If your warehouse or DC needs qualified workers, and you’re having trouble finding them and getting the work done, you are not alone. Most North American businesses are wrestling with a dramatic shortage of qualified labor, and this lack of available workers is especially evident in the warehousing and distribution sector of our economy.

Unfortunately, you have little control over the availability of qualified workers and over the economic and cultural conditions that influence it. You do, however, have much control over the way your business finds, uses, manages, and retains labor. To do these things effectively, you need to understand the nature of the real problem, identify what causes it, and take steps to solve it. Then you can reduce your labor requirements and find the qualified workers you need.

A Failure to Participate

Labor shortages in blue-collar industry sectors are really nothing new. Businesses with warehouses and DCs have been experiencing a growing shortage of qualified workers since more than a decade before the COVID-19 pandemic began.

The U.S. Bureau of Labor Statistics has defined the labor force participation rate as “the percentage of the civilian, noninstitutional population 16 years and older that is working or actively looking for work.” As shown in the graph below, the labor force participation rate has declined steadily since 2000. (See the graph below and the interactive graph at https://fred.stlouisfed.org/series/CIVPART.)

The U.S. labor force participation rate (2000 to present)

There are several causes of this long-term decline in labor force participation. One primary cause has been the aging of the North American population. In recent years, the “baby boomer” generation has been retiring and exiting the workforce in droves, and the supply of new workers has simply been unable to keep up with the demand for them. The result is a steadily growing labor vacuum.

To make matters worse, recent economic events worsened the labor shortage. As you can see from the graph, the labor force participation rate dropped dramatically when the COVID-19 pandemic walloped the economy in early 2020. At the time of this writing, the labor force participation rate was hovering near 61.7%. Prior to the pandemic, it had not been that low since the mid-1970s.

So currently, more than 38% of the US population has chosen not to actively participate in the labor force. Many of these people were employed before the pandemic began, but why did they choose not to go back to work? Labor economists have offered several main reasons. Some people have avoided working due to their fear of being infected with SARS CoV-2 by others in the workplace (and as a practical matter, most workers in warehouses and DCs cannot work remotely). Others have preferred unemployment compensation over earned wages, especially during recent periods of extended unemployment benefits and higher-than-usual weekly payments.

An Imperfect Match

But what about rest of the labor force? Why aren’t more of them searching for work in warehouses and DCs? The short answer is, in the warehousing and distribution sector, there is a growing mismatch between the jobs available for workers and the workers who are willing and able to do them.

The demographics and physical attributes of available workers have evolved significantly in recent decades. For example, older workers who do remain on the job are working longer, but their work performance has understandably been adversely affected by age-related physical limitations, such as limited speed, stamina, dexterity, flexibility, and mobility. Older workers sometimes also have limited technical proficiency in relation to the technologies often found in modern warehouse and DC environments. Plus, more women and minorities comprise the available workforce than ever before, a trend that has changed the anthropometric attributes of the “average” worker. Furthermore, among the growing number of immigrants in the available workforce, there can be language barriers that would make work in a typical North American warehouse or DC difficult.

The growing skills gap is another challenge for employers seeking workers. Managers of warehouses and DCs generally require a basic level of “soft” and “hard” skills that have become scarcer among the available labor force. Necessary soft skills include work ethic, verbal communication, teamwork, reliability, positive attitude, flexibility, creativity, accuracy, and critical thinking. Necessary hard skills include reading, writing, counting, and familiarity and comfort with certain technologies, such as computers and mobile devices.

To make a long story short, many unskilled workers who are available are not wanted, and many skilled workers who are wanted are not available.

What Not to Do

Sadly, some businesses have adopted a “Do something, even if it’s wrong” philosophy to address the prevailing labor shortage, and they focus on the symptoms of the labor shortage rather than addressing its underlying problems. Instead of systematically exploring ways they can reduce their need for labor and make their existing workers more productive, they just throw money at the problem.

As an example, one management team I know was convinced they “just need to hire more people,” so they impulsively and instantly raised the starting wage at their warehouse by more than 36% and increased the size of their warehouse workforce by 40%. As a result, their worker productivity plummeted due to lack of supervision by overwhelmed managers and leads, and their average labor cost per unit shipped spiked.

The CEO of another company I know was so desperate to get work done in his DC that he shortsightedly forced his core management team to leave their posts and join the workforce on the DC floor for several months. Since no one was left to manage the business, you can imagine the array of new problems that have resulted from that knee-jerk decision.

Several businesses I know are paying their workers bonuses just for showing up for work, regardless of how well they perform on the job. But if you can’t depend on your workers to show up for work, then their work performance is not likely to be good.

Easing Your Labor Pains

Despite the current labor shortage, there are fundamentally two steps your business can take to meet production goals in your warehouse or DC. These actions will continue to be valuable to your business even when (and if) the labor shortage becomes a thing of the past.

Step #1: Find Ways to Reduce Your Labor Needs

Fundamentally, there are three ways you can reduce or eliminate labor in your warehouse or DC: You can mechanize, automate, or improve worker productivity.

In addition to reducing your need for labor, mechanizing or automating repetitive activities in your warehouse or DC can pay big dividends in the form of cost savings. The transporting, sorting, packaging, and unitizing functions are the most common activities that can be mechanized or automated using standard, off-the-shelf solutions available in the marketplace. Nevertheless, implementing such solutions can be risky and time-consuming, and doing so can demand significant financial investments. It would be unreasonable to try to summarize in this brief article the myriad of possible mechanization and automation solutions you might consider.

Beyond automation, however, you can also reduce or eliminate your need for labor by making your available workforce more productive. After all, you won’t need to hire as many new workers if you require fewer workers to get your work done in the first place.

In my experience, labor performance improvement is the most misunderstood and overlooked opportunity for businesses who operate warehouses and DCs, yet these businesses could potentially reduce labor by 20% or more if they made a commitment to do so. Too often, businesses blame workers for inferior performance, but the elephant in the conference room usually isn’t the workers themselves – it’s usually the unskilled, ineffective, complacent, or nonexistent management team that manages the workforce. Face it: Your business doesn’t need babysitters in your warehouse or DC – it needs active managers who are sufficiently trained and skilled in the art and science of improving labor performance.

The labor performance of your workforce is typically propelled by a combination of three performance attributes that many industrial engineers refer to as P, M, and U. The pace (P) of a worker is the most obvious, as it reflects how fast they do their work. The method (M) is the way the worker does their work, including the procedures they follow and the tools they use. The utilization (U) is how much of the worker’s time on the clock they are actually engaged in doing productive work, rather than giving in to distractions. And for good or for bad, these three attributes compound each other to result in a worker’s overall level of performance.

Of these P, M, and U performance attributes, the pace (P) of a worker is typically the most difficult to improve. On the other hand, the method (M) attribute can often be improved by documenting efficient standard operating procedures (SOPs) combined with effective training, coaching, retraining, and cross-training programs. And the utilization (U) attribute can often be improved by implementing a well-designed performance improvement program that effectively combines work standards with monetary incentives (bonuses, raises, etc.) and/or non-monetary incentives (rewards, recognition, etc.).

Step #2: Be Creative to Find New Workers

Even after you’ve taken the previous step to reduce your need for labor, you might find that you still need to find and hire more workers who are qualified to do the work. Due to the current labor shortage, however, the pool of workers who are both qualified and available to work in your warehouse or DC is limited. So, you must expand your market of qualified workers who are available and encourage them to work for you.

To find new workers who are qualified, you will obviously want to pay competitive wages, offer the kinds of benefits that workers want, and reward those workers who perform well. Offering flexible work hours, incentives based on performance (not incentives for just showing up at work), opportunities for advancement, and length-of-service raises will help, of course.

How else can you expand your access to these workers? One answer is to flip your thinking about jobs and workers. Since the workers available in the labor market are no longer as homogenous as they once were, rigidly defining job descriptions and then looking for workers who “fit” them is not likely to result in much success. Instead, start by understanding the attributes of those workers who want to work, and tailor your jobs to fit their skills and functional capabilities.

Consider an older worker who no longer has the speed and agility to work in a physically demanding role in a warehouse or DC. They might have other skills you can use, such as reading, math, and accuracy, and they may be more responsible than younger workers. Such a worker might be very productive and effective in a job that allows them to sit instead of stand, for instance, or ride an industrial trike or scooter instead of walk.

Consider a disabled worker or a worker with special needs. These workers have reputations for having a good work ethic, being reliable, having high retention rates, and being enthusiastic about working. Instead of focusing on what such a worker can’t do, evaluate what they can do, and discover which warehouse or DC functions they can do effectively if their job is tailored to accommodate their limitations.

The list goes on. Consider a military veteran who has recently been discharged. Consider someone with criminal record who has paid their debt to society, has recently been released, and is looking for a fresh start. Consider someone with limited English-language skills. Many people have solid work skills and experience that your warehouse or DC can benefit from. Discover what their capabilities are, and connect the dots.

It’s About Results, Not Headcount

The quality of a workforce is much more important than the quantity, especially in the current economic environment. Remember, your goal isn’t to hire a bunch of new workers; your goal is to get your work done as quickly, accurately, and cost-effectively as possible. To achieve this goal, first take the time to plan and standardize the work performed in your warehouse or DC to minimize your need for labor. Then think creatively to identify the kinds of work that can be done for you by the spectrum of available workers with varying attributes. If you take these steps, you’ll not only be more likely to survive the labor shortage, but also save labor costs.

Stephen T. Hopper, PE is Founder & Principal of Inviscid Consulting, whose mission is to help business plan and streamline their warehousing, logistics, manufacturing, and distribution operations to drive down operating costs, boost capacity, improve service levels, and mitigate risk. He can be reached at steve.hopper@inviscidconsulting.com or 404.832.5326.

This article originally appeared in the January/February, 2022 issue of PARCEL.