How to Tackle Labor Shortages in Logistics

A strong economy means an uptick in consumer spending, which should be good for your retail or ecommerce business, right? But it also means a drop in unemployment – now 4.1% and expected to dip to 3.8% by the end of the year, according to the U.S. Department of Labor. Of course, this creates challenges in hiring and retaining qualified labor.

Wages rise, truck driver shortage

Where labor is short, wages rise. Take a look at these statistics:

• Warehousing job wages saw the fastest growth rate since the recession last year. They’re up 3.2%. (Prologistix)
• Truck driver wages account for the highest growth rate: 15-18% (American Trucking Associations)

Higher compensation elsewhere is a key reason for employee turnover. Freight Waves reports that total compensation is the top reason for turnover. After compensation, surveyed drivers rank time away from home, lack of communications, unpredictability of paycheck each week, and issues resolving problems among the top five reasons for leaving a job.

Another factor in the truck driver shortage is the new electronic logging device (ELD) mandate. Because ELD limits time on the road for drivers, it also decreases driver compensation. The labor pool is declining because of retiring truck drivers. The current average age of a truck driver is 55, reports NPR. Now we need more drivers to accomplish the same volume of deliveries. “The recovery and rebuilding in Florida and Georgia will trigger higher spot and contract rates in US haulage. Flatbed capacity is likely to be particularly affected by the hurricanes, while the large amounts of cargo going into southern states will hit rates, as there will be little backhaul traffic. And the market is also going to be affected by the electronic logging device mandate, which could make 2018 a ‘nasty year’. “, reports The Loadstar.

Order fulfillment & delayed shipments, higher costs

What does this mean for retailers, order fulfillment, and last mile delivery? NPR reports, “The trucking industry is facing a growing shortage of drivers that is pushing some retailers to delay nonessential shipments or pay high prices to get their goods delivered on time.” Juxtapose this to the need to earn customer loyalty in last mile delivery and consumer expectation for 1-2 day service in order fulfillment, cited in A Manufacturer’s Guide to Direct to Consumer Sales.

Low unemployment plus climbing wages spell serious labor shortages of both warehouse employees and truck drivers. Many companies are responding with wage increases, sign-on bonuses, and more, but these are expensive tactics poised to spiral out of control. They can increase your transportation costs and can hurt your profitability.

Truck driver shortage: how to respond

FIDELITONE supply chain management experts recommend four strategies for responding to the truck driver shortage: strong operational processes, attractive company culture, investments in technology, and logistics partnerships. Take a closer look.

Strong operational processes

When you can jump-start employee onboarding, you can fill open positions more quickly. Well-defined operational processes with proven efficiency and effectiveness are key. Strong, consistent, well-documented operational processes reduce the learning curve for new employees. They help employees know what’s expected and give them confidence in their ability to perform. An employee who is knowledgeable and well trained tends to be more satisfied. Strong operational processes address two of the reasons for truck driver turnover cited in the Freight Waves study above: communications and insufficient training. FIDELITONE’s proven process, The Path To Loyalty®, allows us to delivery exceptional experiences to you and your customers. One step in this process is “Perform”, which incorporates efficient, proven, and repeatable operational processes.

Company culture

The FIDELITONE blog, How to Scale a Company (Without Sacrificing Customer Experience), describes the importance of company culture in earning customer loyalty. Onboarding new employees to your mission and values and providing ongoing recognition of positive cultural behaviors can help. Consider positive working conditions, employee recognition programs, frequent feedback, and defined opportunities as strategies to retain truck drivers, warehouse workers, and all employees.

Warehouse automation technology

Looking for cost control in the face of labor shortages? As automation technology advances, robotics and other technologies can assume some of the human role in the warehouse. Even where human cooperation is required, automation can sometimes improve efficiency and accuracy, e.g., in order fulfillment. Some robotic solutions’ efficiency can be attributed to the optimization logic for movement around the warehouse, according to Logistic Viewpoints. Though a significant expense, investment in warehouse automation and technology can allow your business to scale up, keep pace with competitors, and earn customer loyalty, even in the face of limited labor. The juice many be worth the squeeze. However, if you are not prepared to invest in automation technology yourself, another option is to partner with a logistics provider who can provide it.

People, processes, and technology

At FIDELITONE, we understand that customer experience is top priority. Getting the right product to the customers at the right time is crucial link to earning customer loyalty. Without people, processes, and technology, delivering an exceptional customer experience is a challenge.

In the logistics industry today, wage increases for warehouse employees and truck drivers are a given, and the labor shortage is real. Knowing we can’t change that, we encourage clients to apply sound business strategies and forward-thinking concepts to protect the customer experience and company profitability. We’re here to help.

Explore our services or contact us to learn how we can help you combat labor shortages, keep your operation running at peak condition, and help you earn customer loyalty.