Supply Chain’s Latest Challenge: The Labor Shortage

It’s been more than 18 months since COVID-19 upended modern civilized life, triggering supply chain shortages that continue to this very day. Experts have attributed these shortages to poor planning or recovery from a V-shaped spike in demand during the economic “reawakening.” In some respects, this is true. But more often than not, the supply chain snafus are ascribable to a cascade of unfathomable events currently taking place that are simultaneously creating huge strains on worldwide distribution channels, the most notable of which is the labor shortage.

During my 40-year career configuring difficult global supply chains, I never imagined that a lack of available (or willing) workers would become one of the most formidable challenges to America’s distribution network. It really boggles my mind. According to the U.S. Department of Labor, nearly 4 million people quit their jobs in April—nearly double the number of those who were unemployed one year earlier. This statistic is incomprehensible, to say the least, considering there currently are a record number of U.S. job openings (9.3 million). It brings to mind the country song “Take This Job and Shove It.”

To reference another 1970s pop culture icon, I can clearly imagine Peter Falk’s Columbo scratching his head mumbling, “this doesn’t make any sense. Four million people just up and quit their jobs?” Indeed, it doesn’t make sense on the surface. But in applying Columbo’s sleuthing strategy (via his trademark “there’s just one more thing”) to delve deeper into the problem, the case becomes more explicable (but not necessarily more solvable). The ongoing labor shortage has huge ramifications for all supply chain configurations and is not easily fixed.

Labor in the Supply Chain
Loyal MPO readers should be familiar with the OE-Tier5 Model I created many years ago to successfully design and execute various types of supply chains. I detailed the mechanics of this model in a May 2016 column for the magazine. The OE-Tier5 model (shown on page 24) clearly shows the importance of rightly ordered talent/mojo. I concluded almost immediately at the start of my career that the “availability” of talent is just as critical as the quality (or “mojo”) of potential workers. Throwing unskilled or uninspired bodies at supply chains can be disastrous, regardless of a job’s pay grade. There are countless examples to be found of poor decision-making from workers positioned in unsuitable roles, whether it be on the shop floor or in top management. It’s important at this point, however, to mention and discuss the line on the outside of Figure 1. It’s there for a reason—it demonstrates a return to prior Tiers if one cannot be successfully accomplished. In other words, if talent/mojo is not available, then supply chain managers must circle back to prior Tiers to make necessary changes. And, such changes are needed more frequently now due to increasing labor pool shortages.

Labor Dysfunctionality
Numerous experts believe the U.S. is experiencing an historic “dysfunctionality” in its labor pool affecting all supply chains. Certainly, many people quarantined in their homes for more than a year have re-evaluated their careers and decided to change jobs. COVID-19, however, is really not the culprit here; it’s human nature to believe the grass is greener elsewhere. Everyone at some point in their lives has contemplated a career reset. Many people have realized they do not like working remotely or they simply cannot adequately juggle their professional roles with parental duties. Workers across America are transitioning from the “as is” to the “to be” in regards to their work lives.

There is also a post-COVID-19 “mojo” issue at play here. I have spoken to many employees, from shop floor workers to C-suite executives who are trying to rediscover their own mojo, not to mention that of their colleagues or subordinates. Many articles are beginning to surface about a type of post-traumatic stress tied to the pandemic. Tens of thousands of people have lost loved ones or friends; many lost their businesses (for some, their sole source of support); and countless others were furloughed at a time they most needed the income. It is very difficult to quantify the true impact of COVID-19 on the human psyche and the effects may not be known for years, if ever. Regardless, the virus has already had a huge impact on global supply chains.

The Child Care-Education-Supply Chain Connection
In my last MPO column, I mentioned some surprising lessons to be learned about the American education system. The most recent U.S. Census Bureau statistics indicate that 73.5 million people in the United States are under the age of 18. That’s a significant and somewhat ominous number, particularly considering its direct impact on the supply chain: All those children have at least one parent (or guardian) who relies on child care and/or school systems so he or she can work. Scholars should study the consequences of the past year’s school closures on the world’s supply chains to avoid a repeat during the next pandemic (it’s only a matter of time, experts claim).

To Stimulate or Not?
Is it possible the U.S. government is perpetuating the labor shortage with stimulus money, which in essence is keeping many workers on the sidelines? Recently, more than one respected business leader told me the July child credit payment is making hiring more difficult because workers are using the funds as an ad hoc salary and to finance “much-needed” vacations. Such behavior confirms the existence of a COVID-19 post-traumatic stress syndrome. It’s real, folks. One executive told me he paid some part time employees $75 per hour to motivate them to show up for work—$30 more than their normal rate. Inflation at its best.

As the economy slowly recovers from the impact of pandemic-induced lockdowns, the Federal Reserve System is considering interest rate increases to curb inflation. During the spring, inflation rose at the fastest pace since 2008, fueling anxiety among economists and politicians, but the reasons for the increase remain unclear. Is demand driving up consumer prices, or are shortages (supply and/or labor) responsible? It doesn’t take an economist to understand that price is generally the result of demand vs. supply balancing. It’s one thing to tinker with demand side levers, but it’s an entirely different story when supply side levers are involved such as labor.

Are Borders Really Necessary?
Notwithstanding the divisiveness in Washington over this topic, America needs workers. And, since they should be legal workers, it would be in the best interest of Congress (and the nation) to fix the “legal” side and welcome workers to the United States. In my last column, I said that it’s hard to “Make in America” when America lacks an adequate size workforce to make products. Nearly 20 years ago in January 2004, President George Bush Jr. stated, “Reform must begin by confronting a basic fact of life and economics: some of the jobs being generated in America’s growing economy are jobs American citizens are not filling. Yet these jobs represent a tremendous opportunity for workers from abroad who want to work and fulfill their duties as a husband or a wife, a son or a daughter.”

Conclusion
Many supply chain articles that have been written over the years discuss very important elements such as ways to plan, source, make, and deliver items, but those stories rarely discuss the importance of the one raw material that is difficult—if not impossible—to manufacture: labor. It’s time for the U.S. Secretary of Labor to assume a more focused role in the current administration because the nation is experiencing one of its toughest moments—the availability of talent. Whether it is keeping schools open, borders legally open, or cash flowing (or not), America’s elected leaders must put politics aside and solutions on the docket. One such solution would be the creation of a new federal agency: the “U.S. Department of Supply Chain Resiliency.” It would serve the nation well, and help ensure the health of America’s value chain.

I’d be happy to help the Administration set it up and provide staffing recommendations. As a matter of fact, I already have someone in mind for the top job.

And he’s available.