Executive Briefings

Labor Forecast: Tough Recruiting with a Chance of Automation

An increasing number of companies are struggling to find quality people to fill positions in their warehouse operations. This issue is not limited to a particular region of the country or industries, but is widespread throughout the supply chain world. Forward-thinking leaders are making changes in both how they recruit employees and how they process orders to minimize the necessary headcount. -Greg Kreis, Principal, Tompkins International

Labor Forecast: Tough Recruiting with a Chance of Automation

According to Bureau of Labor Statistics (BLS), for nine months during the year 2016 the unemployment rate was below 5 percent within North American Industry Classification System (NAICS) 48 - 49, transportation and warehousing. That is the longest run of unemployment under 5 percent since 2007. 

What does this mean for warehouse operations? When you think about it there are only two options.

Continue to Find More Labor

As you can tell from the numbers stated above, and probably from your own experience if you are in warehouse operations, finding additional labor is easier said than done. For the most part hourly warehouse pay rates have been on the lower end of the spectrum when compared to other types of hourly labor, such as manufacturing, construction trades, and services.  While raising pay rates may encourage some labor headcount movement from competitor operations or other industries, this will increase operating costs and last only until others do the same. Based on the most recent information from BLS, hourly earnings are already up 8.8 percent over last year and the growth is expected to continue.

The most successful at finding more labor are being creative, not just increasing pay.  Some successful programs include providing shuttle service from outlying areas, working with a local university to provide part time jobs for students, and creating flexible opportunities for some who may not otherwise seek employment such as stay-at-home parents.

Reduce Dependence on Labor

In the past, evaluating automation was typically about the return on investment (ROI), but more and more companies are considering automation because they are not able to staff their current manual operations. Projects that most often focused on cost reduction are increasingly focused on the ability to get orders to customers, particularly in peak seasons. Attendees at recent trade shows have noticed a considerable increase in the offerings of automated solutions. The potential solutions include a wide range of equipment types from the more traditional conveyors and sortation to more complex robots that have the ability to pick products from a shelf. The key to successfully reducing the need for manual labor is thoroughly vetting the various types of automation. Just because a certain type of equipment “typically reduces labor” does not mean it is the right fit and will have the same success in your operation. Carefully consider product types and order profile to select the right solution.

The Outlook

Projections show the labor force growing at a slightly lower rate than the warehouse employment rate over the next 10 years. The largest percentage of labor force growth is expected for ages over 55. Higher-paying healthcare jobs are expected to grow up to five times the national average. For the foreseeable future, it appears warehousing and distribution operations will need to figure out how to continue increasing production with minimal growth in head count.

According to Bureau of Labor Statistics (BLS), for nine months during the year 2016 the unemployment rate was below 5 percent within North American Industry Classification System (NAICS) 48 - 49, transportation and warehousing. That is the longest run of unemployment under 5 percent since 2007. 

What does this mean for warehouse operations? When you think about it there are only two options.

Continue to Find More Labor

As you can tell from the numbers stated above, and probably from your own experience if you are in warehouse operations, finding additional labor is easier said than done. For the most part hourly warehouse pay rates have been on the lower end of the spectrum when compared to other types of hourly labor, such as manufacturing, construction trades, and services.  While raising pay rates may encourage some labor headcount movement from competitor operations or other industries, this will increase operating costs and last only until others do the same. Based on the most recent information from BLS, hourly earnings are already up 8.8 percent over last year and the growth is expected to continue.

The most successful at finding more labor are being creative, not just increasing pay.  Some successful programs include providing shuttle service from outlying areas, working with a local university to provide part time jobs for students, and creating flexible opportunities for some who may not otherwise seek employment such as stay-at-home parents.

Reduce Dependence on Labor

In the past, evaluating automation was typically about the return on investment (ROI), but more and more companies are considering automation because they are not able to staff their current manual operations. Projects that most often focused on cost reduction are increasingly focused on the ability to get orders to customers, particularly in peak seasons. Attendees at recent trade shows have noticed a considerable increase in the offerings of automated solutions. The potential solutions include a wide range of equipment types from the more traditional conveyors and sortation to more complex robots that have the ability to pick products from a shelf. The key to successfully reducing the need for manual labor is thoroughly vetting the various types of automation. Just because a certain type of equipment “typically reduces labor” does not mean it is the right fit and will have the same success in your operation. Carefully consider product types and order profile to select the right solution.

The Outlook

Projections show the labor force growing at a slightly lower rate than the warehouse employment rate over the next 10 years. The largest percentage of labor force growth is expected for ages over 55. Higher-paying healthcare jobs are expected to grow up to five times the national average. For the foreseeable future, it appears warehousing and distribution operations will need to figure out how to continue increasing production with minimal growth in head count.

Labor Forecast: Tough Recruiting with a Chance of Automation