Labor: Strife and Shortages are the Supply Chain Achilles Heel in 2015

It’s 2015 and the supply chain is increasingly becoming a more complex operation.  Demand driven requirements, omni-channel, and the increasing pressure to cut costs while improving service are forcing supply chains to become more sophisticated.  However, as much as new visibility software, robotics, or other technical advances promise transformative advances; supply chain leaders today are faced with major risks due to a problem as old as the industry itself and that is People! 

When I listen to supply chain leaders today they are faced with 3 labor challenges that can keep them from achieving goals that are critical to their companies success in keeping customers satisfied. 

First, the slowdown at 29 West Coast ports (primarily in southern California) is a huge threat for supply disruption.  40% of our nation’s goods move through these ports.  The Pacific Maritime Association has claimed that worker slowdown has created a drop of 30-50% in productivity.  In some cases a driver may only get one container out of the port in a day.  Companies with key change efforts are having to divert needed resources to either micro manage shipments through the existing network, or to create contingency plans to utilize other entry points within the US.  In either case, some of their best people aren’t working on change initiatives; they are just getting product to store to meet existing Service Level Agreements. 

Getting product through the ports is problematic enough, but then there is the trucker shortage that can play havoc with the ability to move freight expeditiously within country.  Intermodal rail programs that drive costs down have to be abandoned to divert shipments to more expensive trucking modes.  More expensive because driver shortages drive up costs. The American Trucking Association (ATA) calls out a driver shortage of 35,000 drivers.  Trucking companies have to get creative to fill the demand which always involve higher rates for customers.  As bad as it is now, if the issue isn’t addressed, the ATA projects a shortage of 240,000 drivers by 2020.  The problem isn’t going away soon. 

And finally there is the shortage of talent within supply chain organizations.  Last August, Supply Chain 24/7 reported the following: “Today, 60% of companies have open positions. Fifteen percent of the planning positions are open for an average time of five months.  An IBM surveys report that 51% of companies are seeing an increase in turnover of supply chain leaders.  Let me give you the first clue. The answer is not recruiting more college recruits.

There is currently a 9:1 demand to supply ratio for supply chain graduates, and the skill level of new hires cannot stretch to fill the missing mid-management gaps.”

Combing the issues cause Supply Chain Leaders to spend precious time to ensure commitments are met with their internal stakeholders and to consumers. Obviously, each of these issues has a whole set of actions that can or need to be applied to mitigate the risk.  The first step is recognition and awareness that technology alone cannot propel the industry until the basics of labor issues and job gaps are addressed.  The people topic has to be top of mind for supply chain leaders in 2015.