Dealing with the Warehouse Labor Shortage: 3 Critical Tips
According to the US Bureau of Labor Statistics (BLS), in 2015 the Warehousing and Storage sector of the US economy employed 785,000 workers. By 2018, that number had grown to nearly 1.2 million—a total growth of more than 41 percent, or 415,000 jobs—driven largely by a growing economy and increased ecommerce sales across the country.
That rapid growth has been a positive sign for both the economy as a whole, and for the order fulfillment industry in particular. After all, an increase in hiring is caused by an increase in demand, which, in theory, should translate into increased profits.
Unfortunately, this massive growth in hiring and demand for workers has come with a number of significant downsides. One of the most critical of these is the fact that the warehousing and order fulfillment industries are experiencing a significant labor shortage, which threatens the continuation of this growth.
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“What we often find is that labor is in short supply, hard to retain, costly to hire, and difficult to flex up to peak season,” Said Mary Ellen Sparrow, CEO of NextShift Robotics, “When NextShift presents a way to increase that labor efficiency by 50%, our clients are thrilled to be able to shift labor away from manual picking to the things that really matter to their business.”
Below, we explore some of the primary drivers behind the warehouse labor shortage, and offer a number of real, actionable tips that you can use to adapt your operation to this new reality.
Reasons Behind the Labor Shortage
In order fulfillment, as in virtually every industry or sector, there are many factors which could converge to influence the labor pool. That being said, we have seen three primary drivers behind the current warehouse labor shortage: Historically low unemployment rates, an aging workforce, and location.
A. Low Unemployment
As of August 2019, the US unemployment rate is currently sitting at 3.7 percent, which is near historic lows. While this has signalled strength in the overall economy, it has created a number of pressures on the labor pool: Namely, that there are fewer workers available to fill open positions.
When the unemployment rate is high, employers generally have little difficulty in finding qualified workers. But when the unemployment rate is low, employers are forced to compete in order to attract workers. This has the effect of driving up salaries and pay rates (often beyond what smaller companies can pay) and may cause workers to consider transferring to a new job or company, where they could earn higher wages or more favorable benefits.
“When companies mention having trouble retaining, it’s usually due to a competitive job market that causes employees to move to another opportunity,” says Faith Kubicki of Intellichief, a workflow automation service.
This fact remains true across all industries and sectors. But the order fulfillment industry faces a unique challenge: The rapid growth it has experienced over the past 4 years (as discussed above), paired with low national unemployment, indicates a shrinking pool of available labor.
B. Aging Workforce
The post-war Baby Boomer generation has had a significant, transformatory impact on the US economy. While the youngest of Baby Boomers if only turning 55 years old in 2019, the eldest of the generation are already approaching 73 years in age. Despite the fact that Americans are working longer than ever before, the reality is that, as many Baby Boomers approach retirement age, they will either retire completely from the workforce or shift into less physically demanding jobs.
It is no secret that order fulfillment is demanding work. As older warehouse workers transition to less taxing work, some operations can experience a drain in skilled workers, particularly as Generation X and Millennials have shied away from warehouse work. Datex estimates that while 60 million Baby Boomers will retire in the coming years, there will only be 40 million potential Generation X candidates to replace them, many of whom lack the skills necessary to thrive.
That being said, order fulfillment operations may be able to combat this by turning towards younger generations, like Generation Z.
“Our research indicates that Generation Z is more open to working in manufacturing and distribution than prior generations,” says Trent Maw, Director of Marketing Communications for Leading2Lean. “In fact, they are 7 percent more likely to consider it as a career path, and 12 percent less likely to consider it as an industry in decline.”
Where a company or operation is located will have an outsized role on its ability to attract and retain qualified workers, especially in an industry like order fulfillment which requires workers to be physically present in order to perform their jobs. For years, operations that have sought workers with the highest level of skill have located their facilities in the metros and communities where those workers live.
But as ecommerce sales continue to grow and companies require more and more space for their inventory, Deloitte estimates that demand for industrial real estate in the US will increase by 850 million square feet between 2019 and 2023. This increased demand has the effect of increasing property values and rental rates in the most desireable of locations, driving up rent and overhead for many operations.
To combat these increased costs, many operations seek to locate their facilities in less expensive locales. While this can reduce overhead, it can introduce a challenge when it comes time to staff the facility, locating a facility in a smaller metro can equate to a smaller pool of qualified workers.
“One of the biggest challenges associated with attracting talent is location,” says Kubicki. “Operations located in smaller cities simply tend to have more limited talent pools.”
3 Potential Solutions to the Warehouse Labor Shortage
If you manage a warehouse, distribution center, or other order fulfillment operation and are experiencing the effects of the labor shortage, there are steps that you can take to alleviate the burden.
A. Embrace Automation
Warehouse automation offers order fulfillment operations the ability to break free from the constraints of a shrinking labor pool and create a leaner, more efficient, and more profitable operation. By automating the repeatable tasks most typically performed by warehouse operators personnel, you can free up your existing workers to perform tasks that add value to your operation—all while reducing your overall payroll.
“With automation, an operation can complete a higher volume of work with a smaller workforce,” says Kubicki. “It’s a win-win. Companies that automate don’t have to worry about finding qualified employees, scaling headcount in a competitive job market, or replacing retiring workers.”
While there are many potential options for automating your warehouse or DC, AMRs and other collaborative robots offer a tremendous amount of potential, as do good-to-person, AS/RS, and automated packing and shipping.
“Technology is continually evolving to make workers more efficient,” says Erick Luise, Design Engineer at Conveyco Technologies. “Technology doesn’t have to replace jobs, but may enable fewer people to be more productive inside the warehouse environment.”
B. Optimize Your Workflows
Though effective, automation is not the only way for an operation to deal with the labor shortage. Another option is to enable your existing workforce to perform their jobs more efficiently by optimizing your internal workflows.
Walking the warehouse floor to manually pick orders, for example, can account for more than 50 percent of all the time associated with picking. By optimizing that workflow through the use of pick-to-light or pick-to-voice systems, it’s possible to boost efficiencies and make your workers more productive—up to 25 percent more productive compared to paper-and-pencil picking. Similarly, embracing a more intelligent inventory slotting process can drive further improvements.
C. Remain Flexible
The ability to remain flexible and adaptable doesn’t just enable an order fulfillment operation to weather a challenge or period of instability; it can also allow a business to be a first-mover in a space and gain a healthy lead over the competition.
Flexibility could also hold the secret to success in dealing with the challenges associated with the labor shortage, especially in regard to your training processes. For example, Achyut Patel, Director of Operations for Beyond GREEN LLC, recommends that order fulfillment operations cross-train a certain level of trusted, reliable workers in order to preemptively prepare for the possibility of other critical workers leaving.
“This can be a quick band-aid for your operation as you go through the potentially lengthy hiring process,” he says.
Similarly, flexible technologies that are capable of being programmed for multiple different kinds of tasks within your facility can prove essential during times of high worker turnover or while you are ramping up for peak season.
“Many automation options, such as autonomous mobile robots (AMRs), can be used for multiple applications, zones, and even locations due to their portability and flexibility,” says Ed Romaine, VP of Marketing & Business Development at Conveyco Technologies.
“For example, if you were to create a team of AMRs to conduct sortation rather than a conveyor solution, those same AMR robots can be used at different times of the day at different zones and applications beyond sortation. Likewise, portable A-frames provide tremendous picking speeds, and, because units are on wheels, and can be moved further down the process line for additional benefits. These and other types of automation allow you to amplify your return on investment and throughput capabilities.”
You Don’t Have to Go It Alone
If your operation is experiencing the negative impacts of the labor shortage and you are struggling to find the answer to your problem, you don’t need to approach the problem by yourself. A trusted systems integrator can help you evaluate your options and find the RightFIT solution to your challenge—whether that includes new technologies, a change to your workflows, or a mix of multiple solutions.
Ready to get started? Schedule a free consultation with one of our expert systems integrators to see how we can help
Romaine has spent over 30 years involved with organizations looking to optimize their distribution, manufacturing, and warehousing operations. Focusing on the customer’s processes, automation and business model, Romaine has helped dozens of organizations improve profitability by reducing labor, floor space, errors and inventory while improving accuracy, inventory turns and cut-off times.
Within the industry trade association, MHI, Romaine has taken numerous leadership positions including: Chairman of the Automated Storage & Retrieval (AS/RS) Group, Chairman of the Order Fulfillment Council of America, Chairman of the Warehouse Execution Systems Group and was one of the originators of the Carousel and VLM Product Section Group. He has also spearheaded the efforts to create the first ANSI industry safety standards for horizontal carousels.
Romaine is a frequent editorial and information contributor to hundreds of publications, blogs and online publications and has been a speaker at dozens of Supply Chain, Logistics, Lean and Facility organizations and functions. Just a few include the Parcel Forum, Institute of Industrial Engineers (IIE), Promat, North American Material Handling, Modex, National Mfg Week, Southern California Plant Operations, NJ Material Handling Assoc., Applied Ergonomics, Warehousing Education & Research Council (WERC), Lean Manufacturing Conference, Council of Supply Chain Management Professionals (CSCMP), NeoCon, Health Information Distribution Association (HIDA), National Catalog & Operations (NCOF), CSCMP and more.
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