March 25, 2015

IT, IT everywhere, but few people around to service it, MHI-Deloitte survey concludes

Lack of qualified labor to manage sophisticated systems may hamper IT innovation, survey finds.

By DC Velocity Staff

The material handling industry faces an acute shortfall of human capital to manage and maintain increasingly sophisticated technologies, a gap likely to widen as a blizzard of IT innovations demands a level of employee training that is currently lacking. Those findings come from the second annual report on the state of the industry, released today by the material handling trade group MHI and the consultancy Deloitte.

The report, which relied on findings from a survey of more than 400 high-level supply chain executives across multiple verticals, found that 31 percent said the absence of adequate talent to work with new technologies was "a significant barrier to their implementation." MHI CEO George Prest said in the report that the "sophistication of the skillsets" needed to operate today's equipment and systems "requires an equally sophisticated and well-trained workforce."

The report was made public as part of the keynote presentation on the third day of ProMat, the material handling industry's biennial event, held in Chicago. The 2015 conference has drawn more than 35,000 attendees and 807 exhibitors. (Automate, a sister conference held in conjunction with ProMat, drew another 300 exhibitors.) Most of the exhibits at both shows featured whiz-bang technologies designed to infuse the material handling infrastructure with more automation than ever before.

Most of the IT advancements in recent years have focused on productivity gains and labor savings achieved by automating warehouse and distribution center functions that were traditionally handled manually. Today, material handling users have access to powerful predictive data analytics and modeling software; increasingly robust smartphones and tablets; wearable devices like eyewear and watches; 3D printing equipment and technology; drones; and even driverless, or autonomous, vehicles (the latter three being considered more futuristic than the others). These technologies hold out the potential to yield enormous productivity and service improvements. However, their sophistication demands a level of skill and knowledge that the U.S. workforce, on balance, appears to lack.

In the initial report, issued in 2014 in what was billed as a long-term roadmap for the industry, MHI and Deloitte estimated 1.4 million jobs would be created in the logistics and supply chain management industries by 2018. However, the report cited 2012 data from the World Economic Forum that 600,000 manufacturing positions in the U.S. are unfilled due to a lack of qualified workers.

The supply-demand mismatch takes on larger proportions, in part because of the expected acceptance of the new technologies. The current adoption level of 24 percent for predictive analytics is expected to reach 70 percent in three to five years and 77 percent after six years, according to the report. Adoption levels for mobile and wearable technology—including smartphones, wireless devices and "smart glass," is projected to reach 64 percent in three to five years, up from 23 percent today.

Another challenge is the radical change in customer expectations. Today, it is commonplace for end users to order products online across a variety of digital tools and then demand that their goods be delivered on their timetables. This has put enormous strain on supply chain management practitioners, many of whom have been accustomed to supporting just the brick-and-mortar retail channel and have not been accustomed to being dictated to by end customers.

In the 2015 survey, executives cited customer pricing pressure, demand for faster response times, and rising customer service expectations as their three greatest problem areas. Most respondents said they were holding more inventory closer to their end customers than ever before. In addition, respondents report more collaboration with other companies to evaluate and implement suitable technology and process-driven solutions, according to the report.

In what may be the most profound trend of all, these fast-paced changes are occurring as the material handling industry's decades-long mission—to drive improvements within the warehouse and DC—is giving way to a new world that extends beyond the building. "Material handling can no longer stand alone as an efficiency play inside the four walls of a warehouse," said Mike Hayden, director of Deloitte's logistics and distribution practice. Hayden said that data proliferation and the emergence of data-driven technologies are laying the foundation for information sharing across the entire value chain.

More coverage from ProMat 2015