The ongoing labor shortage is one of the most pervasive trends to sweep the logistics industry in years. With the U.S. unemployment rate at its lowest point in half a century, businesses are scrambling to stay fully staffed even as they search for ways to scale up and cope with new challenges.
That balancing act gets even harder in tricky economic conditions. Heading into 2020, the market faces headwinds like a global manufacturing slowdown, shifting tariff rates, red-hot e-commerce growth, and the "Amazon effect," as online shoppers seek ever-faster and cheaper home delivery. So as logistics leaders prepare to navigate those dangerous waters, they are increasingly turning to new strategies and technologies.
To better understand how this will all play out in 2020, we consulted with experts from different corners of the industry. Their overall advice for the new year? Buckle up; it could be a bumpy ride.
ROBOTS CUT WASTE, NOT JOBS
Automation is a crucial tool for helping organizations cope with a shortage of workers, especially for jobs that are located far from population centers, such as in rural warehouses. In the year ahead, that labor shortage will help accelerate the adoption of robotics and artificial intelligence (AI) for many supply chain functions, according to the Framingham, Massachusetts-based analyst firm IDC.
As for how quickly that will happen, the firm offered some estimates in a recent report titled IDC FutureScape: Worldwide Supply Chain 2020 Predictions. Among other predictions, the firm forecast that by 2022, manufacturers and retailers will dedicate 35% of their business process budgets to "process automation," focusing on order, inventory, and shipment tracking. It also predicted that by 2023, 65% of warehousing activities will use robots and situational data analytics to enable storage optimization, increasing capacity by over 20% and cutting work order-processing time in half.
Despite the rising tide of automation, technology is not expected to slash the total number of jobs in the logistics sector, but rather to replace some unskilled jobs with more productive, less redundant work, according to the IDC report's author, Simon Ellis, who is program vice president for the Supply Chain Strategies practice at IDC Manufacturing Insights.
As companies prepare to incorporate robotics and AI into their logistics operations, they will need to reconcile the contradictory notions of technology replacing jobs with the overall talent shortage that is driving that trend, Ellis says. Just as Henry Ford's production line ultimately created far more jobs in the automotive industry than it displaced, technology will drive long-term growth in logistics, he says.
"There are dual perspectives around this. Will certain jobs be replaced by technology? Yes. And will certain people be disenfranchised by robots that are more productive? Probably so. But will technology have a net negative impact on the job market? I don't think so," Ellis says. Instead, many displaced workers and managers will be retrained for new jobs, such as maintaining the new technology or servicing the robots, he predicts.
Despite the pressing need for change in 2020, the transformation from older analog processes to newer digital processes will not happen all at once, according to the IDC report. Rather, companies sailing toward "digital transformation" goals will need to manage hybrid environments for years to come. For example, IDC pointed out that most new supply chain software exists on cloud-based computing platforms, but older logistics applications will continue to run on local, on-premise servers for at least another decade.
WAREHOUSES WOO WORKERS WITH FLEXIBLE HOURS
As companies seek to boost productivity in the stormy business conditions expected to prevail throughout 2020, they will also need to adopt a new approach to managing labor, experts say. For example, one of the keys to attracting ideal workers during the labor crunch will be to offer more flexible schedules, according to Scott Sureddin, CEO of third-party logistics service specialist DHL Supply Chain, North America.
"Flexibility may be one of the most important supply chain issues heading into the next decade—and it has nothing to do with the actual movement of goods," Sureddin said in an email. "Associate expectations are changing, and they are demanding greater flexibility at work. Companies are going to need to rethink traditional HR practices if they hope to continue to attract and retain top talent."
In fact, hourly workers favor flexibility above traditional compensation like pay and perks, according to the Chicago-based on-demand staffing technology platform provider Bluecrew. In a recent analysis of more than 10,000 job-offer rejections, the company found that a quarter (26%) of the jobs were rejected due to the hours, compared with just 10% of jobs that were rejected due to pay.
In a tight labor market, offering flexibility around scheduling and hours is a strategic way to attract and retain workers without raising wages, according to the company.
"Not only are employers facing unemployment [that stands] at a 50-year low, [but] they're also going head to head with gig companies that offer workers a level of flexibility [that's] unprecedented," Bluecrew CEO Adam Roston said in a press release. "To compete in 2020, we'll see employers continue to shift their hiring and retention strategies. More employers will offer flexibility ... to lure hourly job seekers."
Still, job flexibility isn't the whole story, Bluecrew says. As the labor landscape changes, employers will likely adjust their HR practices in other ways as well, the company says. These include offering career growth opportunities through new training, also known as "upskilling," and the use of machine learning (ML) and artificial intelligence to enhance hiring effectiveness by focusing on objective job-performance data and eliminating inherent biases such as appearance.
FREIGHT-RATE VOLATILITY AHEAD
Even if your digital transformation is underway and your DC is fully staffed, a logistics operation still has to move physical inventory. Shippers have enjoyed low trucking rates in recent months, but a turbulent freight market will likely continue to churn in 2020, swinging the compass needle in new directions, according to the Portland, Oregon-based loadboard operator DAT.
In its most recent forecast report, 2020 Freight Focus, DAT notes that 2018 was a peak year for freight pricing in the trucking sector, as a surging economy generated more demand for service than the truckload sector could supply. In response, motor carriers rushed to add capacity, placing record numbers of new-truck orders and raising wages in a bid to attract more drivers.
But then the picture changed. Demand for motor freight services softened in 2019, leading to a glut of capacity and driving truckload rates back down. Pushed to the brink by those falling rates, a number of carriers closed their doors in the first half of 2019, causing capacity to shrink again, DAT says.
Now, continuing consumer spending and hot e-commerce sales are on pace to drive demand back up again. That could trigger a rebound in spot-market truckload rates in mid-2020, unless they're held in check by external factors like severe weather, uncertainty caused by trade wars, or the outcome of the presidential election, according to DAT.
Given the potential for sudden squalls in the 2020 forecast, even the most experienced logistics executive could run afoul of volatile business conditions this year. But applying new technologies and new strategies could help these leaders and their companies survive—or even thrive—as they navigate the tumultuous times ahead.
Editor's note: This article was revised on Jan. 14 to say that DAT is located in Portland, Oregon. An earlier version listed the wrong location.