With labor shortages everywhere, is this a threat or an opportunity?
Recently, I was interviewed about the impact of the truck driver shortage. I’ve also noticed a lot of coverage about the labor shortage in many industries (eg late garbage pickups, theme park closures, and many other small businesses). This is not a problem that will go away anytime soon given the surge in demand as many states reopen along with other factors attributed to the shortage. So what else can small businesses do to solve the problem, besides fighting for new hires during this difficult time? Are there any fruits at hand that can be leveraged before expensive investments are needed in automation or digitization to replace some manual work?
One quick fix is to increase the efficiency or productivity of all operations by optimizing critical bottleneck resources. Unlike just employing more, bottleneck optimization avoids the possibility of increasing inefficient operations and has other benefits beyond meeting demand. First, it reduces inventory, which solves another problem: long lead times for orders. This, along with better bottleneck capability, helps increase sales and improve customer satisfaction. Second, higher productivity helps pay for wage increases and lowers competitor prices, giving firms competitive advantages in both supply and demand markets. It also helps our nation to control inflation. This is also how some jobs may be brought back to the United States due to a more productive workforce to justify the higher labor costs.
Take the trucking industry for example. There is certainly potential for improving driver productivity, as only about 60% of a driver’s driving hours are at the wheel. In addition, 30% of a driver’s working hours are spent waiting for the loading and unloading of goods at the shipping and receiving facilities – dwell time. A 2020 research project showed that individual cargo handling facilities have the greatest impact on dwell time, followed by the method that drivers use to update their arrival time. It is worth considering in more detail the specific operational practices and policies adopted in facilities that have been attributed to such variations. Inefficient installations may be incentivized to adopt some proven best practices (or penalized by higher costs). Likewise, drivers can be advised (or also prompted) to provide a better estimate of arrival time so that facilities can be better prepared. Other inefficiencies can be identified through further research and addressed through better coordination with shippers, recipients and carriers.
These efficiency improvements will begin to have diminishing returns once most of the fruit on hand is picked. Ultimately, more hires may be needed or new technologies will need to be implemented, but they should not be retained by default as the first or only option in the face of a labor shortage.
While some inefficiencies can only be identified through advanced quantitative methods, most can be found quite easily through rapid data analysis. The real challenge, however, for many companies is to change their mindset from the top down in order to break the status quo. The labor shortage is everywhere, including in China. If we are to bring jobs back on board, we cannot afford to do business as usual as it was decades ago.
With the Biden administration presenting plans for relocation and infrastructure spending ready for the post-pandemic economy, addressing the challenges of the labor shortage as the opportunities to improve productivity will boost our economy as we come back to the new normal.
Chen is associate professor of operations and supply chain management at Cleveland State University.