From challenges to opportunities: dealing with the labor shortage in logistics

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We are currently - in 2024 - facing an unprecedented global situation known as the Great Layoff Wave, the Great Abandonment or the Great Reshuffle. This term, coined by Anthony Klotz, a professor of management at the School of Management at University College London, is causing many companies to rethink their approaches and strategies. The biggest problem they need to tackle is their supply chains.

The logistics and supply chain industry is at a critical turning point. It is facing a serious challenge - a shortage of skilled labor. It is in the midst of battling the Great Layoff Wave. In this article, we dive into the multi-faceted issues surrounding the logistics labor shortage, examine its impact and explore actionable strategies. Our focus is on turning these challenges into opportunities for growth, efficiency and resilience.

The great wave of layoffs - an introduction to the topic

As the backbone of global trade, logistics and supply chain management rely heavily on a skilled workforce. This dependency has existed since time immemorial and has continued to grow in the course of the industrial revolution.

Fortunately, the desire to work has always been deeply rooted in our society. Not only is it a central part of the American Dream - which states that hard work leads to success - but it is also a cornerstone of any modern society. At least that was our belief. However, in the midst of the COVID pandemic and as a direct result of it, a remarkable economic trend began to emerge: Employees were voluntarily quitting their jobs en masse. Some economists began to analyze the data and described this "great wave of layoffs" as a kind of global general strike.

The increasing shortage of talented professionals began to jeopardize the smooth functioning of supply chains worldwide. The COVID-19 pandemic, which had already hit most companies hard, exacerbated labor shortages in various industries, including logistics, and led to more vacancies than there were qualified workers to fill them in many industries.

The Great Layoff Wave has led to a monumental shift in the world of work, with an unprecedented number of workers quitting their jobs in 2021.

Understanding the labor shortage in logistics

Alarming statistics

The current statistics are alarming: the shortage of skilled labor in logistics and supply chain management has reached critical proportions. The United States has 11.3 million unfilled jobs, while only six million people are registered as unemployed, as reported by the US Chamber of Commerce.

Why is that? Most workers who quit quickly moved into the gig economy - be it in areas such as content creation, consulting or digital entrepreneurship.

On a psychological level, the COVID-19 pandemic has triggered a shift in the thinking of many employees, as noted by Anthony Klotz. They have begun to reassess their goals and priorities. Many analyzed their current working conditions and found that they were dissatisfied. The following conditions were often cited as reasons for their resignation:

  • Wage stagnation
  • Rising cost of living
  • Limited career opportunities
  • Hostile working environment
  • The forced return from working from home to the office
  • Lack of benefits
  • Inflexible working hours
  • Dissatisfaction with the job

This shortage leads to disruptions and inefficiencies within supply chains that impact various industries. The immediate consequences are delayed deliveries and increased operating costs, while the long-term effects include reduced capacity for innovation and growth.

In response, most industries were forced to re-evaluate their strategies and find solutions to the labor shortage in logistics. This led to increased automation, which in turn triggered a boom in robotics and artificial intelligence in the process sector.

Mitigation strategies

Organizations have implemented various strategies to effectively address this shortage in the supply chain. These include the development of existing employees, talent retention programs, skills enhancement initiatives and diversification of recruitment sources as key initiatives.

In addition, the use of technology and automation is critical. In the following section, we will highlight several ways companies are using technology to counteract the labor shortage. These include the use of Big Data, Robotic Process Automation (RPA) and the Internet of Things (IoT).

Automation processes and IoT

The role of IoT in addressing the labor shortage

By implementing IoT sensors and devices, routine tasks can be automated, reducing the reliance on manual labor. This measure helps companies to overcome the general labor shortage in logistics and it is estimated that it can be applied to 60% of manufacturing tasks. This not only increases efficiency, but also minimizes the risk of disruption due to labor shortages.

A closer look shows that IoT also facilitates predictive maintenance and real-time status monitoring. IoT sensors make it easier to monitor conditions in facilities, including:

  • Moisture
  • Temperature
  • Indoor air quality

This not only contributes to the longevity of equipment, but also optimizes operational processes. The integration of IoT into logistics and supply chain management acts as a multiplier - companies can now achieve more with fewer human resources.

Workforce development and training programs

Organizations need to invest in comprehensive workforce development and training programs, which is a major shift in their mindset. They need to address the needs of their staff and retain them. A notable example of this is Google, which, in the midst of this mass exodus, asked its employees how to make them happier. A significant number of employees said they still had a lot of housework to do after work. Google's response was innovative: they began to provide domestic help to their most valuable employees, who they could not do without. In doing so, they created an advantage and quickly turned one of their employees' pain points into an additional benefit.

Such initiatives can bridge the skills gap by providing employees with the necessary tools and knowledge. Companies can develop customized programs tailored to the specific needs of the logistics and supply chain sector through partnerships with educational institutions and industry experts.

Talent retention and further training

Retaining existing talent is crucial in the fight against skills shortages in the supply chain. Upskilling programs allow current employees to acquire new skills and increase their value within the organization. Companies can implement mentoring programs, workshops and online courses to upskill their workforce. This not only increases employee motivation, but also ensures that the existing talent pool remains adaptable and resilient.

Use of technology and automation

The adoption of technology and automation is critical to optimizing operations in the face of labor shortages in logistics. The integration of innovative solutions such as robotics, artificial intelligence (AI) and robotic process automation (RPA) can help to optimize processes and significantly reduce reliance on manual labor.

By investing in cutting-edge technologies, logistics companies can increase efficiency and maintain a competitive advantage in the market.

Diversification of recruitment sources

Diversifying recruitment sources involves exploring unconventional channels, working with specialist recruitment agencies and tapping into untapped talent pools. Currently, companies have numerous digital resources and specialized service providers at their disposal to attract long-term employees. This industry is experiencing a huge upswing due to the Great Layoff Wave. In many cases, the process can be optimized by outsourcing to external service providers, as they often have a "one-stop-shop" policy. These consultancies often take on the full range of tasks, from recruitment to training.

By using diverse hiring practices, organizations can access a broader range of skills and perspectives, encouraging innovation within the workforce.

Turning challenges into opportunities

Organizations can view the labor shortage in logistics as an opportunity for innovation. By integrating technology and people-driven innovative solutions, organizations can not only overcome immediate challenges, but also position themselves for continued growth and resilience. Proactive steps towards workforce development, combined with the integration of IoT, can pave the way for a transformed, efficient and future-proof logistics and supply chain industry.

Companies must proactively tackle the shortage of young talent in logistics by choosing unconventional solutions. The future of logistics lies in the hands of those who see challenges not as obstacles, but as opportunities for transformation and growth.

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Published February 23, 2024

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