The last two years have been tough for supply chain and logistics operations in terms of workforce availability. After the upheaval at the beginning of the pandemic, the economy righted itself quickly and experienced strong growth over the last 18 months. As a result, the jobless rate in March, 2022 was down to 3.8% — just 0.3% away from the pre-pandemic low of 3.5% in February 2020.
The “Great Resignation” has seen 2.2 million people leave the workforce since the beginning of 2020. The competition to find workers has moved beyond traditional supply chain roles, with virtually everyone trying to hire. To put this into context, there are only 6.5 million unemployed workers in the U.S. and 10.9 million open jobs (see Figure 1).
Figure 1: National Job Openings vs. Number of Unemployed Workers
There’s been recent progress in supply chain and logistics, with employment in transportation and warehousing increasing by 48,000 in February — 584,000 higher than in February 2020. The problem is that this growth isn’t enough to keep up with increased consumer demand for goods. For example, the number of 20-foot equivalent units (TEUs) of containerized goods imported annually into the U.S. in 2021 increased by 22% since 2019, and all of it had to be warehoused and transported to get to consumers. Hence the need for even more workers.
Underlying Global Demographics
It should be easy to understand why it’s hard to fill supply chain and logistics jobs today, but what about the post-pandemic future? Unfortunately, the answer is that it will become even harder to find workers. The situation has been building for decades and is today a global problem. Birth rates in the U.S. have been declining and aren’t keeping up with the replacement birth rate of 2.1 babies per woman; in fact, the birth rate in the U.S. hasn’t exceeded the replacement rate for 50 years. The year 2020 was the lowest birth rate year in U.S. history, at 1.7 children. We’ve already seen the impact of a declining birth rate, with college enrollment is down 11% since 2011.
Internationally, the challenge of declining birth rates in countries such as Japan and China have been well-publicized. The number of working-age people in Japan is expected to have declined 34% by 2050 when compared to 1995. China stopped its one-child policy in 2015 and went to a three-child policy in 2020, but 2021 was the worst year for births there since at least 1950. Other countries might be in even worse shape, with South Korea at 0.6 children and Italy at 1.0. Much of the Western world is facing this decline. Even Latin America recently dipped below the replacement rate and India is only just approaching it.
Immigration used to help address the workforce shortage in the U.S., but it has also been declining steadily for years. In 2020, immigration collapsed, exacerbating the current hiring situation.
Given that supply chain and logistics operations are so labor-intensive, and resource scarcity is only expected to get worse, companies need to take a more strategic view of their current workforce. Instead of focusing just on more effective hiring, they should be paying significant attention to retention and the productivity of labor and existing knowledge workers.
In fact, workforce productivity needs to be addressed at a completely different level and with much more aggressive longer-term. Five years from now, what would your supply chain and logistics organization look like if, to execute today’s business, it had 25% fewer people? That calls for a completely different mindset and action plan than the traditional 2% annual productivity improvement approach. Operating processes, the physical handling of goods and documentation processes will need to be rethought. The goal must be to depopulate work processes or dramatically increase the productivity of the workers who remain.
It’s not just warehouse workers or drivers who need to be considerably more productive — it’s knowledge workers as well. With shipment data becoming as valuable as the shipments themselves, the reliance on knowledge workers is increasing. Data science is one of the hottest jobs today, in high demand by all kinds of businesses. Unfortunately, much of knowledge workers’ time is spent on non-value-added manual data manipulation, instead of gaining deeper data-driven insight into operating performance and applying that knowledge to the business.
The days of hiring and firing are over. In the future, if you let a worker go, you are highly likely to never get them back. Workers who are no longer needed in their current roles need to be retained. Instead of letting people go, workers can be redeployed to new roles to expand the company or meet other business needs. Traditional hiring approaches, such as for seasonal or temporary workers, need to be rethought to either allow the current workforce to scale to handle peak volumes or minimize the number of workers hired. Workers need to be factored into the company’s agility strategy, at a time when many businesses have great growth opportunities but lack the people to execute them.
The investment equation for boosting productivity needs to include getting credit for keeping or upskilling workers. This is a dramatic change for businesses that view investments largely from a financial perspective and as discrete activities. There should be a connected strategy to “free up” workers, to deploy them on the next big initiative instead of making employees redundant. Consider the cost of talent acquisition and the training-to-productive timeline as part of the benefits. If for no other reason, this is why productivity programs must move from a collection of good ideas to a measured approach to help scale the company in the face of scarce resources. Training and augmentation must become more agile.
Technology advances can fundamentally change supply chain processes by eliminating manual and redundant tasks, as well as enabling knowledge workers to focus on higher-value activities. Following are three examples of technology-enabled supply chain strategies that deliver transformational productivity gains.
The supply chain and logistics workforce shortage has been brewing for years. The effects of the pandemic just made it painfully more apparent, as workforce productivity and agility have become critical components of a successful business strategy. Supply chain and logistics operations executives need to think big about their workforce strategies to address the chronic labor shortage, which will exist indefinitely. What will supply chain and logistics operations look like with 25% fewer resources? The sooner businesses have that answer, the greater their chances to thrive.
Chris Jones is executive vice president of industry and services at Descartes.
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