The U.S. supply chain industry is dealing with a persistent labor shortage that threatens to destabilize all aspects of the business.

As companies struggle to attract and retain workers, operational costs are rising out of control, delays are becoming more frequent, and the pressure on existing employees is intensifying.

The effects of the crisis are already being felt, with warehouses operating below capacity, shipping delays leading to dissatisfied customers, and supply chain disruptions impacting countless industries downstream. Reliable shipping and logistics must be restored.

The causes of this shortage are complex, ranging from demographic shifts to immigration policies, but the result is clear: If the supply chain industry fails to take action, the labor gap will only widen.

In addressing the problem, we must first understand the root causes of how the labor shortage reached crisis levels. Then we must implement solutions to alleviate it in a manner that’s reliable and sustainable. 

How Did It Happen?

The supply chain labor shortage is a crisis long in the making, one that’s developed through the convergence of demographic, economic and policy-driven challenges.

One of the slowest-moving and longest-running problems is the aging workforce. As Baby Boomers age out of the labor market, there simply aren’t enough workers to replace them. More worryingly, those aging out are by definition the more experienced workers, leading to a loss of invaluable institutional knowledge. It takes time and resources to train new workers to fill these roles, yet younger generations aren’t entering the fields of warehousing, logistics and transportation at the same rate as in past years. From this diminished pool, industry leaders must obtain skilled workers. 

Industry leaders need to grapple with the question of why fewer workers are choosing these career paths. The supply chain industry has traditionally relied on physically demanding roles that require long hours, making these jobs less appealing to younger workers who are seeking better work-life balance and career progression opportunities.

The New Norm Post-Pandemic 

The COVID-19 pandemic accelerated long-running changes in the labor market. Many workers left physically demanding jobs in favor of remote or flexible work opportunities, and they haven’t returned. In addition, the increased availability of job flexibility shifted workers’ expectations, a trend isn’t going away anytime soon — if ever. Today’s younger workers are further seeking positions with better compensation and greater opportunities for career advancement. The combination of all of these factors post-pandemic has left many supply chain companies struggling to fill positions that were once readily available.

A competitive job market only compounds the problem. Supply chain companies aren’t just competing with one another for workers; they’re vying with industries such as retail, hospitality and construction. Often those sectors offer higher wages, less physically demanding conditions or better benefits.

Another problem to emerge from the pandemic has been the impact on immigration. During 2020, immigration levels plummeted, and employers in the supply chain and other industries have taken years to recover from the loss. Immigration has historically played a vital role in the supply chain workforce, particularly for entry-level roles. And just when immigration-reliant industries have begun to get back to pre-pandemic levels, slower immigration processing times, mass deportations and visa backlogs have significantly reduced the number of foreign workers available. Longer term, policy shifts on immigration and the rhetoric around it are pushing the problem further and further into the future. While legal pathways for hiring foreign workers exist, such as visa sponsorship programs, they’re underutilized or misunderstood by many employers.

Consequences of a Shrinking Workforce

As companies struggle to maintain adequate staffing levels, the effects are becoming increasingly visible across the industry. A smaller labor pool means increased costs, as supply chain companies must raise wages and offer additional incentives to attract workers. While higher wages can help with recruitment, increased operational costs cut into already thin profit margins. Additionally, staffing shortages lead to slower warehouse operations, longer loading and unloading times, and increased shipping delays.

The shortages have the potential to cause serious damage to the existing supply chain workforce. Employees take on heavier workloads, work longer hours, assume multiple roles and experience less control over scheduling. Overworked employees experience higher levels of stress and fatigue, leading to burnout and, ultimately, higher turnover rates. As experienced employees leave, companies must invest more in recruitment and training, creating a cycle of constant hiring that further strains resources.

Labor shortages are already causing noticeable disruptions in supply chain operations. Warehouses are operating below full capacity, logistics companies are struggling to meet delivery deadlines, and retailers are experiencing stock shortages. These inefficiencies affect businesses across multiple industries, leading to frustrated customers, lost revenue, and damaged reputations. The longer this labor shortage persists, the more these issues will compound.

Strategies to Address the Shortage

Supply chain companies have several strategies at their disposal to attract and retain a stable workforce. First and foremost, they can offer better compensation. This can be done by establishing a higher base pay, or through performance-based bonuses. As the industry struggles to return to previous levels of performance efficiency, bonuses reward workers for their help in achieving that goal. They can also be tied to retention, rewarding employees for long-term commitment while helping employers avoid much of the cost tied to high turnover rates.

Improving working conditions can also make a significant difference. Providing better scheduling flexibility, reducing excessive overtime, and improving workplace safety can help retain workers who may otherwise leave for less demanding roles in other industries. 

To best replace skilled departing workers, employers must invest in training programs, certifications, and internal promotion pathways. Such an approach can be doubly effective, helping to retain existing talent and moving them along the promotion ladder. Secondly, such pathways to career development will help attract external workers. Companies implement mentorship programs and leadership training can reduce turnover and increasing employee engagement. At the same time, they can minimize the loss of institutional knowledge and productivity, and better position rising workers to help their fellow employers climb the career ladder right behind them.

Alternative Hiring Strategies

Most importantly, the industry must work to broaden the pool of workers from which they’re hiring. Expanded recruitment efforts to include overlooked labor pools can provide a valuable source of new employees. Second-chance hiring programs focus on formerly incarcerated individuals or those seeking a fresh start. Such workers often are seeking part-time roles, and these can be tailored to accommodate experienced workers, helping keep the workforce full while also retaining invaluable experience and knowledge.

At the other end of the spectrum, companies and businesses can partner with schools and training programs to develop a free-flowing talent pipeline.

The EB-3 visa sponsorship program allows companies to hire foreign workers for permanent, non-seasonal roles. Employers relying on such programs ensure a steady supply of workers, while competitors struggle with high turnover. Supply chain leaders must engage in policy discussions related to immigration processing times and workforce-training initiatives, to ensure that government leaders understand the invaluable role of these workers.

In coupling that approach with strategies for retaining domestic talent, companies can ensure that the talent pool continues to grow.

The labor shortage in the supply chain industry is a long-term challenge that requires immediate action. Companies that prioritize workforce development, improve hiring practices and participate in work visa programs will be best positioned to navigate this crisis. Those that delay action risk operational disruptions, rising costs and a shrinking talent pool. By acting now, supply chain companies can secure a stable, skilled workforce and ensure continued success in 2025 and beyond.

John Dorer is chief executive officer of eb3.Work.