Labor Pains What's Causing the Warehousing Labor Shortage and What's Being Done to Combat It - Visible Supply Chain Management
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Labor Pains
What’s Causing the Warehousing Labor Shortage
and What’s Being Done to Combat It
A Visible SCM Whitepaper
May 2021
Warehouse labor has been in short supply for several
years, and the ecommerce explosion taking place during
the pandemic has created even greater demand for
warehouse and distribution center workers. According to
the U.S. Census Bureau, ecommerce sales in 2020 were
estimated at $791.7 billion, an increase of 32.4 percent
from 2019. As ecommerce volumes continue to grow,
businesses are snapping up warehouse space and
requiring more workers to handle and ship products.
However, it is becoming increasingly difficult to fill these
roles at a time when consumer delivery expectations are
higher than ever.
With the millions of Americans laid off or furloughed
during the pandemic, one might expect warehouses to
be flooded with eager job seekers—but this has not been
the case. Gone are the days of posting warehouse jobs
online and watching applications pour in. Recruiting
warehouse labor for many companies now requires more
effort, creativity and even active poaching. Why has it
been so challenging for businesses to find warehouse
labor, and what can be done to combat the worker
shortage?
In this whitepaper, we explore the factors contributing to
these labor pains and how warehouse managers are
shifting their strategies to hire and retain workers and
maximize efficiency.
2
What’s causing the warehouse labor shortage?
60% of surveyed
Industry experts have said that COVID-19
accelerated ecommerce growth by five years,
forcing retailers and distribution centers to
scramble to keep up with demand. Although the warehouse operators
pandemic didn’t cause the warehouse labor
shortage, it has certainly exacerbated the
reported labor
challenge for warehouses across the nation.
recruitment and/or
Some prospective workers are fearful of
contracting the virus in an environment where labor efficiency and
people work in proximity; others are reluctant to
change jobs in an uncertain economy. According
productivity among
to Zebra’s 2024 Warehousing Vision Study, their top challenges.
3
So what are the factors contributing to the labor crunch?
Here are the primary COVID- and non-COVID-related reasons
the warehouse labor market is tighter than ever:
Unemployment Benefits The Presence of Amazon
The federal government’s first stimulus package The impact of Amazon on the warehouse labor
in March 2020 gave an extra $600 per week in market is undeniable. The ecommerce giant has
unemployment to workers who qualified. At the grown its real estate footprint by 50 percent
end of July, after the previous stimulus expired, year-over-year and now has more than 800
the replacement unemployment fell to $300 per warehouses across the United States. The
week. Analysis from hourly job staffing platform company is hiring tens of thousands of workers
Snagajob shows that when the federal across the country, squeezing the labor market
supplement was $300 per week, 75 percent of for other fulfillment solution providers. The
hourly workers in the United States were presence of Amazon becomes an issue for its
financially better off collecting unemployment competitors especially during peak season
benefits than by taking a new job. When the when warehouses must augment their staff with
supplement was $600 per week, analysis shows seasonal labor to accommodate holiday
that nearly 100 percent were better off taking volumes.
the check.
4
“Location, Location, Parents, Caregivers
Location” Staying Home
According to research from Deloitte, the To limit the spread of COVID-19, many schools
demand for industrial real estate in the U.S. shifted from in-person to at-home learning. With
will increase by 850 million square feet by erratic school schedules and kids at home all
2023 due to the growth of ecommerce. High day, it has been more challenging for parents to
demand for space has increased property value take warehousing jobs and commit to shifts.
and rental rates, driving up company overhead According to a recent Kaiser Family Foundation
and forcing businesses to seek facility space in (KFF) survey, one in ten women with young
less expensive locations. While moving into children quit a job due to the pandemic, and 51
smaller metros can reduce overhead, it may also percent of those women did so because their
mean a smaller pool of qualified workers. child’s school or daycare was closed. Forty-two
Additionally, workers who have been laid off percent said they quit because they did not feel
from other jobs due to COVID and live in urban safe at their workplace.
areas may not want or have the means to travel Caregivers tending to the sick or elderly have
to warehouses located in more distant areas. also been less likely to take warehousing jobs
where they could be exposed to COVID-19.
Among the women and men who were caring for
someone with special needs prior to March 1,
2020, 44 percent of women and 37 percent of
men said they gained additional caregiving
responsibilities as a result of the pandemic.
5
How warehouses are combating the labor shortage.
Warehouse managers now
have the opportunity—and
responsibility—to build
solutions and improve
upon their strategies
to attract and retain
talent, leverage
warehouse technology
and maximize efficiency.
With an essential service to provide, surging order volumes and a tight labor market, warehouse
managers are finding themselves in a challenging position. But for glass-half-full leaders with
the will to innovate, these challenges are a path to opportunity. As Visible President Casey
Adams has said, “the ultimate silver lining is the ingenuity that follows disruption.”
6
How warehouses are combating the labor shortage:
When it comes to recruiting talent, warehouses
may have to try several approaches before
finding out what works for them. Recruitment
methods that deliver results for one warehouse
may not be effective for another, and what does
Revamping hiring approaches—
work might come as a surprise. Visible offered
and sweetening job offers
higher hourly wages and even full benefits on a
worker’s first day before finding that the most
effective way to attract applicants and improve
retention was by offering free breakfast or
With Amazon controlling about 44 percent of the
lunch. It was through trial and error that Visible
ecommerce market, the company often sets the
learned traditional approaches are not
benchmark for warehouse labor rates, forcing
guaranteed to be effective, and money isn’t
competitors to pay higher rates to attract
always as strong of a motivator as one might
workers. Supply Chain Dive reports that
think.
businesses may need to increase salaries by as
much as 3.5 percent to compete for talent for
high-demand roles. It is expected to take at least
$19 per hour to get workers interested.
In addition to greater pay, warehouses are
offering flexible hours, employee discounts and
in some cases, even a signing bonus in order to
attract workers. Others are offering free
Data from the U.S. Bureau of Labor Statistics shows that wages
coronavirus treatment and testing benefits for for warehouse workers are up just 1.47 percent per year despite
massive employment growth over the past decade. Although
temporary hires and enhancing existing
warehouse wages have increased nearly 16 percent over the past
employees’ health packages. decade, inflation-adjusted average wages actually have fallen
since 2001 (SEC.gov).
7Investing in
physical automation
Warehouses have been moving toward In order to boost operational efficiency and
automated solutions long before the COVID accomplish more with fewer bodies, warehouse
pandemic, but the labor shortage is likely to leaders are investing in physical
accelerate this shift. “There just aren’t enough automation—essentially, the use of robots in
bodies that are capable of doing the work and warehouse operations. According to MHI’s 2021
meeting the demand,” said “Adapt or Die” author, Annual Industrial Report, 39 percent of surveyed
Jeremy Bodenhamer, during a virtual roundtable supply chain companies said increasing
hosted by Visible. investments and budget for innovative
technologies was one of their top three focuses
over the next ten years.
8Examples of physical automation are goods-to-person systems, driverless automated
guide vehicles (AGVs) and autonomous mobile robots (AMRs). This technology is not
meant to replace humans, but to assist and make them more efficient. Although it
can be capital intensive, physical automation addresses labor availability concerns
while improving productivity, increasing workplace safety and reducing labor costs.
Physical automation Physical automation improves
increases productivity. safety and worker retention.
At a time when labor is limited and order Many warehouse injuries are sprains and strains
volumes are soaring, automation could be the caused by repeating the same motions. Robotic
key to boosting warehouse productivity. Even technology that can take over or assist with
though warehouses may have sophisticated these tasks prevents workers from using the
Warehouse Management Systems or other same muscles over and over again, making
technology in place, picking and packing is still repetitive tasks easier, safer and more efficient.
a labor-intensive and costly process. A By reducing the physically demanding aspects
warehouse worker will often walk miles to find of warehouse jobs as well as operator fatigue
an item and bring it to a processing station; and safety risks, companies will not only
automated sortation systems can reduce the improve retention of older employees but also
time workers spend walking by up to 40 percent. attract younger employees, who tend to lean
toward more tech-centered jobs.
SupplyChainBrain notes that by reducing
physically demanding activities, warehouse
automation “makes the work environment more
enjoyable, and offers opportunities for
prospective employees to gain highly
marketable tech-oriented skills that contribute
to their overall professional development.”
9Process automation is the digitization of
manual processes, such as collecting inventory
data using barcodes and barcode scanners,
which is then sent into a database or centralized
Investing in process automation
repository.
To stay competitive and deliver top-level service,
warehouses should map out and analyze their
Speed, accuracy and transparency are critical in processes, looking for opportunities to
the world of ecommerce, and a warehouse’s maximize system utilization and warehouse
ability to deliver these is what creates customer layouts. With optimized systems and processes,
value. Accomplishing this at a time when labor tasks can be completed more quickly with less
is challenging to come by requires investments risk of human error and high levels of
not only in physical automation but also in transparency.
process automation, or system automation.
Supply chain leaders continue to turn to technology to build resilience and maximize operational efficiency. This chart illustrates the
technologies in use today and which technologies will be adopted over the next several years (source: 2021 MHI Annual Industrial Report).
10This means prioritizing health and safety,
building quality training programs, maintaining
open communication and recognizing and
rewarding top performers. Some warehouses
are experimenting with out-of-the-box methods
Prioritizing employee retention
like “gamification”—adding a game or
competitive component to daily tasks—to
engage, incentivize and reward workers.
Workers who are treated with respect and
Retaining employees is a top priority for
encouraged to have a sense of ownership and
warehouses. Keeping talent on board is not only
pride are likely to have greater job satisfaction,
critical because of the ever-increasing demand
motivation and loyalty. The COVID-19 pandemic
for labor, but also because employee turnover
has created an opportunity for companies to
costs can be a real threat to company profits. In
make employees feel valued and respected by
fact, Multichannel Merchants writes that
putting their health and safety first and being
turnover can cost between $3,000 and $10,000
willing to be flexible. Warehouses that prioritized
per employee. If a company’s warehouse worker
workers during this time are likely to have higher
turnover rate is high (the industry average is
levels of retention than those that did not. To
about 33 percent), this means they are
make facilities safe for workers during the
continuously recruiting and training new
pandemic, Visible has taken the following
workers, which takes time and becomes costly.
measures:
It also takes time for new workers to reach
maximum productivity.
• Redesigned work areas to allow for a safe
“To boost employee retention, warehouses distance between workers
must create a work environment that workers • Adjusted work schedules to reduce the number of
can thrive in.“ workers in a building at one time
• Invested in personal protective equipment (PPE)
Visible has also paid more than $220K in sick leave to
workers who contracted the virus over the past year.
11Looking ahead.
Will these “labor pains”
be alleviated when the
pandemic ends?
As more people become vaccinated, fearfulness Workers who sought employment in
fades and parents and caregivers can return to warehouses after being displaced from
work outside of the home, some degree of relief restaurants and other businesses are expected
is possible. But the warehouse labor shortage to return to pre-pandemic jobs as the service
was an issue before the pandemic, and it will industry opens back up. Amazon shows no
remain so afterward. signs of slowing its footprint expansion, and the
generational factors impacting the labor market
prior to the pandemic are unlikely to change.
12During times of disruption, adaptability is key.
There is no one-size-fits-all solution to the labor Only fulfillment providers that can adapt
shortage challenge. Warehouse managers will during this labor shortage will be able to
have to sharpen their strategies and think continue serving their customers effectively.
creatively if they are to keep up their service And while the customer experience is always a
levels amid surging order volumes. This means top priority, warehouses must also prioritize
rethinking recruiting techniques, making the experience of the worker. Visible remains
strategic investments to boost operational committed to delivering exemplary service and
efficiency and experimenting with different investing in employees at all levels. We are
approaches to improve employee retention. continuously evaluating our systems and
Adaptability is essential for any business during processes in search of opportunities to optimize
times of disruption, but it is especially important every element of our operation. Adaptability is
in the world of supply chain. what enabled our team to deliver high-quality
service throughout the pandemic, and it is
adaptability that will keep Visible and its
customers thriving throughout this warehouse
worker drought.
Visible stays on top of industry trends and
developments that could impact your business.
Contact one of our experts to discuss your supply chain
needs and how to navigate these challenges today.
Sales@VisibleSCM.com 866.537.9678 VisibleSCM.com
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