How Can Supply Chains Boost Slipping Workforce Morale While Under Transition?
The highlight of ‘23 has been labor unions rising up in demand for better working conditions, job security, and fair wages. Such calls could get louder in the future.
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The United Automobile Workers (UAW) strike continues in full swing against its Big Three manufacturers, as workers push back against EV projects, which they see as an increasing onslaught on their existing jobs. This has set off several ripple effects across auto supply chains, as production stalls and the need for freight services — both upstream and downstream — get impacted.
Regardless of the resulting chaos, the UAW puts forth a genuine concern. Electric vehicles, with fewer moving parts, would require a smaller workforce for production compared to traditional ICE vehicles. Workers fear that a climate-conscious government and regulatory policies pushing for curtailing ICE production at the expense of EVs would ultimately result in them losing jobs during the transition.
While the circumstances surrounding the International Longshore and Warehousing Union's (ILWU) unwillingness to sign a work contract with the Pacific Maritime Association (PMA) for over a year is quite different from the current UAW strike, the fear of being laid off is a common denominator.
Incredibly enough, the ILWU and the UAW stand on either end of a common touchpoint — automation. While the ILWU seems to reject any semblance of automation creeping into its midst, the UAW seems to favor automation. In fact, automation has become a stepping stone to UAW’s demands for a ‘32-hour work week for 40 hours of pay.’
Incredibly enough, the ILWU and the UAW stand on either end of a common touchpoint — automation.
While reducing work hours and demanding better pay is no surprise coming from a labor union, the idea of shorter work weeks for the same pay was an untenable demand before automation made a visible impact on supply chains. Automation ensures worker efficiencies can continue improving, giving the UAW demand legs to stand on.
Shawn Fain, the new UAW boss, spoke to auto workers in August on the importance of time, and how there is more to life than just work.
“It’s not enough to just survive, we should all have a right to thrive,” said Fain. “I believe all of us have a right to look back on our life and not regret spending so much of our time making hundreds of billions of dollars for greedy companies rather than spending time with our families and friends.”
Such sentiments resonate deeply in our contemporary context, especially in the wake of the 'Great Resignation,' a recent phenomenon that saw millennials and Gen Z workers leaving their jobs during the pandemic, reevaluating priorities, and expressing disillusionment with traditional workplace norms and values.
Keeping emotions aside and sticking to hard facts, it’s clear automation is here to stay. For instance, the number of employees in US auto manufacturing is roughly 20% lower today than in 2000, but industrial production increased by 25% in the same period. While this could be attributed to increased workforce efficiency, this period also coincides with explosive growth in industrial robotics exports — going from below 10,000 units annually in 2000 to over 120,000 in 2020.
This isn’t just a story of automotive supply chains. Manufacturing, at large, is undergoing a transition where automation of non-value-added repetitive tasks is becoming cheap enough to replace humans in the equation. The same is true of warehousing and fulfillment operations, as is evident with the ILWU's skepticism over allowing automation in their yards.
Integrating automation into supply chains without appearing predatory to the workforce is a challenge. How do we deal with workforce inertia that occurs from supply chains transitioning?
“It is important that workers realize they are integral to supply chains despite all the automation and process transition,” said Nick Pellegrino, the chief operating officer of order fulfillment company Boxzooka, with extensive experience running agile fulfillment facilities.
“It is important that workers realize they are integral to supply chains despite all the automation and process transition.”
“We had a customer who added jewelry to their product line. One Friday, we received 5,000 different jewelry items. Based on SKU velocity assumptions and demand forecast, we slotted the new inventory over the weekend. When it went to market on Tuesday, it sold out immediately,” said Pellegrino.
“Had we been in a highly automated environment, it would have been challenging to adapt so quickly. Instead, we were able to adjust because of our human workforce, creating a pick line to get every order out within 24 to 48 hours, far exceeding our service-level agreements.”
This flexibility, Pellegrino argued, was due to a strategy that prioritized operational agility, which entailed a healthy mix of human workforce and automation.
For instance, consider an AutoStore servicing a massive 30,000 sqft warehouse. Cubes would be built 100 feet long and 30 feet tall, with robots operating on top of the cube. Inventory gets inducted into totes placed in a grid within the cube. When the order arrives, the robot brings the tote to an operator who picks the SKU. While this is incredibly optimized for consistent demand, dynamic changes in SKUs and product lines — like the above scenario — would need more malleable fulfillment options with humans as the lynchpin.
So, how do we ensure workers feel comfortable and at ease? “By giving them a full-time employee status,” pointed out Pellegrino. “It’s common to see companies have a 50% full-time and 50% temporary labor mix, which isn’t great. I’d call for at least 90% of the workforce to be full-time, even if it means handling seasonal peaks in demand.”
Incidentally, an important demand in the UAW strike runs parallel — the call to end the tiered employment system that engages workers on a ‘temporary’ basis, extracting comparable work from them as full-timers, but at lower pay scales and worse benefits.
“The key to retaining employees in today’s labor market is to focus on being an employee-centered operation,” said Pellegrino. “It is about actively upskilling the workforce.”
“The key to retaining employees in today’s labor market is to focus on being an employee-centered operation.”
“At Boxzooka, we have associates who started with basic tasks and have gradually moved up to become leads or even supervisors. We even have client success managers who started at an hourly rate and moved through the ranks to a position where they directly interact with our clients. This offers team members a career path, not just a job. Whether advancing to a forklift driver position, becoming a lead, or moving up to a supervisor role, it’s important to provide opportunities.”
This is congruent with what Biden, one of the more worker-friendly presidents in recent times, has promised — better-paying blue-collar jobs. Pellegrino contended that a dynamic of shared prosperity takes root by fostering an environment where blue-collar workers can have career mobility and seek growth opportunities.
Such an ecosystem will also lower employee churn rates, helping companies scale operations sustainably. “This is significant considering some poorly managed operations in the industry can see turnover rates exceeding 100%, where you’re replacing your entire workforce every month,” said Pellegrino. He suggested that making internal promotions a part of the retention strategy will signal to the team that upward mobility is attainable, keeping them motivated and engaged.
“Employee engagement is another critical aspect, which builds organizational culture. Creating a sense of community and encouragement within the team while supporting individual well-being and a work-life balance translates into dedication from the team. This way, when a client issue requires immediate attention, I would never have trouble finding volunteers willing to step in. Automation can’t replicate human commitment.”
“Automation can’t replicate human commitment.”
To that effect, building a sense of community in manufacturing or warehousing operations would require mid-level managers and frontline leaders with solid people skills. “My first job right out of college was as an industrial engineer for Coca-Cola. I remember asking the VP of Manufacturing why they hired me, and he said while they looked for engineers who were analytical and process-driven, they specifically took me for my people skills,” said Pellegrino. “Strong leaders make it easier to implement processes and engage with the workforce.”
Ultimately, while automation does warrant change in regular operations, the primary concern for those on the frontline isn't the technology itself, but job security. It’s essential to remember the very human faces behind these jobs. To many households, these jobs are lifelines, providing a steady income and the promise of climbing the economic ladder.
“If employees are treated well, given a good salary, and offered opportunities for growth within the company, employee turnover decreases. People become more committed and are less inclined to leave their positions,” he said. “In an employee-centric environment, companies can be confident integrating automation into operations without sacrificing workforce morale.”
The Week in Snippets
Europe's feeder fleet faces an impending shortage as the majority of ships have aged over two decades with minimal new-build orders in the pipeline. Alphaliner warns of the potential extinction of smaller vessels, further complicating the scenario as carriers show reluctance towards long-term charter commitments for eco-friendly, methanol-powered replacements.
The International Longshore and Warehouse Union (ILWU) has filed for bankruptcy due to a lawsuit over illegal slowdowns at Oregon’s Port of Portland. This raises concerns as the union, controlling operations at 29 West Coast ports, plays a pivotal role in US seaborne trade. It is an interesting development, considering the impact it could have on labor negotiations and tactics in the future.
In the face of post-pandemic demand fluctuations, technology is revolutionizing the truckload market with rapid, data-driven pricing decisions. Experts underscore the vital role of these platforms in navigating volatile conditions and stress the importance of proactive freight procurement. They also emphasize the need for a balanced carrier portfolio to build network resilience.
Economic analysts anticipate that the freight market may experience weakness until late 2025, influenced by factors like saturated retail inventories and rising interest rates. Despite some positive trends in consumer spending, the overall demand for shipping remains subdued. However, there's optimism as the U.S. is predicted to avoid a full recession. In the near term, the 2023 peak season is expected to align with historical trends.
“The world is becoming more complex because now you see more trade barriers and geopolitical risks. Moving to a more resilient supply chain system adds complexity. But once the move is done, I think it will simplify the situation.”
- Marie-Christine Lombard, the CEO of Geodis, while commenting on the need for companies to navigate neo-age risks to build a resilient supply chain
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