Navigating Labor Challenges in the Growing Warehouse Industry

Introduction

In today's fast-paced world of commerce, the growth of e-commerce and evolving consumer expectations have significantly impacted the warehouse industry. Shipping volumes are surging, and distribution is becoming more complex than ever before. However, amid these evolving dynamics, a critical challenge looms large - the tightening labor market. Here's what Brian Carlson, Founder and Principal at Cornerstone Edge, had to say about the labor challenges faced by warehouses and how companies can navigate these choppy waters.

The Tightening Labor Market:

As the demand for goods continues to rise, warehouses are grappling with a significant hurdle - finding and retaining qualified labor. According to a survey of Berkshire Grey’s customers, which informed their 2022 State of Retail & eCommerce Fulfillment Report, “Customers simply can’t find the labor force they need to get goods to their customers.” The labor pool just does not exist and many companies are struggling to retain the labor they do have. Some of their customers have reported a 300% turnover. That’s three people per year for any given role.?

The report also found that continued e-commerce growth along with very clear shifts in generational employment preferences are having a remarkably powerful impact on the fulfillment industry. Survey respondents predict it will lead to long-term labor shortages that will only get worse over time. According to Brian, high turnover rates have become the norm in regions with numerous competitive warehouses, as employees often migrate for higher pay across the street.

Labor Challenges: Urban vs. Rural Areas:

Brian emphasized that labor challenges vary between urban and rural areas. In densely populated regions with numerous warehouses, high turnover rates can reach staggering levels, sometimes exceeding 300%. In contrast, rural areas face the predicament of finding any labor at all. Although turnover may be lower, the limited pool of available workers makes hiring a daunting task.?

In a study done by The Manufacturing Institute in partnership with FORVIS, researchers explored the issues of attracting and retaining manufacturing talent in a rural versus urban setting from March to May 2023. The goal was to identify key workforce challenges for manufacturers in rural and urban areas, along with any potential solutions that could be implemented. The study revealed that the top labor force challenges in urban areas are more thoroughly impacted by compensation and cost of living. Rural areas, on the other hand, have challenges that are slightly more involved, encompassing childcare access, transportation difficulties, and affordable housing, which vary in availability from one rural community to another.

The study also provided insight into what features work best in attracting labor in an urban versus rural area. In rural areas, applicants are looking for:

• Work/life balance (74.0%)
• A sense of community (68.8%)
• Cost of living (66.2%)?
• Career advancement (62.3%)

For urban areas, access to quality health care (64.7%) and work/life balance (61.8%) ranked highest. All of these data offer insights into different strategies operations can implement to successfully address the growing labor shortage.

Adapting to the Labor Market:

For companies seeking to establish or expand their warehouses, it is essential to consider the labor market's conditions. Brian suggests that embracing technology can improve engagement and reduce turnover. It’s all about automating redundant tasks and allowing humans more time to focus on strategic, value-added tasks. Brian also suggests that incorporating gamification elements into job roles can attract younger workers who are motivated by recognition and competition.?

This insight is supported by the data in Berkshire Grey’s 2022 State of Retail & eCommerce Fulfillment Report. It found that robotics and automation are the keys to staying ahead of labor shortages, especially when considering the demographic shift. “Not only is it a huge attractor for young talent due to the increased safety and specialized upskilling it enables, it is also a game changer in terms of cost reduction, throughput, and ROI.”

Automation vs. Human Capital:

The conversation inevitably leads to the debate of automation versus human labor. While automation can streamline operations and reduce reliance on labor, it comes with substantial costs. Brian advises companies to develop a long-term roadmap, spanning a decade or more, that prioritizes technology investments based on their cost-effectiveness. He underscores that small tweaks can yield significant improvements, and a phased approach can be more financially viable.

More importantly, he explains that automation is not here to replace human labor but to serve as a beneficial resource. The most significant benefit is seen in using automation to help manage exposure to labor risks. To create a long-term roadmap assessing your operation’s needs and how they pertain to automation, Brian recommends:

• Examining where current employees can be better utilized within the organization, and which labor-intensive positions can be replaced with automation. This allows operations to move employees to higher-skill positions.
• Investing in upgrading and improving laborious workflows today as they will only hinder operations down the line.
• Having a plan for employee turnover while simultaneously making attempts to provide advancement opportunities to attract employees committed for the long haul.????
• Frame automation investments as opportunities for employee development, not as employee displacement.?

Success:

Brian shared an inspiring success story where a company implemented changes across its warehouse operations, including improvements in conveyance systems, packing stations, and inbound receiving processes. These alterations led to a remarkable 60% improvement in labor efficiency within just two weeks. Such success stories underscore the potential for significant progress with the right strategies in place.

Conclusion:

The challenges posed by the tightening labor market in the warehouse industry are undeniable. However, as Brian highlights, a combination of technology, strategic planning, and a deep understanding of the labor market can help warehouses not only survive but thrive. By embracing innovation and adapting to changing workforce dynamics, companies can continue to meet the growing demands of the modern consumer landscape.

Brian Carlson's Expertise:

Brian Carlson, Founder and Principal at Cornerstone Edge, is no newcomer to the logistics and warehouse industry. With a wealth of experience in labor management products and a deep understanding of the labor market, Brian is well-versed in the challenges faced by warehouse operations, both from a technological and personnel perspective.

Learn more at Cornerstone-Edge.com.