Impact of Reduced Labor on Logistics

Published on: June 24, 2024

Over the past several years, the logistics industry has undergone seismic shifts. What began as a temporary halt during the onset of the COVID-19 pandemic lingered into ongoing and complex global supply chain disruptions as the logistics industry worked to address labor shortages.

By understanding the impact of reduced labor on logistics, you can begin to build forward-thinking solutions that will propel this vital industry forward.

Understanding the Causes of Reduced Labor in Logistics

The labor shortage that currently exists in the logistics industry did not bubble up overnight. In fact, this looming labor shortage could be identified years ago, as the workforce began to age and fewer young employees were taking positions in the industry. However, the COVID-19 pandemic significantly expedited the labor shortage, taking it to crisis levels in the early months of 2020.

According to MossAdams, these are the main causes of reduced labor in logistics:

The COVID-19 Pandemic

The global pandemic brought the world to a screeching halt, and that included the logistics industry. For a moment, it seemed that the supply chain would not be disrupted, but the complexity and scope of the pandemic quickly proved those theories wrong. Many workers became ill with COVID-19, and for some, the virus was fatal. Contact tracing and exposure led to the closure of warehouses, sometimes for days and weeks at a time. It soon became clear that the logistics industry would suffer a serious setback due to the COVID-19 pandemic. During this time, a number of workers quit, some were unable to return due to health issues and others found more lucrative positions elsewhere.

An Aging Workforce

While an aging workforce was an issue prior to the pandemic, it continues to be a challenge for the logistics industry. There are more workers nearing retirement age in the shipping and logistics industry, and far fewer workers taking these same positions to offset those leaving.

Demand for Flexible and Hybrid Employment

One of the reasons why the logistics industry is having a hard time attracting new talent and motivated workers is because it does not offer the same flexible, hybrid work environment that other industries can offer. Workers who may have previously considered positions in the logistics sector are now choosing to work in factories or plants where they may be able to enjoy a more flexible schedule.

The Immediate Impact of Labor Shortages on Logistics

The effects of the intense labor shortage in the logistics industry could quickly be felt, not only by those who were working in logistics but also by consumers around the world.

The immediate impact of labor shortage on supply chain could be seen in the following ways:

Shipping Delays and Product Shortages

During the first harrowing weeks of the COVID-19 pandemic, it was clear that there had been significant global supply chain disruptions. All you had to do was browse your local grocery store to see the empty aisles, barely stocked with essentials.

While it took a few months for the supply chain to begin moving somewhat cohesively again, it was still obvious that there was a labor shortage. To this day, consumers face shipping delays and product shortages because of reduced labor in logistics. The delays and shortages are heightened during peak times, such as around the holidays in the winter.

Increased Costs for Goods and Services

Shipping delays are quite expensive for companies who rely on the logistics industry to transport their products. While the company may not be able to control the delays due to the labor shortage, they must make up the costs somehow, which usually means that they begin to increase the prices for their products. Consumers around the world have felt the economic impact of the reduced labor force in the logistics industry, as prices have been rising steadily for the past several years.

Decreased Efficiency With Resource Allocation

With fewer drivers and workers available in the warehouses, it’s been more difficult for logistics companies to allocate their resources and maximize efficiency. For example, one workforce management issue stems from the fact that there are fewer drivers available, and many times, the drivers that are working are not in a location in which there is demand. It can be challenging to anticipate where there is demand in the logistics industry and prepare accordingly, given the fact that there are far fewer people working in logistics today than there were previously.

Long-Term Implications for the Logistics Industry

Unfortunately, the impact of the labor shortage cannot be addressed overnight. While logistics companies are actively working to recruit new employees and develop employment packages that are favorable and enticing, there will be long-term implications as a result of the labor shortage in logistics.

These are a few long-term effects of the labor shortage in the logistics industry:

Ongoing Delays and Bottlenecks at the Ports

The fact of the matter is, businesses are shipping higher levels of freight than can be dealt with at the ports, given the current labor levels in the logistics industry. Even as more people are hired, it will take years to clear the bottlenecks at the ports. This means that people must become accustomed to the idea of shipping delays and increased costs.

Increased Inventory Shortages in Warehouses

Warehouses will continue to feel the pinch as well, as their inventory cannot necessarily move through the supply chain as quickly as it once did. Ongoing inventory shortages will continue to be the norm in the months and years ahead, until more innovative solutions have been put in place to address the impact of reduced labor on logistics.

Technological Solutions to Mitigate Labor Shortages

Recognizing the fact that workers are turning to other industries and opportunities for employment, many thought leaders in the logistics sector have begun to turn to technological solutions. While these solutions may not be able to fully mitigate the impact of reduced labor in logistics, they can help off-set the challenges that have been created as a result.

Logistics Management Software

Cloud-based logistics management software is helping to automate the logistics industry. Companies around the world are investing in software management systems that allow them to view the supply chain in real-time and identify where there are disruptions or delays. Then, they can use the management software to redirect resources accordingly to minimize the impact.

Machine Learning in Logistics

Artificial intelligence and machine learning technology are some of the greatest advancements of our time, and there’s no doubt that they will have a significant impact on the logistics industry as a whole. A myriad of logistics professionals believe that automation and machine learning in logistics may be the key to mitigating the long-term impacts of the current labor shortage, though there are some experts who remain apprehensive about the technology. At a minimum, machine learning in logistics can help increase efficiency and improve supply chain optimization overall.

Strategies for Logistics Companies to Adapt

While the current labor shortage crisis in the logistics industry is not a new problem, companies are in the perfect position to begin developing long-term strategies to adapt to the changing times. The reality is that the labor levels that existed prior to the digital transformation in logistics will probably never return. That said, it’s time to begin developing innovative strategies to help prioritize the workers currently employed in logistics while mitigating the impact of reduced labor overall.

Develop an Innovative Process Flow to Avoid Stressed Nodes

Logistics companies need to rely on logistics management software and other technology to reroute shipments and avoid stressed nodes where there are significant labor shortages. In fact, some companies may even want to go so far as to consider new manufacturing processes. This ultimately allows them to create and develop products in a different location not as stressed by the reduced labor market.

Create a Value-Based Employee Package

Simply offering logistics workers higher wages to entice them to consider jobs in logistics is not going to be enough, particularly in an age where most workers are looking to find an increased sense of flexibility, balance and purpose in their positions. Obviously, in competitive labor markets, increased wages will be necessary to attract the most reliable and qualified workers. In addition, companies also will need to create packages that include flexible scheduling and opportunities for growth and development within the organization.

The Role of Sustainability and Employee Well-Being

The future of the logistics industry requires companies to prioritize current employees and implement strategic worker retention efforts. Logistics companies will need to focus on sustainability and employee well-being to ensure they can retain qualified workers and continue to attract top talent in the logistics industry.

Learn More About the Digital Transformation in Logistics at Park University

At Park University, we offer a Bachelor of Science in Logistics degree program that provides you with a future-forward foundation in this dynamic field. With a curriculum that touches upon automation in logistics and supply chain optimization, you will enjoy rigorous and thought-provoking coursework that equips you with the knowledge and skills needed to succeed in this field.

Request more information about our online degree programs today.