It’s no secret that the supply chain has seen more than its fair share of trials and tribulations over the last several years. They’ve experienced the global pandemic; many ships stuck in port and at sea, container and chip shortages; a struggling economy; and ever-rising inflation. Not surprisingly, The American Institute of Stress reports that as our environment becomes increasingly complex. Unfortunately, this is not a new supply chain job problem; those in the industry know that the labor crisis began about a decade ago and has only worsened with time. Today’s problems may not continue forever, but the supply chain labor shortage will likely stick around longer than the rest and have more significant, more far-reaching effects. As this is a trend we see continuing indefinitely, it is best to get ahead of it and begin to factor it into your overall supply chain strategy. Below we outline some of the chief contributing factors to the labor crisis and what you may be able to do to lessen its impact on your business.
Supply Chain Challenges are Organization-Wide Problems
In the pre-pandemic era, some executive leadership members saw supply chain challenges as a departmental issue. Numerous studies have proven that companies with high-performing supply chains achieve revenue growth well above the industry average. These studies from Deloitte and others, along with the widely publicized supply chain issues plaguing companies across the global economy, have led to organizations recognizing the critical role the supply chain plays in organizational success.
This new attention being showered on a previously low-key part of the business (nearly 2.2 million mentions of “supply chain” on Twitter in the fourth quarter of 2021, according to the WSJ has increased demand for supply chain talent higher than ever. The increased demand for supply chain jobs remains high in the post-pandemic era, with e-commerce levels remaining high and record low unemployment (3.6% as of last month). These market influences have made good people hard to hire and retain.
There has also been a sizable increase in people taking early retirement, Roughly 2.4 million additional Americans retired in the first 18 months of the pandemic than expected, making up the majority of the 4.2 million people who left the labor force between March 2020 and July 2021, according to Miguel Faria-e-Castro, a senior economist at the Federal Reserve Bank of St. Louis, increasing the overall number of positions that need to be filled.
For Many Job Seekers, “Money isn’t everything.”
What’s noteworthy about the current supply chain job hiring is that, unlike what we’ve seen in the past, higher wages alone have not led to open positions being filled. “The Great Resignation” (the recent wave of widespread quitting to the tune of 4 million people) shows that workers feel comfortable amid record-high job openings to leave in pursuit of higher pay or better working conditions.
Some organizations interviewed by the Federal Reserve for their annual Beige Book noted that they hiked pay by 20% or more to bolster worker retention amid elevated quitting with mixed success. According to the Fed, “firms throughout the country generally anticipate wages to rise further over the next year, but that is no guarantee of employee retention. A survey from GOBankingRates found that 42% of adult Gen Z workers — those aged 18 to 24 — make work-life balance, working from home, and flexible vacation time a top priority when looking for a job. The tide has shifted regarding what American workers prioritize in their work. “While higher salaries and performance bonuses formerly led the charge, those perks have since been toppled by the freedom to work from home.” Mike Grossman, CEO of GoodHire, stated in an interview. “The pandemic gave employees a true taste of the flexibility that comes with remote work, and understandably, they’re not keen on returning to the office,” Grossman said. “It’s important to remember: For some Gen Z, their entry into the world of work was during the pandemic. These individuals are fully acclimated to a remote setting, and the concept of working in an office is altogether alien.”
Companies that provide competitive salaries and build attractive value propositions for supply chain jobs beyond just wages have found it easier to retain their workforces.
New Competition for Supply Chain Jobs
While everyone in the supply chain can agree that governmental investment in infrastructure is a good thing for the industry overall, it comes with an unexpected cost. Recently signed infrastructure legislation is projected to further drive-up labor demand opening more than a million jobs in construction-related industries if the projected 30 percent of Infrastructure Investment and Jobs Act (IIJA) funds are spent by 2025.
Since the logistics and construction industries tend to draw from similar labor pools, the impact of this legislation could contribute to the supply chain labor shortage for years to come.
Digital Transformations Reveal Skills Gap
Several factors have led to the current labor crisis, not least of which is the growing complexity and interdependency of modern supply chains. Interconnected systems tend to be relatively delicate and sensitive to change; supply chains are no different. Because of the rapidly evolving nature of the supply chain, particularly around digital transformation, supply chain professionals have struggled with a skills gap.
According to a survey conducted by Deloitte, “90 percent of those surveyed see the need to update their skills at least annually—of which half see development as a year-round, continuous exercise.” This can be a time-consuming and expensive endeavor that many organizations, including busy supply chain departments, can’t afford. While digital supply chain transformation may be part of the problem for some, it may be part of the solution for others.
Plan Ahead & Use a Proven Path to Peak Performance
While there isn’t one “cure-all” to address the supply chain labor shortage, a dramatic impact can be made by planning ahead and using a Supply Chain Optimization platform such as GAINS. Organizations must harness supply chain complexity and move steadily toward automation and quick time to value as the best path forward.
Moving the burden of repeatable decision-making away from humans and onto computers using machine learning (ML), artificial intelligence (AI), and other strategies equip supply chain professionals with the right tools. This approach allows them to apply their talent where it makes the most significant impact.
Ensuring the Supply Chain Optimization platform you chose is easy to use, reduces the risk of a skills gap within your organization, and increases adoption. GAINS provides its Proven Path-to-Performance (P3) Methodology, a proprietary value prioritization framework that brings quick results and drives continuous performance while removing risk and accelerating time to value. The GAINS (P3) Methodology enables customers to achieve rapid onboarding and tangible results, from increased sales, faster inventory turns, and better service levels at reduced operating costs in as fast as eight weeks.
The GAINS (P3) Methodology
- Helps companies to quickly adapt to technology while taking into account the current company practices and culture
- Determines the best way to scale at the appropriate cadence, taking into consideration the current team and how they work
Adjust Inventory Using Simulation Techniques
GAINS can provide supply chain professionals with the ability to pinpoint the overtaxed sectors of your network and adjust labor flows accordingly. Companies can act by shifting network flow away from labor-stressed areas, especially where hiring for supply chain jobs is difficult. Orders could be rerouted to alternate warehouses in other regions, or products could be manufactured in locations that aren’t stretched as thin in terms of labor supply.
Steel and Pipe Supply, a carbon steel distributor, was able to lower working capital requirements despite company growth over eight years using the GAINS platform. GAINS intelligently determined optimal service levels and stocking policies for each SKU by location. The GAINS platform identified a gap in the ability to strategically adjust inventory on most SKUs vs. the fixed and limited policies supported by the ERP system. Using advanced predictive and simulation techniques, quantities of essential products were increased to prevent stockouts or the need to expedite while other SKUs could be reduced. The outcome was tangible, supporting profitability goals and sustaining customer service levels while reducing costs and increasing business process efficiency.
“With GAINS, we’ve been able to maintain our excellent service to our customers while getting better at managing our working capital. We have outperformed our peers on that metric in many instances.”
— CEO of Steel and Pipe Supply
Introduce Automation to Reduce Repetitive Tasks
Introducing automation reduces the overall dependence on labor across the supply chain and frees employees to spend more time on higher-value, more meaningful work. According to the Smartsheet report: “Automation in the Workplace,” more than 40 percent of employees spend at least a quarter of their time performing repetitive manual tasks sighting email, data collection, and data entry as the tasks occupying the most time. In the survey, nearly 70 percent of workers said the most significant opportunity for automation lies in reducing time wasted on repetitive work.
Which repetitive tasks would workers most like to see automated?
- Data Collection – 55%: Eliminate human error and manual data entry by automatically collecting, uploading, or syncing data into a system of record
- Approvals – 36%: Become more efficient by automating approvals, sign-offs, and confirmation requests
- Updates – 32% Reduce wasted time by automatically requesting status updates and other information
Nearly 60 percent of workers surveyed estimated they could save almost an entire work day (six or more hours a week) if the repetitive aspects of their jobs were automated.
Workers believe that automating these tasks will:
- Reduce wasted time – 69%
- Eliminate human error – 66%
- Recover hours lost to manual, repetitive tasks that could be automated – 59%
Boost Efficiency and Attain Higher Service Levels
Automating planning activities frees up valuable personnel to focus on customer needs. GAINS customer, and one of the nation’s largest wholesale distributors, Mayer lowered operating costs by $2 million in year one. Mayer implemented the GAINS Supply Chain Performance Optimization platform, reducing inventory and automating planning tasks with integrated workflows. Freed up from time-consuming manual tasks, the Mayer team invested more time in supporting customers by offering more responsive services.
Implementing the GAINS platform empowered buyers and planners at Metalwest, a leading supplier of stainless, aluminum, and carbon flat-rolled metal products, with new insights and greater visibility. Using GAINS to dynamically monitor and analyze every SKU by location across the enterprise, Metalwest quickly achieved new productivity levels, increased service levels, and improved financial performance.
In conclusion, supply chain jobs will continue to be difficult to fill for the foreseeable future. However, some things can be done today to mitigate its impact on your business. GAINS has a proven platform and methodology designed to address many underlying factors contributing to this ongoing crisis. Optimizing your supply chain has many organizational benefits. Not the least is allowing you to make the best use of the talent already present in your organization without extensive training and eliminating the recruiting process for outside hard-to-come-by qualified supply chain candidates.
Contact us here to learn more about how GAINS can help optimize your supply chain or email us at firstname.lastname@example.org.