Supply Chain Disruptors

 

Improving Productivity with a Changing Workforce

Several weeks ago, at enVista’s third annual FUEL conference, Steve Banker, Vice President of Supply Chain Services for ARC Advisory Group, presented his keynote address titled “Mega Trends in Logistics and Supply Chain Management.” With such a broad-based topic, I assumed Steve would focus a great deal of his presentation on emerging supply chain digitization technologies such as Artificial Intelligence (AI), Blockchain and Machine Learning (ML).

As expected, these topics were covered. However, I was pleasantly surprised that he spent a significant portion of his presentation on the people and process improvement side of supply chain optimization. Banker presented on the state of the U.S. workforce and ideas for gaining productivity and process improvements within the four walls of the distribution and manufacturing centers.

Banker’s presentation was accurate as these supply chain improvement initiatives can be seen being implemented across all market sectors, including grocery, food & beverage, manufacturing, retail and third-party logistics, in order to meet what has often been termed the “Amazon Effect.” In its simplest definition, the “Amazon Effect” is the consumer-driven choice of delivery options from two-day to one-day, and even same-day shipping, directly to the consumer.

enVista, along with Banker, believe the following Mega Trends challenging today’s supply chain leaders are the changing workforce, labor shortages, e-commerce growth and warehouse best practices.

The Changing Workforce – Millennials and Gen Z

The youngest members of today’s workforce are Millennials, 1980 to 1994 birth dates; and Gen Z’ers, 1995 to 2010 birthdates. These two generations have been associated with many negative traits, including three mentioned during the presentation1:

  1. Lack of commitment to their employers,
  2. Difficulty in engaging them; and
  3. The notion of “job jumping” to get ahead

An interesting statistic shown to the audience was that Millennials are changing jobs at the same frequency as Baby Boomers born between 1957 and 1964, which is the generation of a large segment of today’s managers and executives. He went on to state that, in general, people in their 20’s have been more likely to job hop than their elders. In essence, their behaviors are no different from what others have done before them, yet it appears Millennials and Gen Z’ers are being held to a different standard.

What is different about these two generations, as compared to Baby Boomers and Gen X, is that they are getting married and having kids later in life and are more likely to relocate for employment. Their independence and willingness to relocate for employment opportunities away from their families or college campuses supports the three traits and behaviors mentioned by Steve above.

What is the solution? The answer is all about communicating expectations. As easy as that sounds, the difficulty in performance management often resides in the lengthy time periods that occur between the communication or touch point sessions. We have a saying at enVista that “difficult news does not get better with age.”  We are firm believers in having frequent, yet honest feedback sessions with our associates, at least every two weeks, to ensure the proper expectations and behaviors are understood, and rewarded or corrected, if necessary.

Labor Shortages

As we have mentioned in past posts, the competition for labor is fierce and it’s not about to go away. The current unemployment rate of 3.6 percent, as reported in October 2019 by the US Labor Department and Bureau of Labor Statistics, extended the record streak of less than 5 percent unemployment to 50 consecutive months dating back to September 2015 and 4 percent or less for 20 straight months dating back to March 2018.2

US Unemployment Rate; January 2015 to October 2019

This tight labor market is leading to significant turnover in the trucking and warehouse industries.  A graphic from the presentation, shown below, illustrated the spectrum of warehouse turnover1.

Warehouse Turnover %

“Warehouse turnover is significant. You are doing pretty well if the turnover in your warehouse is 10% or less. Roughly half of all companies have turnover greater than 10% per year.”

 – Steve Banker, ARC Advisory Group

With unemployment at record lows and the number of job openings exceeding the number of unemployed people3, enVista recommends the following 10 strategies for attracting, onboarding, retaining and compensating your associates.

10 Strategies for Attracting, Onboarding, Retaining and Compensating Employees

  1. Consider the use of social media platforms and geo-fencing for recruiting
  2. Conduct annual market wage studies taking into consideration your geography and other employers in your area
  3. Offer a base wage in the 50 to 75th percentile of the wage study
  4. Consider offering an incentive-based pay component and/or non-financial rewards to your overall employee compensation plan
  5. Offer flexible working shifts of varying length within the work week
  6. Allow for online viewing of the associate schedules and the ability to trade shifts through mobile applications
  7. Ensure your associate training plans are current
  8. Focus associate training using a variety of senses including classroom (Hear it), mobile applications and video (See it) and on-the-job training (Do It)
  9. For companies that use temporary staffing agencies for seasonal employees, engage them early to ensure demands can be met
  10. Provide frequent and timely feedback to your associates daily. Don’t wait until the end of the shift or week

e-Commerce Growth Effects

In 2018, retail e-Commerce sales in the United States topped $500 million and is projected to grow at 7 to 9 percent, year over year, through 2023.

Retail e-commerce sales in the United States from 2017 to 20234 (in million U.S. dollars)

e-Commerce growth has also spiked the number of warehouses and number of warehouse workers required to meet the demands of commerce. Since 2010, the number of warehouses in the United States has been increasing every year, reaching 18,182 in 2018. This compares to 15,152 warehouses in 20105.

With e-Commerce providers continuing to push the envelope of shorter delivery times and the convenience of shopping through the use of mobile applications, e-Commerce will continue to drive the supply chains of the future. As Banker put it, “Warehouse labor is replacing the picks used to be done by shoppers.”

Warehouse Performance Best Practices

In order to identify what issues impacted warehouse performance, Banker conducted survey-based research to identify the top 20 percent of survey respondents across productivity, customer service, people and safety. The results of the survey led to the following operational improvements, with several supporting the 10 enVista strategies mentioned above regarding on-boarding and compensation1.

  1. Have a well-lit and clean warehouse
  2. Pay 50 percent more than minimum wage
  3. Provide non-financial based remuneration for high performance
  4. Engage in 360° reviews of managers
  5. Provide training to managers on how to provide effective feedback to subordinates
  6. Monitor workers at least one time per month for SOP and best practice compliance
  7. Managers monitor individual performance and provide on the spot, positive reinforcement

Four of the findings above (4 through 7) are directly related to people and change management. enVista’s take on this is that success in a warehouse is not strictly limited to digitization or mechanization, as all warehouses are not automated. For those distribution centers that rely on a large full-time and/or seasonal workforce, employee and managerial engagement is necessary to improve labor productivity!

Summary

The current state of the supply chain is a constant reminder that change is inevitable. The incorporation of people, process and technology and investments necessary to drive innovation, build brand loyalty, and differentiate against the competition is what will separate the leaders from the followers.

enVista’s vision of the convergence of the physical and digital marketplaces are a testament to our commitment to enable the consumer-driven supply chain.

Let’s have a conversation on how the products and services enVista offers for workforce management and operational improvements will enhance your supply chain operations.  

References

1 “Megatrends in Logistics and Supply Chain Management,” Steve Banker, AC Advisory, September 14, 2019

2 Bureau of Labor Statistics, https://data.bls.gov/timeseries/LNS140000000, November 15, 2019

3 There are still 1.4 million more jobs than unemployed people, but the gap is closing, CNBC.com, Jeff Cox, https://www.cnbc.com/2019/08/06/there-are-still-1point4-million-more-jobs-than-unemployed-people-but-the-gap-is-closing.html, August 6, 2019

4 Retail e-commerce sales in the United States from 2017 to 2023 (in million U.S. dollars), Statista, https://www.statista.com/statistics/272391/us-retail-e-commerce-sales-forecast/ August 20, 2019

5 Total number of warehouses in the United States from 2007 to 2018, Statista, https://www.statista.com/statistics/873492/total-number-of-warehouses-united-states/ October 21, 2019

 

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