The Supply Chain is Suffering Labor Pains

Stephen DeAngelis

November 18, 2021

Suffering through labor pains normally results in a bundle of joy. Currently, however, the supply chain, like many other economic areas, is suffering from a different kind of labor pain — a pain unlikely to result in much joy unless companies can attract a new generation of supply chain professionals. Robert J. Bowman, Managing Editor of SupplyChainBrain, states the problem succinctly, “The supply chain needs people. Desperately.”[1] Today’s labor market is in disarray. Job reports show that people are quitting their jobs in record numbers (aka the Great Resignation). According to Axios reporter Kate Marino, “[In September,] the rate of quits increased to its highest level ever, at 2.9% of the workforce.”[2] Simultaneously, some companies are pulling back on job openings, while they search for alternative ways to continue operations. Marino reports, “Layoffs remained at record lows as companies tried to hold on to employees — but notably, they pulled back on new job openings. [And] total job openings receded to 10.4 million, from a record high 11 million in July.” Due to the current situation, David Joseph, Marketing Director at Aimpoint Digital, confidently predicts, “The future of supply chain belongs to those who can find the talent!”[3]

 

Labor Woes are Contributing to Supply Chain Woes

 

“These days,” writes journalist Susan Caminiti (@SusanCaminiti), “everything from the seemingly random shortages of items in the grocery store to the small-print warnings that your online purchases could experience shipping delays can all be traced back to a woefully out-of-whack supply chain.”[4] Adding to this woe, she notes, are labor shortages. “Labor shortages at every part of the supply chain are having an impact on companies of all stripes,” she explains, “It’s also affecting economic growth. A survey of local chamber of commerce leaders by the U.S. Chamber reveals that 90% of these leaders say that labor shortages are limiting economic growth in local areas.” And the problem is an international challenge. Bowman laments, “Multiple stages of the global supply chain, including manufacturing, distribution, warehousing and trucking, are suffering from a severe shortage of qualified workers.” The ugly truth is that labor shortages are not going away soon.

 

Joseph explains, “The supply chain talent crisis is a significant problem that will cause widespread disruption in the industry. More workers are retiring, and there are just not enough members from the newer generations interested in the industry.”[5] Strong consumer demand is exacerbating the situation. Joseph notes, “Demand for more products [as well as] faster and at lower costs is increasing, so supply chain executives need to start thinking about how they can prepare for and respond to the current and forthcoming supply chain talent crisis.” Consumers may desire lower costs, but the hard truth is that filling supply chain job openings will require higher salaries which will inevitably increase consumer prices. For example, Caminiti explains, “FedEx reported that it spent an additional $450 million in the quarter ended Aug. 31 to cover costs associated with increased overtime, higher wages to attract more workers and increased transportation costs.”

 

Better pay and improved working conditions will help attract workers; however, as FedEx, UPS, Amazon, Walmart, and other companies have learned, attracting new employees comes at a price. If you are wondering what effect the COVID-19 pandemic has had on supply chains, it’s two-fold. First, the pandemic has sporadically shut down factories and closed ports. Even when factories and ports are open, some workers fear exposure to the coronavirus and spreading it to their families. The second significant effect of COVID-19 on the supply chain is increased demand caused by at-home consumption and a rise in e-commerce spending. Journalist Jessi Devenyns reports, “At-home consumption continues to put pressure on the CPG industry at a time when the supply chain is already stretched. According to a CBA/Ipsos poll conducted in early August, 35% of Americans said they were spending more time at home because of the delta variant.”[6]

 

Demanding Job, Few Candidates

 

Some workers are looking for jobs that stretch their abilities, test their intellect, and pay well, yet few workers look for jobs with those benefits in the supply chain field. Bowman reports, “[The Association for Supply Chain Management (ASCM)] recently released its 2021 Supply Chain Salary and Career Report, and the findings reveal an odd contradiction.” The “contradiction,” he notes, is great jobs, few candidates. He elaborates:

 

[The ASCM] paint a picture of an industry with stellar opportunities, including a median salary for supply chain professionals of $86,000, 38% above the national number, and a typical starting salary for industry newcomers of $60,000. [An ASCM] survey finds 81% of respondents satisfied with their benefits packages, and nearly 70% receiving paid maternity, paternity and medical leave. What’s more, the doors are open to those wish to pass through. Around a third of respondents to the ASCM survey said they found employment in the industry in less than a month, with more than half getting work within three months. So where’s the disconnect? For starters, the term ‘supply chain’ can describe a broad range of jobs, from truck driver and warehouse worker to high-paid senior executive. ‘There’s no job called ‘supply chain,’ notes [Abe Eshkenazi, ASCM’s CEO]. ‘It’s planning, sourcing, manufacturing, delivery and a variety of other functions — it’s not well-defined.’ The universe of supply-chain jobs can encompass everything from a minimum-wage worker to a professional pulling down a six-figure salary. Each stage of the supply chain faces its own set of unique challenges in attracting and retaining talent. But the labor shortage is especially acute for physical jobs such as driving, the production line and warehouse work. And in some of those areas, Eshkenazi believes, at least part of the problem can be chalked up to misperception.”

 

Because supply chain jobs span such a wide range of occupations, Joseph observes, “The talent and skills gap affects the manufacturing and supply chain industries more than almost any other occupation in the U.S. As more workers reach retirement age, the burden of the supply chain skills gap will undermine the future of supply chain management.”

 

Concluding Thoughts

 

Current supply chain woes only highlight what Lora Cecere (@lcecere), founder of Supply Chain Insights has been saying for years, “The supply chain IS Business, not a department within a business.”[7] And, like any business, the way out of the current morass is to focus simultaneously on people, processes, and technology. The hardest of those areas to get right is the people part. Bowman writes, “Technology promises to bring about ‘huge transformation’ in the industry, Eshkenazi says, ‘but we’ve got to make sure we have competent employees who can understand that data and use it make informed decisions.’ The supply chain has always needed a steady flow of candidates of the highest quality, he adds, ‘but there’s no more critical time [for that] than where we’re sitting today.'” Joseph adds, “Attracting the right talent will be key to success in the future of supply chain management, and Supply Chain Managers need to take notice today.” He suggests there are five things supply chain executives must to address the people problem. They are: 1) Change the perception of supply chain careers; 2) Recognize the needs of millennials and the Gen Zers, as well as future generations; 3) Create inclusive work environments that focus on a shared path to success; 4) Increase career opportunities for new hires, ensuring next generation workers can always strive for improvement and advancement; and, 5) Connect with possible employees in communities through programs aimed at high-school students, those attending technical colleges, people of all backgrounds, and even those considering a career change later in life.

 

Footnotes
[1] Robert J. Bowman, “The Supply Chain Industry’s Dilemma: Great Career, Too Few Candidates,” SupplyChainBrain, 11 October 2021.
[2] Kate Marino, Axios Markets email, 13 October 2021.
[3] David Joseph, “The Future of Supply Chain Belongs to Those Who Can Find the Talent!” Supply Chain Game Changer, 20 September 2021.
[4] Susan Caminiti, “Lack of workers is further fueling supply chain woes,” CNBC, 28 September 2021.
[5] David Joseph, “Are You Prepared For A Supply Chain Talent Crisis?” Supply Chain Game Changer, 10 October 2021.
[6] Jessi Devenyns, “CPG manufacturers face ‘labor crisis’ amid supply chain pressures, report says,” Grocery Dive, 31 August 2021.
[7] Lora Cecere, “Sage advice? Only for turkeys.” eft, 1 February 2013.