One of the disruptive impacts of the rise of e-commerce is a shortage of labor to fill a growing number of warehouse positions needed to keep up with increasing e-commerce volume and customer expectations.  Distribution hub markets are oversaturated with new DCs and that's driving greater competition for labor. This, at a time when both the working population and unemployment statistics are trending downward. The challenges were never more evident than through the most recent peak season. -George Swartz, Group Vice President, Fortna Inc.

Dramatically shifting labor pool dynamics mean that fewer workers than ever are available to fill warehouse jobs as Boomers retire and fewer Millennials seek warehouse positions. At the same time, the cost of labor is rising due to changes in minimum-wage laws and health care costs. And more distribution centers being built in primary and even secondary markets mean greater competition for labor.

If labor availability were the only issue, companies could respond with a number of recruiting and retention strategies; for example, hiring bonuses, higher wages, flex hours, incentives for longevity and referrals and shift differentials. Some might look to become the employer of choice by making facility improvements, such as better lighting, HVAC, misters, upgraded gym facilities and lockers. Those looking to appeal to the next generation (Millennials) might look at ways to make the workplace more of a place of community and social awareness with green programs, mentoring, town hall communications and other programs that are designed to make work more fun. Others might try adding perks like daycare, social events, catered meals, improved benefits and stock options.

Companies are starting to look at alternative pools of labor to fill gaps by hiring more part-time workers, including college students and stay-at-home parents. But that comes with its own burdens. It requires higher training costs and additional work for Human Resources or temp agencies to find workers. And filling positions with part-time workers requires twice as many people to fill the need.

In the future, peak season may require a different shift structure altogether (shorter shifts or school-day hours for part-timers and/or weekend and evening work to accommodate more flexible schedules). Companies may ultimately have to shift the work and orders to where there is capacity. That might mean working with marketing and merchandising to level peaks or even re-setting customer expectations around service requirements during peak to spread the work out over a longer period of time. Some companies may even choose to fulfill orders from the store because they have the labor available to fulfill in a same-day time frame.

But labor availability is not the only challenge. There’s the rising cost of labor that must be reconciled with the fact that businesses are being squeezed by the cost of “free” shipping and increased service requirements (faster fulfillment, value-added services, etc.). Strategies focused on recruiting and retaining workers may not be enough to meet the new demands being placed on distribution. It may be a case of simply being unable to find enough workers or not being able to afford the available workers. The solution may require automation to help reduce dependence on labor and mitigate risk for the future.

The Outlook

If the business is not yet feeling the pain of labor challenges, it will be in the next few years. A look at the demographics of population and the aging of the workforce paints a grim picture for the future of labor availability. It takes time to transition from manual operations to even low levels of automation or transform existing automation to take advantage of emerging technologies that reduce dependence on labor and increase flexibility. Companies that are already in-flight on these initiatives and those who begin now will have an edge on those who wait to address the labor problem.