Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Brian Devine launched ProLogistix, a leading provider of logistics talent in the U.S.
It's unfortunate the rest of the U.S. economy isn't firing on all cylinders the way the industrial property sector is. Demand is strong, space can't come online fast enough, and, after more than a decade of lean times, DC workers are finally seeing more money for their efforts.
These also make for good times for Brian Devine. A 20-year staffing veteran and senior vice president of Atlanta-based EmployBridge, Devine in 1999 launched ProLogistix, a division of EmployBridge dedicated to specialized warehouse and distribution center staffing. ProLogistix has since become a leading provider of logistics talent in the U.S.
Devine recently spoke with Mark B. Solomon, executive editor-news, to discuss the outlook for labor and how managers will need to balance the realities of higher pay and margin pressure.
Q: How are the supply-demand scales balancing for peak season?
A: Based on what we've seen over the past three years, we expect the demand for hourly labor to increase by about 28 percent over the headcount needs of the third quarter. This large increase will be on top of the already-tight labor market we are now experiencing, so recruiting for this peak season will be even more challenging than it was in the last few years. The good news for associates is that over half of the positions created during the peak season of 2015 turned into full-time positions. That compares with just 10 percent of the positions converting to full time in 2013 and 2014.
The current labor market will require companies to pay peak season premiums of $1.50 to $3 per hour to attract and retain workers through the fourth quarter. Additionally, weekend shifts and second and third shifts will require a $1-per-hour shift differential during this upcoming peak season to meet demand. I anticipate that companies will have to include more part-time positions to attract people who want to work just 20 to 25 hours per week. Fortunately, many of the jobs created during the peak season have a very short learning curve, so employees can be productive with just a few hours of training.
Q: It sounds like workers have bargaining power?
A: Workers are in a better position now than at any time since 2007. With unemployment rates well below 5 percent in major logistics markets, good workers are reaping the rewards of an employer base that has become more creative and generous in its attempts to attract and retain their services. The generosity starts with a competitive pay rate. We know the most important factor in attracting employees is competitive pay. Secondarily, employees want job security so they can gain a sense of financial stability. After over a decade of stagnant wages, we have seen an 11-percent increase in pay rates for logistics employees in the last 24 months, and I anticipate that rate of pay increases will continue for the next year.
Q: To what levels can wages rise before they become a pain point for managers?
A: I expect average pay rates for hourly logistics employees will rise until we get to $14 per hour. At that point, we should start to see some leveling off. That will put associates' wages in line with their spending power back in 2002. Wages will vary depending on the availability of labor in a specific market and the minimum wage laws for each market. Another important variable affecting pay is the complexity of the position. For instance, an associate who is expected to operate four different types of forklifts will warrant a higher pay rate than an associate who is operating only a sit-down forklift.
Q: What do your customers tell you about the role that robotics or other forms of automation will play in managing through peak season?
A: I get a mixed response. On one hand, technological improvements in robotics allow some functions to be performed by a robot at a much lower cost than having a person perform that same function. But that activity has to be repetitive enough and be required to be performed for a duration long enough to warrant the cost associated with purchasing, setting up, and programming the robot to perform the task. Many of today's consumers want their purchases to be customized, which creates a higher demand for the flexibility you can only get by using employees.
Q: To what extent can automation offset the impact of a shortage of human labor?
A: The use of automation can help make employees significantly more productive. We are seeing automated solutions implemented in almost every aspect of a distribution or fulfillment center's operations from a basic corrugated box assembly to a complex conveyor system tied to a pick-to-light station. The combination of the right automation and the right work force can drive down labor costs considerably. While the use of automation and robots reduces the headcount requirements in a facility, the remaining positions often require an advanced skill set to optimize the capabilities of the new technology.
Q: Looking beyond peak and into 2017 and 2018, what is the most likely scenario confronting warehouse operators?
A: In the near future, I expect to see the "Uber-fication" of positions within distribution or fulfillment centers. For example, companies will digitally post various schedules for 100 order selectors on their website, and associates who have been previously vetted and certified can go online and choose the schedules that work best for them. The labor market will be able to react in real time, so companies will be able to make quick adjustments in schedules or pay rates to attract the required number of associates.
Some of the changes facing warehouse operators will be determined by the timing and duration of our next recession. In recessionary times, labor becomes more plentiful, and while I do not anticipate a retraction of the pay rate increases that we've seen in the last 24 months, any further increases would be unlikely.
Q: New federal overtime rules have broadened the universe of workers that are eligible for overtime. What will be the impact on warehouse staffing costs and availability?
A: The changes will impact warehouse supervisors and managers with annual salaries of less than $47,476. Hourly employees will not be affected by the new ruling. Currently, most salaried employees earning more than $23,660 are exempt from overtime pay. Under changes to the Fair Labor Standards Act, effective Dec. 1, salaried employees must make more than $47,476 a year before they will be exempt from overtime pay. Companies will have to be prepared to pay more employees overtime or to change their salaries to meet the new threshold.
This change takes effect in the middle of peak season, so companies have to take this into consideration for the end of the year.
Q: The growth of e-commerce and a broad recovery in the industrial market is leading to more project approvals and construction of new DCs. Is the labor market big enough to accommodate the ongoing expansion?
A: The Bureau of Labor Statistics (BLS) tracks a segment of the population it classifies as "Not in Labor Force." These are people 16 years and older who are neither working nor unemployed. They might be in school or retired or simply not actively looking for work. The number of people "Not in Labor Force" has grown by more than 17 million people in the last 10 years. We now have over 94 million people who fit this description. I'm certain that companies will find ways to attract many of these people back into the work force. By increasing pay rates and offering flexible work schedules for students, retirees, and stay-at-home parents, we can meet the demand for more workers.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.