There are few basic economic tenants that rarely need explanation. One such phenomenon is the principle of supply and demand. In the world of supply chain, we are seeing this principle play out across every sector of the industry. From trucking to shipping to ports to production and warehouses and to the people who manage all of the touchpoints, supply and demand has rarely, if ever, been more of an issue. As consumers’ purchasing power increases, so does the need to increase capacity in direct proportion to this change in consumer behavior. As executive supply chain recruiters, we’re seeing a lag in this capacity. Let’s lay out some background for these issues and the corollary impacts of supply chain talent shortage.
Supply and Demand: Bottlenecks of an archaic system
A strong economy puts more money in more people’s pockets. People tend to spend that money on themselves rather than pay off debts. Add to that a robust online purchasing atmosphere and you have lots more buying power in the hands of the people. Our buying habits have also changed. We’re no longer brick-and-mortar shopping during business hours. Our commerce desires are just a few mouse clicks away at any hour of the day or night.
Consumer technology, however, evolves A LOT faster than industry-wide technological advances. Certain suppliers and distributors have more capital to invest in cutting-edge supply chain technology advancements. Smaller retailers, distributors, procurements specialists, or transportation outlets are less inclined to have that sort of cash on hand. Their margins are smaller and they rely on the capital influx of their buyers to help fuel their operating expenses. Sometimes these smaller operations are absorbed – or acquired – by larger competitors and the markets stabilize. Sometimes they form alliances with other more adept entities who help increase purchasing power within the markets. But one small break in the line, and you have a supply chain disruption that can be felt in a multitude of places.
Josh Lehner, Economist of the Oregon Office of Economic Analysis cites a 14% spike in consumer spending from 2017-2019 which helped create ripe conditions for this disruption. Combine a shift in consumer buying behavior and eCommerce and boom, perfect storm of disruption. In a CBSN interview on October 27, Peter Tirschwell, Vice President, Maritime & Trade, for IHS Markit, cited 5-7 years of eCommerce growth in just 2020, which placed a huge burden on distribution centers. The capacity at these centers were not able to handle this burden, which passes the shortages on to retailers.
Too much and not enough coupled with supply chain talent shortage
In 2020, the pandemic interrupted production and distribution of the world’s goods. Whether it was governments imposing shutdowns to slow the spread of the virus or companies halting production because of a shortage of workers or the forced redirection to production of pandemic supplies like masks and PPE, the shelves were bare. This was a swing from the pre-pandemic condition of having a surplus of goods.
Surely no one has forgotten the 2020 toilet paper shortage, which seemed to be more of a product of panic buying than supply chain issues.
2021 saw the pendulum swing swiftly and sharply in the exact opposite direction. The arrival and distribution of Covid vaccines coupled with Covid relief cash injections sparked a new wave of purchases. Consumers seemed to be making up for lost time and went on buying frenzies. However, supply chains had deteriorated in places and were slow to recover. Supply chain talent shortages created some mismanagement issues. Couple said shortage with a massive reduction in workforces as different parts of China and Southeast Asia struggled to get vaccinated and continued to face Covid outbreaks.
With increased purchasing power came bottlenecks. The supply chain had not ramped back up to meet the rapid spike in demand. These bottlenecks along supply chain routes slowed things down immensely, as one supplier waited on another to fulfill orders and distribute to retailers. And with the impending holiday season, panic ordering by retailers is only worsening existing issues.
Candidate Driven Talent Market
Employers all over the United States are clamoring to deal with the supply chain talent shortage. This lack of candidates is also a combination of many factors, pandemic and a lack of candidates among them. There don’t seem to be as many students enrolled in supply chain courses, which has created a bit of a fresh talent shortage. Employers compete for hiring top-tier executive and c-suite supply chain talent as is. This new phase has also put a strain on mid-level professional and management-tier talent. Automation drove some people out of the supply chain talent pool but the need remains high for human intervention and operation of the supply chain. An additional problem seems to be the lack of exposure to a lot of the automations within the workforce, creating an even greater dearth of talent.
As these shortages add up, existing professional candidates find themselves with more leverage in the market. Post pandemic America has more of an appetite for supply chain remote work with higher pay grades. Employers seem to be adjusting to this with added flexibility in compensation packages, but many employers continue to rely on somewhat dated employment models.
The combination of these factors leads to a lot of positions that need to be filled by an ever-shrinking pool of candidates.
Supply chain talent shortages, therefore, have evolved over time. You could blame talent shortages on increased demand. You could attribute accelerated supply chain innovation and increased automation for the shortage. You could also identify myriad other ancillary issues that have tangentially contributed to the shortage of supply chain talent. Add it all up and you have somewhat of a perfect storm.