2021's Workforce Shortages Have Supply Chain Implications
Martin Pahulje - August 24, 2021
The global economy is continuing to face disruptions due to the workforce shortages brought on by the COVID-19 pandemic. This has created a ripple effect of implications on several industries, particularly in supply chains. Companies are experiencing bottlenecks and inflated prices due to increasing demand, and without an adequate workforce, supply cannot keep up. While this is a significant problem for manufacturers at the moment, as the economy recovers, there are hopes that bottlenecks and shortages will be resolved soon. Until then, organizations must understand the significance of the workforce shortage and its implications on supply chains.
Understanding the Labor Shortage
Before discussing the major components affecting the labor pool, you must understand how labor shortages impact supply chain businesses. In customer-focused industries, such as the supply chain industry, providing the best level of service is critical to retain customers and remain competitive. A significant factor in providing high-quality service is through maintaining a qualified and capable workforce. Without its workforce, a company is unable to perform the day-to-day operations that keep them in business. As a result, deficiencies in the supply chain labor pool are resulting in poor customer service. As a consumer, you may have experienced this yourself. A prime example of this would be the shipping delays that companies have faced over the past year. Not only does the workforce shortage increase the cost of labor, but it could even prevent companies from growing their business.
So, what has caused this labor shortage? While the pandemic has undoubtedly had a negative effect on the global workforce, additional components have contributed to this disruption.
- Lack of Emerging Talent. As the economy begins to recover from the impact of the pandemic, there is now significant growth in the supply chain and manufacturing industries. As a result, there is currently a hiring surge. To keep up with growing demand, companies are creating numerous new positions to accommodate this expansion. Unfortunately, the rate they are scaling is outpacing the growth of the respective labor pool 6:1. If finding experienced talent weren’t difficult before, it is significantly more so now.
- Supply Chain Transformation. Modern business is all about technology and innovation, and supply chains are becoming more complex as a result. In addition to this, customer requirements are changing, so companies must adjust how they conduct order fulfillment, value-added services, omnichannel retailing, and more. As a result, supply chain jobs require new skills that only a fraction of the current labor pool possesses. Supply chain jobs that are relevant today may not be for much longer, and the workforce may not be able to keep up with the demand for new skills.
- Talent Gaps. Another significant component of the current labor shortage is that the workforce is experiencing talent gaps. A considerable portion of our workforce is made of the “Baby Boomer” generation, and it is estimated that 60 million will retire in the near future. As a result, these professionals are being replaced by the less experienced “GenXers." With fewer qualifications and a smaller population of 40 million, companies are facing serious gaps in their workforce talent.
- Academic Shortages. In addition to losing Baby Boomers as supply chain employees upon their retirement, they will also be lost as educators in the supply chain and logistics fields. This means that in addition to introducing a new and less experienced workforce, there are fewer experts to teach them, limiting the qualified workforce further.
How Supply Chains are Addressing the Shortages
Even as our economy begins to recover, the workforce shortage that we are experiencing could be devastating to companies. Without an adequate workforce, companies cannot perform the operations that keep their customers happy and businesses thriving. Fortunately, the supply chain industry is resilient and has begun implementing new practices to combat this shortage.
- Community Engagement Programs. If there is any silver lining to the pandemic, it brought communities closer together (figuratively). One way that businesses have tried to address the workforce shortage is by reaching out to their communities. In doing so, they have removed misconceptions about the supply chain industry and educating professionals about available jobs within their organization. These programs can take form in various ways, such as trade shows, summer camps, ambassador programs, and local competitions. In engaging with their communities, supply chain companies have brought awareness to the shortage and exposure to opportunities they offer.
- Partner with Local Schools. While partnering with schools and universities is far from an immediate solution to the labor shortage, it can help to ensure a steady flow of candidates for the next decade. Engaging with universities and starting STEM programs can equip students with the knowledge, skills, and experience that the supply chain industry desires. This can also expose your company to qualified candidates that they may not have found otherwise.
- Third-Party Recruiters and Interns. In search of qualified candidates, many SCM companies are utilizing recruiting firms to identify professionals in the labor pool. This introduces companies to new talent while allowing a third party to do the brunt of the work. Additionally, utilizing internships is an excellent method of attracting talent while training prospective full-time employees, which is particularly helpful in filling high-level technical positions. Investing in internal training and development programs has been proven to improve the talent gap for skilled labor positions by training from within.
- Industry Wage Increases. A significant component of the labor shortage is the increase in supply chain job complexity. For this to be met, professions require a higher-level skill set, which typically results in higher wages. In order to satisfy qualified professionals, many organizations are increasing wages. This attracts top talent in addition to incentivizing employee retention and skills development.
- Investments in Technology. Companies are growing more and more technical each year. While younger generations may not possess as much experience as the Baby Boomers, they are much more tech-savvy. For companies to attract this generation, investing in workplace technology is key. Businesses with higher levels of automation are more successful in filling open positions with interested GenX employees, in addition to optimizing their business operations as a whole.
In order to stay competitive and successful in the supply chain industry, you must be resilient. Supply chains are constantly adjusting and evolving, and this includes challenges such as the workforce shortage. To recover from this trying time, supply chains must find ways to address their labor shortage and overcome it. By investing internally, whether through developing your current workforce or implementing attractive technology, your company can overcome the current workforce shortage and come out stronger than ever.
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