labor shortage Archives

How AI/ML can address the supply chain labor shortage…but not like you think!

Labor | By Polly Mitchell-Guthrie • 12/13/2022

What almost cost $2B a day and more than 700,000 jobs in the US alone, but would have led to global reverberations? The rail industry was on the brink of a strike-induced labor shortage that would have happened overnight if the President hadn’t intervened. This averted disruption is just one recent example of the impact of a labor shortage on supply chain planning and execution. If a strike is a flood – a sudden event that can occur suddenly with catastrophic effects – the loss of supply chain talent is a slow leak. LinkedIn reported earlier this year that supply chain turnover was up 28%. A talent leak may appear less dramatic than a strike but can have equally pernicious effects. In the 2022 MHI Annual Industry Report, 54% of respondents cited hiring and retaining qualified workers as a threat second only to disruptions. Preventing talent leak entails paying attention to what supply chain managers need to succeed.

The Boom Global Network recently conducted a survey, “What the Thriving Supply Chain Professional Needs to Succeed,” and found that they want support for their ambition; the right tools; and leadership with vision, clarity, and compassion. Artificial intelligence and technology can address these issues, but maybe not in the way you think. Talk of a “lights out” supply chain suggests we can replace missing workers with machines. But instead we should look to AI/ML to boost the productivity of our existing talent by augmenting their capabilities, allowing us to retain them and grow their impact rather than replace them.

Help me grow in my career

Supply chain professionals love challenge, teamwork, and the impact they have on the core of their business. But in the boom! survey, 28% reported plans to change jobs in the coming year (echoing the LinkedIn data referenced above), a higher rate than before the pandemic. The top two reasons for leaving were inability to achieve career goals fast enough (31%) and desire to better use their skills and current abilities (20%), factors that grow even stronger as they advance in their careers, trumping the search for better pay and benefits. What happens if that ambition is not fulfilled? You lose your most mature talent, with the greatest knowledge and institutional memory.

How can you get supply chain talent to stay? By investing in their professional development, the second highest priority boom! survey respondents ranked. Advanced analytics (35%), digital transformation (33%) and artificial intelligence and machine learning (AI/ML, 32%) were three of the top four areas listed as topics of interest for professional development. How can AI/ML help these professionals advance in their career and do more with what they know?

Rather than turn the lights out, we should opt to augment humans, not replace them. Machine intelligence can complement human intelligence to accelerate intuition. For example, keeping supply lead times up to date in a planning system is harder than ever, and the more complicated the bill of materials the less likely a planner is able to do more than spread outdated assumptions across parts. Not every adjustment is worth a planner’s time to update, but AI/ML can predict lead times, based on historical patterns, and update changes automatically, flagging for intervention only those changes outside parameters the planner sets herself. A “self-healing supply chain” allows her to use her current skills and abilities better, by focusing her time on more complex exceptions instead of tedious manual updates, and learn new skills as she understands how to “consume” results from AI/ML to make better decisions.

Invest in better tools to address the labor shortage

When supply chain professionals were offered a magic wand in the boom! survey, what was their #1 wish for to boost their work performance? Better, integrated tools, and no wonder. When asked to describe their world, 59% said they use legacy systems that are fragmented, uncoordinated, and siloed. In spite of their well-known limitations, a survey by consulting firm McKinsey that found that spreadsheets remain the top software for supply chain planning, in use by 73%. Ongoing use of spreadsheets can even put your supply chain at risk.

The supply chain labor shortage is driving investment in digital transformation, which MHI argues will create provide paths to give employees new skills and attract talent who want to work on modern systems. Modernizing the environment for her team, in addition to poor forecasts and inventory levels, sent Lizet Tymon in search of better options than the homegrown tools and spreadsheets they were using. The transition to concurrent planning and her leadership enabled a very profitable planning-as-a-service option for her company, Jabil. Lizet’s story illustrates the importance of leadership, in combination with technology, to reap the benefits of the investment.

Lead with vision, clarity and compassion

In fact, more than half of the boom! respondents ranked “visible, empowering senior leadership with a clear, well-communicated strategic vision” as the most important resource needed to help them in their role. Another 35% wished for leaders like Lizet, who are willing to support and implement change. Because moving from spreadsheets to digitally integrated tools entails a digital transformation, which won’t happen on its own. In spite of our wishes, there are no magic wands in supply chain.

Giving supply chain managers better, integrated tools will break them out of spreadsheet prison and make it easier to collaborate, working together in teams to make the impact they desire. Removing tedium from their tasks with AI/ML can free them to use more of their current skills and learn new ones. But fear can get in the way for those who worry that AI/ML will automate them out of a job.

TRUST Resistance to change and the unknown leads to suboptimal results. As two leading operations professors observed in the Woolsey-Swanson rule that bears their names: “People would rather live with a problem they cannot solve than accept a solution they cannot understand.” One way to facilitate acceptance of the solution is to build trust by incorporating interpretability into AI/ML solutions, which are prized for their greater predictive accuracy but delivered in a black box. Demand for AI/ML has driven options for interpretability, a term for a variety of techniques that can increase understanding of the factors in producing the predictions.

Conclusion

While discussions of an autonomous supply chain can feed fear, turn the discussion around by emphasizing that AI/ML works best when it complements human intelligence. AI/ML models literally learn from data, but when data is disrupted by black swan events the learning is interrupted. In these times we must rely on human intelligence to make decisions, just as we did early in the pandemic.

Supply chain professionals want to use their current skills more and learn new ones. They want access to a single version of the truth working in a digitally integrated world so they can plan concurrently. They want leadership with vision willing to make change. Digital transformations that include AI/ML can empower and motivate planners on all these dimensions. Supply chains are only as good as the humans who run them, rendering a supply chain labor shortage a significant risk. People are our most valuable asset. Listen to what your supply chain professionals want and invest in the technology to give them what they need.

Polly Mitchell-Guthrie is the VP of Industry Outreach and Thought Leadership at Kinaxis, the leader in empowering people to make confident supply chain decisions. Previously she served in roles as director of Analytical Consulting Services at the University of North Carolina Health Care System, senior manager of the Advanced Analytics Customer Liaison Group in SAS’ Research and Development Division, and Director of the SAS Global Academic Program.

Mitchell-Guthrie has an MBA from the Kenan-Flagler Business School of the University of North Carolina at Chapel Hill, where she also received her BA in political science as a Morehead Scholar. She has been active in many roles within INFORMS (the Institute for Operations Research and Management Sciences), including serving as the chair and vice chair of the Analytics Certification Board and secretary of the Analytics Society.

Editor’s Choice: Labor Shortage and the Rise of Real-Time Visibility

Labor | By Chris Cunnane • 05/05/2022

Note: Today’s post is part of our “Editor’s Choice” series where we highlight recent posts published by our sponsors that provide supply chain insights and advice. This article is from Longbow and looks at the ongoing labor shortage and supply chain visibility.

Over the past 20-22 months, we have experienced worldwide disruptions that have altered and influenced lifestyle changes. With COVID-19 inspired Global policies in place, day-to-day routines for industries on a global scale had to change how they operate within the supply chain sector.

The Labor Shortage Effects on Supply Chain

As the pandemic continued and Stay at Home Restrictions were established, many began to re-evaluate their careers and professional positions, which created an influx of individuals starting early retirement. With the current labor shortage, organizations are on a mass hiring spree but are facing challenges in finding, hiring, and retaining talent. Goldman Sachs researchers led by Jan Hatziusworf estimates that these trends will last well into the year (2022) as nearly 60% of the labor force will not be returning.

Some factors to consider are that individuals of working age and capability are becoming much more selective in which career path they are willing to consider/pursue. Many are finding alternative ways to make an income and establish financial stability and are choosing to stop working the traditional 9-5’s altogether. These variables, coupled with the competition from other industries like technology (remote positions have gained immense popularity) or health care, manufacturing employment has decreased nearly 400,000 from pre-pandemic levels, creating the supply chain labor shortage we are experiencing today.

Despite the Labor Shortage, Consumers Still Consume

We saw disruptions in delivering goods and merchandise worldwide, from delays like the Suez Canal obstruction, slowdowns in China, and unloading in Los Angeles. With these disruptions and the labor shortage, employers are finding that due to a lack of visibility, they are having a hard time effectively managing processes, and unloading imports, resulting in slow delivery times and shipping delays rippling across the entire supply chain. Thus, organizations have shifted to keep up with demands, leading them to re–strategize and reframe how to maximize their efficiency with their existing labor force, like adding new processes like pay for performance. However, not all organizations have implemented new software, strategies, or procedures to help increase visibility to their supply chains and deliveries, contributing to a 6.2% surge in the consumer price index.

Rise of Real-Time Visibility – A Step Towards an Intelligent Enterprise

Although organizations have solutions to manage their inventory, labor, and warehouse operations, they continue to face challenges with increased velocity, complexity, constraints, and declines in labor availability, visibility, and opportunities for efficiency gain. Other organizations look to automation and/or robotics as a solution, but these solutions are difficult to assess ROI. There are great technologies available today that help with manufacturing, but rarely do these solutions factor in inventory, labor, or storage constraints and are limited with their ability to integrate between all systems involved.

To read the full article, click HERE.

“Transitory” Inflation and Supply Chain Disruption

Automotive Industry | By Clint Reiser • 08/18/2021

The phrases “transitory inflation” and “supply chain disruption” have been frequently used in the general and business news media this summer. And they have at times been used together to describe the general economic environment. Certainly, supply chain constraints are a partial cause of the current above trend inflation. Furthermore, there is much discussion about the word “transitory,” as used by Federal Reserve Chairman Jerome Powell to describe what he believes is like a short-term phase of price increases. Nonetheless, it is interesting that the discussion has evolved from possible inflation to whether or not it is transitory or longer-term. Also, it is interesting that supply chain is at the center of the discussion, rather than oil prices or monetary expansion as has been the case when past inflationary periods are discussed. Let’s look at some publicly available information on the topic/s.

Whitehouse Council of Economic Advisors

Look no further that the blog of the Whitehouse Council of Economic Advisors for commentary on the connection between supply chains and inflation. A post from June discusses how the pandemic has disrupted supply chains focuses on the rapid deceleration and subsequent acceleration of economic activity and the friction of getting back up to speed. Supply shortages, low inventory to sales ratios, and hiring lags are noted as factors at play. Data as recent as the end of June 2021 show that inventories remain below 1.3 times a month’s sales, a low for the period since January 2019 included in the chart.

In a subsequent Whitehouse.gov blog post, titled ”Historical Parallels to Today’s Inflationary Episode” the authors’ conclusion stated, “No single historical episode is a perfect template for current events. But when looking for historical parallels, it is useful to concentrate on inflationary episodes that contained supply chain disruptions and a spike in consumer demand after a period of temporary suppression.” With that said, let’s take a look at some recent and more granular data on sales, prices, and supply chain performance.

This Summer’s Sales, Prices, and Supply Chain Performance

Yesterday, the U.S. Census Bureau announced the advance monthly sales for retail and food services sales for July. The estimate of $617.7 billion represented a decrease of 1.1 percent from the previous month (June), but a 15.8 percent increase from July of 2020. So, the month-to-month change indicates a recent slowing in the longer trend of year-over-year business activity growth. By kind of business, the notable month-to-month slowdowns were motor vehicle parts and dealers (-3.9%), clothing and clothing accessory stores (-2.6%), and non-store retailers (e-commerce) (-3.1%).

Last week, the Bureau of Labor Statistics released the Consumer Price Index (CPI) for July. It stated that the items index increased 5.4 percent over the last 12 months, before seasonal adjustment. Meanwhile, all items, less food and energy (aka “core inflation”) was up 4.3 percent. These price increases are clearly above the Federal Reserve’s long-term target of 2 percent, but not overly alarming, if they’re only “transitory.” Looking at item subcategories, the notable price increases include energy (+23.8%), with the gasoline subcategory up 41.8%. Used cars and trucks were up 41.7%. I question if this is a data anomaly. It doesn’t feel correct, unless used commercial trucks are selling for a large premium. However, the CPI report did state, “the index for used cars and trucks rose 0.2 percent in July (month-to-month) after rising at least 7.3 percent in each of the last 3 months.” Finally, transportation services (mostly motor vehicle maintenance and repair) was up 6.4%.

The slowdown in motor vehicles parts and dealer sales in July, along with the 41.7% increase in used car and truck prices indicates that the supply constraints in automotive, partially caused by semiconductor shortages, is causing sales volume decreases and increased prices for alternatives such as used car purchases and automotive maintenance and repairs. The increase in energy prices is also important to monitor. Energy prices have played a role in much of the inflation within the recent past. If supply does not increase to offset excess demand, then high prices could persist and cause continued pricing pressure.

The July 2021 Manufacturing ISM Report On Business shows that economic activity in the manufacturing sector grew in July, with the overall economy notching a 14th consecutive month of growth. But the specifics highlight the breadth of supply constraints. The prices index went down from June. But the June price index reading since July 1979. An included quote attributed to T. Fiore, Chair of the ISM Manufacturing Business Survey Committee, was as follows, “Business Survey Committee panelists reported that their companies and suppliers continue to struggle to meet increasing demand levels. As we enter the third quarter, all segments of the manufacturing economy are impacted by near record-long raw-material lead times, continued shortages of critical basic materials, rising commodities prices and difficulties in transporting products.” The quote went on to name worker absenteeism, short-term shutdowns due to parts shortages, and difficulties in filling open positions as the issues limiting manufacturing growth potential. Fiore also noted transportation inefficiencies as an obstacle to increasing growth.

Final Word

These sources, and others, indicate acute supply constraints in certain areas, such as automotive, and other factors that appear to be more widespread, such as labor constraints. Other sources have attributed the labor shortage to increased unemployment benefits (soon to expire), frictional unemployment due to factors such as childcare requirements, and concerns with increased risk of COVID infection for certain high-risk jobs. Perhaps salary increases in jobs that are in high demand and now come with increased risk of infection, greater certainty surrounding the school year, and the expiring increased unemployment benefits, will direct activity that will reduce labor constraints and limit inflation to “transitory.”

A Warehouse Labor Shortage? Robots to the Rescue

Logistics Service Providers | By Steve Banker • 11/20/2017

There is a looming warehouse labor shortage. Logistics service providers (LSPs) are beginning to think that robots are the answer.

The Looming Warehouse Labor Shortage

We (ARC Advisory Group) had the CEO of a large North American logistics service provider in to visit us recently. He told us that a few years ago they had ten applicants for every open warehouse job they had; today it is just one. “If an ex-con with a burglary record shows up, we say ‘We know you will steal from us, but we can really use the help. You’re hired!’”

There is a greater need for warehouse workers because of ecommerce. Historically, consumers went to stores and picked their goods off the shelves. Now warehouse workers are increasingly doing the labor consumers use to do for themselves. Not surprisingly, this CEO also believes warehouse wages are poised to rise significantly.

Robots to the Rescue

When wages are high, or labor is difficult to attract, automation is a natural solution. In warehousing, attention is increasingly focusing on autonomous mobile robots. One of the hotter companies in this space is Locus Robotics.

I happened to be flying to Indianapolis, a prime location for ecommerce warehousing, when Bruce Welty sat down next to me. Mr. Welty is the founder and Chairman of Locus Robotics. Locus Robotics has a trial implementation in progress with a very large LSP in the Indianapolis metro area.

Mr. Welty said they have close to 200 robots in use. Trials with two of the largest LSPs in the world are going well, and growth next year could be as much as one thousand percent. Mr. Welty believes that the main limitation to growth will be based on the capacity of their factory in Wilmington, Massachusetts.

The Locus robots – called LocusBots – and humans engage in waves of picks; A wave is a large batch of orders passed down from a warehouse management system and worked until all orders in that wave have been completed. The order selector moves in a straight path down an aisle. Robots are doing interleaved order fulfillment – the bot stands next to slot to be picked before the picker gets there. Once that location has been picked, the bot moves to a separate row, which is being picked by a different picker, and stands in front of a different slot, until the picker in that row gets there and picks the order.

Totes are located on top of the robot. The robot also has a scanner attached to it. A user interface of the robot tells the picker how many items to pick from a slot. Then the robot goes to the next pick location. A tote may hold the contents of one large customer order or up to 12 small orders.

Warehouse Labor Shortage — Autonomous Mobile Robots in the Warehouse

When a tote is filled, the robot moves to the pack station where a packer takes items out, packs them, and then the packages move to the loading dock. The fact that the robot is taking the totes to the pack station helps allow humans to minimize what is known as “empty” travel.

Optimization logic ensures totes come close to cubing out if the LSP has product cube information. There is also optimization logic for ensuring that the bots move through the warehouse efficiently. But minimizing human travel takes priority over minimizing the travel of the bots, it is really the elimination of empty travel that accounts for most of the productivity gains.

The optimization is driven by a layer of software known as a robotic control system. The optimization allows the robots to double the productivity of the human order selector.

Robot Economics

Let’s take a quick look at the economics of this. Locus rents their LocusBots – they call it Robots as a Service – for $1,000 per month. There are typically three or four robots that support each order selector. That means that it costs between $36,000 and $48,000 to eliminate one human. The average pay for a warehouse worker is roughly $15 per hour – $30,000 per year. Throw in benefits, and a fully loaded worker is probably about $35,00 to $40,000. That means a large part of the value proposition of the Locus robots is replacing warehouse labor, which is increasingly hard to find and poised to become more expensive.

Mr. Welty will be speaking more on this topic at ARC’s Annual Industry Forum – Digitizing and Securing Industry, Infrastructure, and Cities – in February in Orlando. Please join us!

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