As consumers, we’ve grown to expect fast and easy access to the products and goods we need exactly when we need them. Expedited shipping, such as two-day and next-day delivery, has moved from being a perk to a requirement for many online shoppers. If consumers can’t get their hands on a product quickly, it’s on to the next retailer, which is just a couple of clicks away.
Logistics providers serve as the link between product manufacturers or retailers and consumers, ensuring that the flow of goods runs as quickly and efficiently as possible throughout the supply chain. Though many companies have established methods and processes to get products to their final destination, the logistics industry has rapidly evolved and grown over time, especially at the dawn of the COVID-19 pandemic.
The pandemic not only amplified demands for the logistics industry, but it also reshaped the way many people performed their jobs. Some workers were introduced to new working environments or technologies and tools, where others adjusted to new responsibilities to keep pace with the record-high demands. The pandemic continues to leave many wondering about the future outlook for work in the logistics industry and how it will change in the years to come. Amongst the many drivers of change, here are three key factors that are shaping the future of work in the logistics industry.
1. The Pandemic Evoked Major Changes for the Supply Chain
Within a matter of just days, the entire world was forced to adapt to monumental changes that would have otherwise likely taken years. The manner in which we work, shop, live, and interact was completely redefined overnight. Many of the routines and processes we once knew and relied on no longer worked in our new world.
As stay-at-home orders were put into place and store-fronts closed down, the e-commerce sector began to experience a record-high surge. Shopping behaviors made a drastic shift to the digital space, enabling consumers to get the goods they needed without leaving their homes. Everything from daily grocery shopping to large ticket purchases, like refrigerators and workout equipment, were expected to be available online with near-immediate delivery.
Peak demand season was no longer a temporary window on a set schedule. Even now, retailers continue to experience a perpetual peak with e-commerce order volumes surging on an everyday basis. The growth in e-commerce has led to an extreme uptick in demand for logistics facilities as they attempt to handle and deliver the increased number of orders on time.
Many consumers now prefer to make their purchases online, and there is also an expectation for a broader, more expansive selection of products offered on the web. This ultimately strains and adds complexity to the supply chain, especially for logistics facilities that not only need to accommodate higher volumes, but also a larger variety of products, including large, odd-shaped items that can’t fit into existing infrastructure and processes. Logistics facilities are struggling to keep up with demands to fulfill order shipments accurately and on time, and there is no slowing down in sight.
2. Labor Shortages and Shifting Workforce Demographics
Order volumes continue to outpace the labor supply. Logistics providers are encountering an extreme scarcity of workers, resulting in major supply chain and delivery delays all over the world. Because companies are having difficulty attracting and retaining workers, it is causing the cost of labor to significantly rise.
Recently, FedEx reported that the labor shortage increased costs by $450 million in just one quarter, due to higher wages and capacity constraints in sorting hubs. McKinsey & Company reported that the labor shortage pushed private-sector wages to increase at more than double the long-term pre-COVID-19 growth rates in the U.S., yet positions remain unfulfilled. The job openings rate is roughly 50 percent above pre-pandemic levels, but the U.S. workforce to fill them has significantly decreased. In fact, more than four million people have left the civilian workforce. Even with appealing increased wages being offered, logistics facilities are struggling to hire and retain workers, causing on-time delivery rates to dwindle.
However, the conversation has started to change regarding the logistics labor gap. A major cause of the shrinking labor pool is due to shifting workforce demographics. Now, individuals who grew up in the digital-age outnumber those who began working pre-internet.
As the name of their generation implies, Baby Boomers represented a large portion of the population that has yet to be replicated. Millions of Baby Boomers–those born between 1946 and 1964–retire each year from the U.S. labor force. As of the third quarter of 2020, a total of 28.6 million Baby Boomers retired, which is an additional 3.2 million more Boomers than those that retired by the same quarter in 2019. These individuals built the foundation of today’s logistics industry accumulating years of experience and knowledge, and now they are leaving a very large void in the workforce as they end their careers.
Now, Millennials–those born between 1981 and 1996–represent the largest portion of the workforce today. This generation is the first to have grown up with the internet and widespread digital technology. Also entering the workforce is Generation Z, or those born between 1997 and 2012. This generation goes even a step further with technology usage, with many interfacing with smartphones the entirety of their lives. With both Millenials and Gen Z in the workforce, these tech-savvy individuals are perfectly aligned to fill positions that accelerate the digital transformation of the world’s supply chain.
On the other hand, it’s increasingly difficult to backfill the manual labor positions once held by the Baby Boomer generation, as the younger workforce is more attracted to tech-forward, less physically demanding careers. In fact, a recent survey found that 80% of Generation Z members aspire to work with cutting-edge technology, and 91% indicated that technology would influence job choice among similar employment offers.
These generations also hold a different set of values and attitudes about the workplace. Now, there are more pressures for companies to focus on diversity and inclusion, sustainability, employee safety and wellbeing, and providing tech-forward environments where technology is emphasized–from hiring through to their daily work experience. Today’s logistics companies need to be extremely strategic to attract, retain, and develop workers in the digital era.
3. Innovation and Acceleration of Technology
The COVID-19 pandemic put a direct spotlight on supply chains. Logistics companies urgently navigated increased throughput demands, employee absenteeism, and new health and safety protocols, among several other evolving challenges to keep production running. These challenges led many facilities to accelerate their automation initiatives and digitalization efforts for strengthened resiliency.
Automation technology has completely transformed the logistics industry, because it can help ensure the industry’s projected growth remains on pace. Now, automation is viewed as a necessity within the logistics space; the continued strain of the labor shortage and pandemic only reinforces this. A recent article stated that more than half of U.S. companies were increasingly open to investing in automation to survive changing market conditions brought on by the pandemic.
Along with solving for the widening labor gap, automation can also help companies address the shifting workforce demographics by improving employee satisfaction when existing employees are redeployed to rewarding, safer, tech-forward, and more meaningful positions. These employees can have the opportunity to pursue careers that are more relevant to their values and interests. Automation solutions, like autonomous mobile robots (AMRs), excel at the repetitive, dirty, and dangerous jobs within a logistics facility.
The benefits of industrial automation are clear. With the right technology in place, companies can increase throughput, improve safety, and lower operating costs with more reliable workflows. A report from Interact Analysis predicts that the warehouse automation market will grow from a value of $29.6 billion in 2020 to just under $70 billion in 2025, growing with a CAGR of 18% during the forecasted period. This influx of automation in facilities will drive continuous improvements while evolving the roles and responsibilities within the workplace to elevate human potential.
A Bright Future for Both Humans and Machines
We may not know exactly what’s ahead for us in our new normal world, but a new way of work and life has been established. The effects of the pandemic, labor shortages, shifting workforce demographics, and technology innovations have created a new path for the future of work within the logistics industry. It is now more crucial than ever for companies to embrace these changes as well as automation solutions to not only gain a competitive advantage, but to also create better, stronger work environments for today’s and tomorrow’s workforce.