If the new and ongoing disruptions of Q1 left you more uncertain than ever, you’re not alone.
Questions were all that experts at the TPM22 conference in February had to offer their audience of global container shipping and logistics professionals.
Nariman Behravesh, former chief economist with IHS Markit, was no exception. He observed that the Russian invasion of Ukraine, layered on top of the lingering impacts of the pandemic, have clouded the future of the global economy and supply chains, while delaying relief from their present pains. “We are in a double-shock world,” he said.
In this review of Q1, we’ll explore how shocks old and new are impacting supply chain labor now and how they might change it going forward.
Labor woes of war
Some expect labor fallout from Russia’s invasion of Ukraine will be felt especially in ocean freight.
Ships were already struggling for crew members due to multiple issues brought on by the pandemic. Now, with 15% of seafarers hailing from Russia and Ukraine, war between the two countries could make crew shortages even worse.
Western sanctions, for example, might make it hard to pay crew from both countries. And even if ships are able to bring them on board, the mix of crew members could make for very choppy waters.
“The whole thing is going to be an operational nightmare,” a ship manager told the industry publication Tradewinds. “What do we do if we have Russian and Ukrainian crew on the same ship? What is going to happen if we have Ukrainian crew on a ship that is calling at Russia, or Russian crew on a ship calling at Ukraine?”
A long crunch?
Meanwhile, labor problems continue on dry land too.
The outlook from Korn Ferry was even less rosy. The talent firm projected that businesses around the world could be in for a labor shortage of 85.2 million skilled workers by 2030. The bite that takes out of revenues is estimated to be $8.45 trillion––the equivalent of Germany and Japan’s GDPs combined.
In other words, the struggle for talent shows no sign of ending anytime soon. And while labor shifts have come and gone in the past, this feels different. The pandemic appears to have prompted many workers to re-evaluate their definition of success and look for careers that will support their updated priorities.
Old tactics in a new fight
Yet despite the more intangible source of workers’ discontent, that hasn’t stopped employers from trying to keep them through very tangible means.
Allegion CEO Dave Petratis, for example, told Reuters he boosted wages for his U.S. factory workforce six months ahead of the normally scheduled annual increase. And he expects to do it again in the coming months. Why?
He said the multiple increases are essential now that the fight for talent has become a key part of the supply chain crisis.
“When labor becomes a problem in the middle of something like this––it creates a lot of disruption,” he said. “And it’s not just a lack of incoming talent that’s feeding the problem. It’s also people with heavy experience leaving the workforce to retire.”
Petratis also said that, unless consumer demand slows, he expects labor shortages to keep driving inflationary pressure.
For other companies, the labor shortage has prompted big investments in tech.
Tyson Foods, for example, plans to spend $1.3 billion over the next three years to increase automation in meat plants. During their Q1 2022 earnings call, CEO Donnie King said he expects the move to deliver $1 billion in recurring productivity savings by the end of their 2024 fiscal year.
They aren’t the only food company with an interest in robots. According to a recent report released by Meticulous Research, the food automation market alone is expected to grow at a compound annual growth (CAGR) rate of 9.5% through 2027 to reach $29.4 billion.
The open question is what the acceleration of manufacturing and supply chain automation will mean for workers.
The World Economic Forum recently predicted that, instead of reducing the need for labor, automation will actually result in a net increase of 58 million jobs. It will also allow employees to gain more advanced skill sets.
Where to focus
While shocks like war, inflation and a change in workers’ priorities have strained supply chains around the world, they are and always will be forces outside our influence. That’s why focusing on what can be influenced makes sense––especially now.
The proactive retention and nurturing of key talent, is one example. Career advancement programs, flexible hours, skills training and more are practical strategies that can help stem the loss of valuable workers.
Increased operational efficiency is another area within our control. On-site technology can quickly find which improvements will not only lower costs, it will also point to changes that can make existing teams more successful and productive.
In a business environment that seems more uncertain than ever, focus and innovation will likely make all the difference between getting by and getting ahead.
How can we help you respond to labor shocks?
nGROUP is a staffing and labor management provider that helps labor-intensive operations run a more cost-effective and productive workforce.
We help you find enough great people so your shifts are always full. We provide on-site management to relieve your team and guide those teams to maximize their production, while keeping costs low. We use in-house technology to provide visibility into the inner workings of your operation, giving you the information you need to discover more efficiency.
If labor problems are holding you back — if they are stretching you and your team to the limit— give us a call today. We help retail distribution, wholesale distribution, reverse logistics, fresh food production, and light manufacturing operations gain an edge through a more cost-effective, productive labor force.
Don’t let labor headaches cripple your ability to compete. Call nGROUP today, and win this year.