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Supply Chain’s People Problem

The Supply Chain’s People Problem: What It Means for Your Business

In a recent report, CBS News noted that at the Port of Los Angeles, incoming cargo is straining warehouse capacity.  The number of containers waiting to be shipped inland has jumped from 9,000 to 35,000, and incoming cargo ships may soon be backed up in the harbor. The cause of this disruption is not wildfires, storms, geopolitical forces, or trade barriers, but rather a lack of railroad workers to haul containers out of the port. That’s just one problem in a single location, but it illustrates the fact that labor shortages have become a major source of continuing supply chain disruptions.

Supply chain labor shortages have made headlines throughout the COVID pandemic, and they were already in evidence long before the term “the Great Resignation” was coined. While COVID clearly made labor shortages worse, it’s not the only factor driving the problem. Waves of retiring baby boomers, a lack of critical technical talent, and the new expectations of younger workers have all made it difficult to recruit and retain the right people. And the problem is not going away soon.

Gaining More Resiliency While Reducing Vulnerability

The question is what can be done about it. Much of the problem is, of course, outside of any one company’s control. Manufacturers, for example, cannot solve their suppliers’ labor problems for them. But they can work to increase visibility into their partners’ operations to identify problems early on; keep the channels of communication with partners open; expand their supplier base to reduce reliance on a limited number of partners; and build robust risk management capabilities to make supply chains more resilient and less vulnerable to the labor shortages their partners might face.

There are also internal actions companies can take. Typically, much of the supply chain is in-house and performed by a company’s employees—and that reality should prompt companies to revisit their talent strategies. A recent study from the Pew Research Center, which looked at why people quit their jobs last year, offers some insights that can inform those efforts.

Pew found that less than one-third of the people who quit their jobs last year did so for COVID-related reasons. Instead, many pointed to low pay as a top reason, cited by about two-thirds of respondents. But workers also pointed to a range of other reasons, some of which could be addressed by targeted changes to company policies. For example, child-care issues were cited by nearly half of employees with young children, which suggests that daycare programs could be an advantage in the labor market. And more than 4 out of 10 respondents cited a lack of flexibility in work hours; here, companies might consider strategies such as flex time, job-sharing, and the use of digital technology to support more remote work.

“Soft” issues are also critical. About two-thirds of respondents said they quit because “they felt disrespected at work.”  Executives should take that to heart because they set the tone for a respectful company culture. They can back that up with training and clear career paths that demonstrate respect.

Overall, addressing the supply chain labor shortage is not just about higher pay, but also about how the company relates to employees and their lifestyles. There is no silver bullet solution available. Instead, companies will need to consider “all of the above” to create a clear employee value proposition that will enable companies to attract and retain the employees they need to keep their supply chains moving.  It’s a puzzle±but those companies that crack it will be in a better position to keep their supply chains running smoothly and efficiently.

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