company an edge?

Our team of project managers, engineers, and analysts can assist and support you through your DC automation evaluation and implementation process from start to finish. Contact us today via phone (+1 856.727.1100) or online to learn more.

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