The logistics industry faces formidable challenges as organizations strive to balance profits with delivery pressures. Volatility across the supply chain is forcing logistics organizations of all sizes to reduce costs, improve efficiencies, and increase customer satisfaction in an attempt to maintain profitability and competitive advantage. Achieving these goals, however, requires that HR (human resources), operations, and IT professionals work together to optimize and coordinate the critical elements of operational success: people, process, and technology.
Labor typically accounts for 50 percent of operating costs in the logistics industry, and nearly two-thirds of that labor is directly responsible for driving revenue and delivering quality service.
Today’s supply chain is powered by people. In fact, labor typically accounts for 50 percent of operating costs in the logistics industry. And nearly two-thirds of that labor is directly responsible for driving revenue and delivering quality service. In a business climate characterized by tight profit margins and growing capacity issues, your ability to attract, retain, and optimize a quality workforce is critical to meeting customer expectations for the perfect order.
The current talent shortage, however, is making it difficult to build and maintain a high-performing workforce. In fact, recruiting and retaining qualified supply chain managers is the No. 1 challenge facing third-party logistics (3PL) companies across the globe. In studies conducted at Northeastern University’s D’Amore-McKim School of Business, CEOs of some of the world’s largest 3PL companies consistently rank “finding and keeping talented managers” among the top three problems facing their industry.
But the logistics talent crisis doesn’t end there. The driver shortage also remains dire and is expected to get even worse. According to a recent American Trucking Association (ATA) report, the current shortage of drivers now stands at almost 48,000 and has the potential to increase due to industry growth and imminent retirements. These shortages create ripples throughout the supply chain with downstream implications for service and quality that extend all the way to the customer.
Given these challenges, making the most of your labor resources is more important than ever before. Optimizing your workforce — through strategic HR management, proven processes, and effective use of technology — can help you reduce costs, improve service, and boost profits. This white paper explores the top people-related trends and issues facing today’s logistics industry and presents best practices for accelerating your organization’s path to workforce optimization.
With no end to the talent shortage in sight, you need to make sure the employees you hire not only stick around, but also perform well on the job. A critical first step for retaining and optimizing a quality workforce is to implement HR strategies that have a direct impact on performance. Based on your corporate culture, HR management style, and business goals, you can determine which of the following employee reward strategies is most likely to drive performance across your organization:
Once you choose the HR strategy that is the best fit for your workforce, you need to back it up with a pay-for performance compensation program. When designing and implementing your incentive pay program, incorporation of the following steps will help ensure desired outcomes:
A well-defined process — communicated clearly and implemented consistently — is key to any successful incentive pay program. By establishing clear, attainable metrics, tracking and measuring progress, and rewarding achievement of defined goals, you can incentivize employees to be more engaged and productive on the job. For optimal program effectiveness, employees need to understand what is expected of them and why, receive frequent updates on their progress, and be rewarded appropriately for meeting targets. It’s also important that HR, managers, and employees work together throughout the process to make sure individual goals support corporate objectives — even as business priorities change.
Labor management systems can support your pay-for-performance program by automating the review cycle for timelier, more meaningful evaluations. More sophisticated solutions can be configured to reflect your established processes and provide alerts to keep form completion, feedback, and approvals on track. What’s more, these systems maintain compensation data linked to effective dates so you can track and report on your incentive pay program to gauge effectiveness and support compliance.
More companies are recognizing employee engagement as a key competitive differentiator. Why? An engaged workforce is good for business. In fact, Forbes Leadership columnist Kevin Kruse calls employee engagement the “wonder drug for customer satisfaction.” According to Kruse, because engaged employees care more, they’re more productive, provide better service, and even stay in their jobs longer — all of which increases customer satisfaction, and ultimately drives sales and profits.
More companies recognize employee engagement as a key competitive differentiator.
When developing employment engagement strategies, it’s crucial to take into consideration your workforce demographics. More than one in three American workers today are millennials (adults age 18 to 34 in 2015), making this generation the largest share of the American workforce. By 2018, millennials will make up 50 percent of the workforce. As millennials continue to flood the workforce, they are changing the requirements for employee engagement.
Having grown up using laptops, mobile devices, and apps, millennials embrace technological innovation and recognize how it can continually improve the way we live and work. Therefore, it’s not surprising that millennial employees want to leverage technology in ways that enhance flexibility, enable collaboration, and increase efficiency on the job. According to recent studies, millennials expect “a workplace technology ecosystem that includes social networking, instant messaging, video-ondemand, blogs, and wikis. These tools enable them to instantly connect, engage, and collaborate with cohorts and managers in ways that are natural to them, leading to better productivity across the enterprise.” Social recognition and gamification technologies are also proving effective for promoting and rewarding positive behaviors — from good attendance to teamwork to policy adherence.
Millennials are also committed to their personal learning and development. In fact, this is their first-choice benefit from employers.10 An automated labor management system can help your organization stay on top of professional development by tracking employee skills and certifications with customizable reports that show you who needs training and when. These systems also make it easy to define training courses, assign employees, and track participation, completion, and results.
The rapid growth of omnichannel distribution is pressuring logistics providers to perform to ever-higher standards. As retailers integrate their bricks-and-mortar stores and e-commerce channels, consumers have more options than ever before. Items bought online can be shipped to a specified location or picked up at a nearby store for more immediate gratification. Online purchases can be returned to a bricks-and-mortar store or shipped back to a distribution center. While all these options are convenient for consumers, they add complexity to fulfillment and logistics operations — whether they’re handled in-house or outsourced to a 3PL.
Efficient, profitable omnichannel logistics require flexibility and agility throughout the supply chain — especially when it comes to workforce management. One of the biggest challenges is aligning labor to demand in order to balance service and costs. Managers need to put the right people with the right skills in the right place at the right time to fill orders in a timely, accurate, and cost-effective manner — even as volume fluctuates. Plus, they need to manage absenteeism to avoid reliance on costly overtime or replacement labor, and measure performance against labor standards to maximize productive time. All of this requires real-time visibility across your labor supply chain to identify and resolve potential issues — before service levels or profit margins are impacted.
Put the right people with the right skills in the right place at the right time to meet omnichannel challenges.
Every day, logistics organizations like yours are up against people-related variables that can increase costs and decrease overall productivity. But these variables — whether absenteeism, overstaffing, or idle time — are often difficult to identify and control. Over time, these missed opportunities for reducing costs and improving efficiency can eat away at profit margins. Consider this: for a company with a $10 million payroll, just 5 percent nonproductive time can waste $500,000 annually.
Uncover hidden costs and capacity in the workforce: For a company with a $10 million payroll, just 5 percent nonproductive time can waste $500,000 annually.
As your organization faces rising labor costs, omnichannel distribution challenges, and a shrinking talent pool, a comprehensive labor management system can deliver significant value by providing real-time visibility into the workforce. Equipped with the right technology, your organization can:
By replacing manual, spreadsheet-based approaches, semi-automated systems, or disparate solutions with fully automated and integrated labor management technology, your organization can more effectively address complex workforce challenges for competitive advantage and bottom-line results.
In today’s logistics industry, people are a critical component of any successful business strategy. But when you’re faced with persistent talent shortages, high labor costs, complex operational challenges, and volatility across the supply chain, you must get the most from your people to execute on your strategy and drive results. Labor management technology provides the automated tools and real-time visibility you need to identify productivity gaps and uncover hidden labor costs and capacity in your workforce. Armed with these insights, your organization can take action to optimize labor resources and keep results in line with expectations. The payoff? Reduced labor costs. Improved workforce productivity. And new levels of operational excellence.