March 8, 2022
Labor Shortage – 5 ways to tackle it
What’s a good definition for a Call to Action? This one works. “… an exhortation or stimulus to do something in order to achieve an aim or deal with a problem.”
The current labor challenges do not show any signs of abating any time soon. There is a likelihood that the problem will get worse. The data makes a compelling case for focus now:
- There are 490k open positions in the warehouse and transportation industry (Forbes 10/12/21)
- The demand for warehouse labor will grow an additional 7 percent this decade (Bureau of Labor Statistics, 9/12/21)
- Wages for this sector have increased 7 percent year over year (Bureau of Labor Statistics, 1/12/22)
- Turnover is always an issue and is getting worse
- As the labor pool shrinks, employers are loosening hiring requirements
How’s that for a Call to Action?
The work culture and competitive pay are a foundation for attracting and retaining staff. The challenge we see today is that we do not have enough labor to fill these roles. In a large part, this is a supply problem. We know that when demand exceeds supply, costs increase, and, at the extreme, shortages occur. The question becomes how to reduce demand.
There are steps that you can take in your warehouse and distribution operations to reduce the time needed to process an order and lower the headcount required. That reduces demand and helps address the labor shortage. Depending on your environment, the following strategies are worth a look.
The Five Ways to Tackle the Labor Shortage
- If you do not have labor standards, put them in. Performance will increase when the team knows their goals. When this is done, estimate productivity to improve by 15 to 35 percent. The measures need to be accurate, understood, and visible.
- Consider a labor management system. That takes your labor standards to a new level. Depending on the maturity of your operations, there may be as much as a 30 percent productivity gain.
- Evaluate your inventory handling procedures. As much as 50% of a picker’s day is spent in travel time; there are considerable gains in reducing that wasted time. Slotting and replenishment logic can greatly impact travel time and waiting time for pickers.
- Add a warehouse management system or upgrade your current WMS. A WMS will improve the material handling in your operation adding visibility and control. Better material handling will reduce the labor requirements. A warehouse execution system can add additional benefits to a WMS.
- Consider physical changes and technology from warehouse redesign improving the flow to high-velocity picking areas or things like mezzanine, conveyor, pick-to-light, voice picking, goods-to-person technology, AGVs (autonomous guided vehicles), and robotics.
All of these are potential solutions to the labor shortage challenge. None is a silver bullet and they all need to be considered in the context of your operation. There is no lack of stories about companies that made a major investment for the best of intentions, without getting the desired result. Often, the process and the technology did not align. Occasionally, there is an unwillingness to alter processes to optimize their new investment.
Additionally, the suggested operational changes above all have different impacts on the culture of an operation. If the team is concerned about the impact of these changes on their jobs, if they are confused on why these changes are being made, or if they don’t have faith in leadership to execute these changes the project will fail. Make sure you invest in a robust change management process. It is as critical as any other investment you may make.
The pandemic accelerated the already increasing consumer demand for fast home delivery. The traditional distribution center or warehouse would be shipping to other retailer warehouses or direct to store as a large part of their mix. The demand for direct home delivery increases the order volume, although for much smaller orders. That model requires more labor, which increases demand against a limited supply. Labor costs increase. Labor shortages evolve.
Is it time, or past time, to assess your warehousing operations with an independent advisor?
Look for one that is dedicated to helping you make the best investments to improve operational performance.