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The War for Supply Chain Labor and Talent

It's Not Going Away

The past few years have surfaced significant issues in the labor market within the US and worldwide. Although COVID exacerbated these issues, many of these dynamics and shifts were already part of the underlying ecosystem. As a result, the supply chain's demand for labor and talent continues to exceed the available pool of resources. Hence, as leaders transform their supply chains digitally, they should evaluate the levers needed to evolve to a different workforce and model.

Key reasons why labor and talent will continue to be a challenge in the supply chain

Heavy reliance on contract and seasonal labor

Many operations rely on contract workforces to augment full-time labor, especially as a lever to scale capacity to meet peak or seasonal demands and throughput. Notably, as the labor gap persists, the overall reliance on contract labor poses a more significant risk. In general, contract and outsourced labor results in fundamental problems, such as overall employee performance management, high turnover, and lack of loyalty. The combination of higher turnover rates and the use of contract labor to further augment peak needs results in a continual, additional investment made to ramp up and ramp down the workforce. Lastly, there is the impact on the contract worker, that often is subject to less desirable benefits, sometimes lower pay, and increased uncertainty of regular employment.

Scarcity of roles with critical skills and certifications

CDL drivers, forklift drivers, technicians and many other roles require training or certification ranging from an investment of days, months, or years. These roles represent some of the scarcest in the industry. As a result, not only is availability a factor, the lead time to create a talent pool is another key barrier. Additionally, the increased wages and pay associated with specialization often begin to compete with compensation in other roles requiring less physical labor, better hours, and more flexibility. This was exemplified during the driver shortage during COVID, where plenty of licensed CDL drivers existed. Hence, where qualified resources exist, the less desirable lifestyle and career lead to resources moving to other types of employment.

Workforce expectations in mature markets

Hourly wages and salaries in the supply chain have experienced growth as competition for resources increases. However, compensation alone is no longer the sole factor that drives talent to select employment. Increased flexibility, culture, the ability to acquire new skills, advance, additional benefits, and more are factors that the workforce is evaluating. This is especially true with younger generations entering the workforce seeking purpose and opportunity. However, across the board, employees opt for jobs and careers that provide a more holistic value proposition that is often counter to the stringent shifts and repetitive labor and tasks that mark much of the frontline experiences for the supply chain.

Developing digitally adept supply chain talent

The rate of adoption for automation solutions, advanced analytics, and overall industry 4.0 solutions will only continue to accelerate along the supply chain. The introduction and scale of these digital capabilities will require different skill sets, such as operational knowledge alongside data literacy, real-time problem triage for exceptions v. the execution of standard operational tasks, understanding of the algorithms and intelligence recommending or execution, and more. The reskilling of labor in conjunction with introducing new technologies is too often an afterthought or treated as purely adopting new system workflows. This creates a chasm in culture and knowledge to effectively leverage the existing workforce to support evolution to a more automated and mature operation.

Rudimentary approaches to planning, scheduling, and allocating operational workforce

Even with the right talent and workforce, effectively planning and allocating labor in an increasingly more dynamic market is challenging when fixed, linear processes characterize many legacy ways of working and rely on basic Excel plans. It is common to see a disconnect between higher-level demand and supply planning and the ability to translate this into the operational plans to execute. Let alone being able to adjust to ever-changing inputs proactively. Even within an operation, there are opportunities better to leverage real-time data and intelligence v. tacit knowledge and observation to plan resources, balance resources or reallocate to different tasks.

The implications of these persisting issues and trends are a high risk to reliable operations due to labor availability, increased direct costs through wage competition, the increased indirect cost to continue to train and retain talent, and a potential skill gap as technologies continue to advance and adoption is accelerated.

Recommendations and considerations

Develop an automation strategy to enable, NOT eliminate

  • Start by identifying highly repetitive activities and tasks with higher risks (safety, turnover, bottlenecks, etc.)
  • Consider alignment to highest risk areas for turnover, bottlenecks
  • Understand that automation will drive a potentially different process than human execution
  • Understand how human capital will still be needed to perform different types of tasks going forward

Robust labor planning

  • Align operational labor planning and scheduling with demand and inbound supply planning
  • Use modeling and simulation to evaluate different scenarios, issues, or risk
  • Capture real-time operational insights and leverage analytics to make more real-time adjustments to scheduling or labor allocation

Develop a workforce strategy centered around the digitally enabled worker

  • Identify skills needed to support digital strategy and align investment in talent and training upfront - be open and clear that the type of roles will be different
  • Consider how XR technologies can enable onboarding, training, cross-training/ upskilling, and execution to reduce the burden on employees and employers
  • Ensure the culture rewards the acquisition, retention, and success of digital skillsets
  • Evaluate opportunities to move away from a standard shift work mentality to a more flexible schedule and labor policy

Mitigating risks associated with labor and talent while also driving toward an intentional future digital-enabled workforce and vision should begin with a holistic view of challenges, opportunities, and priorities.

Human-centered design alongside an intentional workforce transition and planning should be a core pillar of the digital transformation roadmap and investment.

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