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ADVANCED AUTOMATION INVESTMENT CAN ALLEVIATE US LABOR SHORTAGE IN DISTRIBUTION AND LOGISTICS

With the unemployment rate in the United States holding steady at around four percent, memories of the dark days of the post-2008 financial crisis are fading fast. Full employment is fast becoming a reality in the private sector, and there is a consensus that a consistently low unemployment rate will see both higher wages and increased opportunities for the North American workforce.

The Current State of Employment

Around 6.5 million people remain unemployed, according to the latest data from the U.S. Bureau of Labor Statistics, with the national unemployment rate remaining relatively stable in the last 12 months. Long-term unemployment—jobless for 27 weeks or more—accounts for around 20 percent of the total unemployment rate, although it should be noted that this number rarely fluctuates by more than 2 percent at any one time.

In fact, the United States currently has a labor force participation rate of 63.2 percent, the BLS said in its January statement. In addition, the number of people who are either employed on a part-time basis or are “marginally attached” to the labor force sit at the 5.1 million and 1.6 million mark, respectively.

Wages have also shown a year-on-year growth rate of just under 3 percent and there is a widely-held expectation that the labor market itself will remain buoyant for the foreseeable future.

That is the good news for employment. The caveat to a low unemployment rate and upward wage levels is that the U.S. could experience an extreme labor shortage sooner rather than later. And, in many distribution hub geographies, warehousing and logistics are already feeling the pressure.

Distribution And Logistics Jobs Rise

With ecommerce cemented in the retail industry, the distribution and logistics sector has been forced to up its staffing levels. As a result, job growth in the sector has remained strong, irrespective of the seasonal fluctuations that the industry experiences from October to December every year.

The latest BLS data shows that the distribution and logistics sector continues to experience strong job growth. The agency said that employment increased by 27,000 in January 2019, with 15,000 job gains in warehousing and storage alone. And while average wage numbers have not yet been released – due in part to the partial government shutdown in December – total employment in transportation has increased by 219,000 in the last 12 months.

This increase cements the perception that the distribution and logistics sector is a significant contributor to the job market. Warehousing, for instance, makes up almost 20 percent of all employment, with the sector increasing its workforce on a monthly basis. However, as the table below shows, that doesn’t always equate to a rise in hourly wages.

MONTH TOTAL WORKFORCE WAREHOUSE PRODUCTION/NON-SUPERVISORY WAGES (WAREHOUSE) WAGES (PRODUCTION/NON SUPERVISORY)
JULY 5,417.3 1,139.7 1,000.3 20.16 17.83
AUGUST 5,441.0 1,148.2 1,008.6 20.10 17.91
SEPTEMBER 5,464.2 1,160.3 1,025.8 20.19 17.98
OCTOBER 5,488.0 1,171.2 1,054.6 20.14 17.99
NOVEMBER 5,512.1 1,174.2 1,078.0 19.90 18.00
DECEMBER 5,507.2 1,172.4 1,074.6* 20.09* 17.95*
JANUARY 5,533.8* 1,187.5* Not Available Not Available Not Available
  • Workforce in thousands, as per Bureau of Labor Statistics
  • Hourly wages, based on average work week of 40 hours
  • “*” indicates Preliminary BLS figures, full figures due to be released 3/6/19

 

As you can see, the total workforce in transportation and warehousing has risen in the last six months, with a minor drop in December (those seasonal fluctuations in full effect). Hourly wages have hovered around the $20 mark for warehouse workers, while production and non-supervisory employees can expect to earn an average of $17.90 for their efforts.

On the flip side, the extreme labor shortage that we alluded to earlier is already making its presence felt in the distribution and logistics sector.

The Demands Of The Digital Society

CNBC recently reported that North America’s labor shortage is approaching “epidemic levels,” citing a study by ADP and Moody’s that highlighted the problems that employers are having in finding skilled or qualified workers.

Certain sectors such as distribution and logistics, retail and supply chain management are struggling to solve the problem of a so-called “skills mismatch,” CNBC said, with the number one problem encountered by companies is the hiring of people to do a set job. In addition, employers are struggling to attract or entice workers, especially as the good candidates are likely to already have jobs.

The main stumbling block, it appears, in distribution and logistics networks is that the need to keep pace with the increased demands of the digital and connected society has skyrocketed.

Amazon, for instance, now accounts for almost 50 percent of the online retail market, a staggering number when you consider that its closest competitor is eBay with 6.6 percent of ecommerce sales. Add into the mix that the customer can take advantage of shipping options that can be two days (or less) and it is not hard to see where the pressure points are being squeezed.

A recent report from commercial real estate firm CBRE said that distribution and fulfillment centers would need to hire an additional 226,000 workers in 2019 just to handle demand from ecommerce. This number far exceeds the average of 180,300 new positions per year that the sector has enjoyed since 2013, CBRE noted, with ecommerce distribution space predicted to increase to around 184 million square foot by 2020.

“Increasingly, development of e-commerce warehouses is contingent not only on close proximity to large customer populations but also on finding increasingly scarce labor,” said David Egan, CBRE Global Head of Industrial & Logistics Research, in a press release. “Warehouse users will want to ensure that access to qualified labor is a priority in their considerations for expansion. Several markets, especially those with strong population growth, offer ideal conditions for staffing up distribution centers.”

Solving The Labor Shortage

With that in mind, there is a growing need for companies involved in both the distribution and logistics sector and digital supply chains to look at ways to solve the labor shortage problem, especially in metropolitan areas that serve as distribution hubs.

Around 25 percent of the transportation and warehouse workforce is concentrated in places such as Atlanta, Houston and Chicago, with regional hubs (Boston, Detroit, Philadelphia, for example) accounting for a further 16.4 percent of the distribution and logistics labor supply, the CBRE report said.

In addition, distribution and logistics centers may have to factor in the seasonal variations that occur in the later months of each year. The simple answer would be to not only cast the net wider to attract skilled workers but also offer competitive packages that can tap into a defined labor pool. Which sounds great in theory, but doesn’t actually offer a long-term solution to this identified labor shortage.

The alternative—and one identified by the CBRE report—is to invest in advanced automation and robotic solutions.  Automation addresses a defined labor shortage by increasing efficiency in the distribution center and reducing the need for people to do simple tasks (and labor intensive) such as ecommerce picking and store inventory replenishment.

The CBRE report cited industry studies that predicted productivity gains of up to 46 percent in distribution centers that introduce automated or robotic technology. This gain becomes especially relevant in areas that are short on workers, with robots able to complete tasks quickly and with a minimum of fuss. And robots don’t need lunch breaks.

Robotics Can Plug The Gaps

When you take all of this into account, the labor shortage is a catalyst for innovation in the distribution and logistics sector. When the unemployment rate is high, companies get to set the standards for employment. However, when the labor pool is shallow, decision makers need to look at other ways to alleviate the pressure on the supply chain. And advanced automation and robotics is a solution that can both plug the gaps and ensure that the supply chain is not interrupted.

At Berkshire Grey, we believe that leveraging the advances made in robotic automation technology and AI software can provide the distribution and logistics sector with answers to real-world labor challenges. Our holistic approach to complete robotic picking solutions includes state-of-the-art vision systems, advanced gripping, dynamic planning and machine learning supported by intelligent infrastructure. Robotics is a game changer for the supply chain and will take distribution and logistics to the next level.

To find out more about how Berkshire Grey’s intelligent commercial robotics can increase profitability and productivity in your ecommerce and logistics operations, please contact us here.

 

Sources:

https://www.cnbc.com/2018/07/05/the-us-labor-shortage-is-reaching-a-critical-point.html

http://www.scdigest.com/ontarget/18-05-031-2.php?cid=14276

https://multichannelmerchant.com/operations/labor-shortfall-distribution-fulfillment-centers-growing-acute/

https://www.cbre.us/about/media-center/labor-a-chief-concern-for-warehouse-owners-and-operators

https://www.bls.gov/news.release/jolts.nr0.htm

https://www.bls.gov/news.release/empsit.nr0.htm

http://www.ncsl.org/research/labor-and-employment/national-employment-monthly-update.aspx

https://www.deptofnumbers.com/unemployment/us/

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