State of the Supply Chain Job Market: Labor Hoarding and Co-Sourcing
The supply chain labor market has been going through volatile changes and disruptions. Staffing has been a challenge at the front line and in professional ranks for the past two plus years. In the last six months, there have been signs that economic activity is slowing. Some spaces, including technology, have seen the beginnings of layoffs. This is what we would expect given history. To date, this type of activity has been less prevalent in supply chain jobs.
So what is different about jobs in supply chain and will we see this continue? Supply chain leaders are using different approaches and we will discuss a few of them. One such shifting dynamic is “labor hoarding” – an age-old term used to describe the retention of a company’s labor base during economic downturns.
Pandemic Affected Supply Chains
We have all heard and read of the challenges supply chains have faced in the past few years. This took a toll on supply chain professionals and their teams. Supply Chain leaders are very aware of this and the impact it has had on morale, engagement, and productivity.
The pull and tug of virtual work and the desire to get folks back in the office is an active pain point for most firms. Many firms have sought a compromise and are landing on a 3 day in the office model or similar hybrid variations. This works for many employees but for others, this is a reason to continue to search for the 100% virtual role.
Employers have also had to suffer with a high percentage of resignations and increased ghosting activity over the past few years. Supply Chain leaders have had to scramble to deal with this and get creative to keep the trucks, planes and trains running on time. The best have worked hard to improve the quality of work, increase compensation, and provide better tools to both retain employees and improve their effectiveness. Other employers have augmented their workforce with contract workers and consultants to fill the void. Offshoring of knowledge work has also been a lever that many firms have employed for repetitive work or analytics that can inform decision making.
The pandemic also highlighted weak spots in capability and many hiring managers see a need or opportunity to upskill in many areas like Sales & Operations Planning and Strategic Sourcing, for example.
Normalization vs. long-term change? (regression to the mean or not?)
Leaders thought they would get a breather in 2022 but most have not. For some, their business has stayed strong in industries like Consumer Packaged Goods, Food & Beverage and Travel & Tourism, yet labor challenges have remained. For others, customer demand has stalled quickly and they’ve had to face the stack of resizing and restructuring to deal with a period of slow growth or contraction. In either case, the desire to hire and keep the best talent is always front of mind.
Candidate Driven vs. Employer Driven Job Market
As the economy has slowed, it would seem the job market would tip in favor of employers versus candidates. Yet it seems hiring is still very strong and employees are still looking to upgrade their situation. Employers are still in the mode of keeping their best employees in a good place through steady pay increases, an enhanced focus on learning & development, and related tactics for creating a positive workplace. Employers know that it is still a challenge to land top talent candidates as many have missed on hires in the last few years. They also know the time investment of bringing a new employee up to speed is still anywhere from three months to a year. It is a challenge to provide constructive feedback to help an existing employee see a gap and commit to close it through training and development. That challenge appears to be worth it for more managers today when it comes to not only their best but their middle of the pack employees.
When companies are in a place to restructure, the range of workforce reductions are wide but typically average between 5-15%. That suggests managers need to focus on retaining 85% of their teams. All these points would lend credence to the concept of labor hoarding and would suggest that high performing employees will stay in the drivers seat for the foreseeable future.
More or Less Automation: Still Need People to Run Things
All that said, the specter of automation of both physical and knowledge work has been a threat to employees over the last ten years. In fact, like autonomous vehicles, the real impact seems off in the distance. Digitization is happening but at a pace slower than most firms hoped and would like. In cases where it has been well implemented, the value has come in real productivity and better decision making. In most of these cases, employees have been up-skilled and not eliminated. This is good news for both managers and employees.
The key takeaway is the need to be a continuous learner and embrace change. Being proactive about professional development and continuous improvement will likely ensure a spot on most teams. The pace of digitization is not even, and leading firms have experienced a lot of poaching of their talent in the last few years, especially those with proven ability to lead transformations. This is another motive for those firms to take care of their employees and keep them in the boat through better compensation, development, advancement, and investment in a positive post-pandemic work culture.
Another trend that continues to gain steam is offshoring of knowledge work, with an emphasis on repetitive tasks and increasingly heavy analytical tasks. Many firms have had positive experiences but there have been some painful stories as well. Most managers who are looking at offshoring are focused on a smooth transition and want to keep a foot on both sides of the stream and hedge their bets. So we see another hoarding motive that is positive for employees in the short term. Long term, if your work is repetitive or analytics heavy and you are virtual, you may be at risk. A variation of offshoring is the idea of co-sourcing. This forms the best of both worlds, capacity augmentation and the ability to maintain some capability on the teams. This is a classic hedge with some hoarding attributes as well.
Supply Chains are People
In the end, supply chains are people. From manufacturers to warehouses, to truck drivers, freight carriers and shipping to those in C-suites making decisions, our supply chains consist of, and are driven by, people. No amount of technology or automation will replace the people needed to operate digital tools or those making crucial decisions about which tools to use and how. What we are seeing is a shift in skill sets and acumen of the supply chain talent sought after by employers. Along with these attributes is a relatively shallow talent pool to choose from. While the university pipeline will eventually be augmenting the supply of qualified supply chain talent with the right blend of hard and soft skills to match the supply chain jobs of today and in the future, this will take some time.
For now, it’s important to find the right people for the right jobs. It would be advised to retain specialized talent acquisition experts. Employing talent acquisition specialists that speak supply chain and have deep relationships in the space can make a world of difference in the depth and breadth of the talent that is sourced for you. Fields like Risk Management are immensely impacted by automation but still rely very heavily on the right person to implement these very important practices. Not having the right person in these positions can not only impact your margins but will also decrease your competitive edge for years to come.
Determining the volatile shifts in supply chain labor markets requires a keen eye for lasting vs. temporary change agents. What are the greatest influences? How many of these volatile adjustments are here to stay and how many are temporary responses to disruptive dynamics? A couple things that we can say for sure: while the wheel seems to be reinvented with digitization on a daily basis, the supply chain is still all about people. And things like labor hoarding which have been around for decades are going to be used in the future as well. The more things change, the more they stay the same. It’s just a matter of frequency and magnitude of the disruption which can dictate and drive these changes.