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Just how bad is the labor problem?

By Kevin Gue | 09/16/2014 | 1:21 PM

Recently I visited the distribution center of a local 3PL that supports e-commerce and other distribution operations. At some point in the visit I asked my host if he was having problems with labor availability. "Oh, yea." He went on to tell me that his firm was considering locating new clients into DCs away from Louisville for exactly this reason. Let me say that again: his firm was moving business away from Louisville, Kentucky (home of the UPS Worldport and about 100 miles from the population weighted center of the continental U.S.) specifically because they were having trouble finding workers. OK, so I'm partial to Louisville, but can you imagine moving e-commerce business away from Louisville when you already have a DC there? That's how bad the labor problem is.

Help Wanted

Driving away from the DC, it occurred to me that labor availability is an obvious constraint on supply chain network design problems, but I wondered if there had been any work in this area. It is tempting to think that labor availability is "just a capacity constraint," until one realizes that competitors are also trying to scoop up that capacity. Mix in the uncertainty of labor availability data in the first place, and you have a very hard problem.

The labor shortage in distribution earned an entire chapter in last year's U.S. Material Handling and Logistics Roadmap. Participants in the workshops identified two classes of labor that were particularly troublesome: skilled workers, such as those who could program PLCs and do installations of automation, and unskilled workers who had to have a solid work ethic and a willingness to learn. One participant told a prototypical story, "If I have two open positions, I'll receive a hundred résumés. I discard ninety immediately, due to no high school degree, failed drug tests, felonies, and so on. Of the remaining ten, I'll hire seven. Five won't show up for work for all five days of the first week—they didn't realize the job would be that demanding. That leaves me with two." No one in the room thought he was exaggerating, and no one was laughing.

We are past the time of complaining about this problem. 



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About Kevin Gue

Keving Gue

Kevin Gue is a professor of industrial engineering at the University of Louisville, where he holds the Duthie Chair of Engineering Logistics and serves as Director of the Logistics and Distribution Institute (LoDI). His research addresses the design and control of logistics systems, with a focus on distribution, warehousing, and material handling. He is co-inventor of the warehouse aisle designs known as the Flying-V, Fishbone, and Chevron, work for which he received multiple best paper awards and was awarded the Technical Innovation in Industrial Engineering Award from IIE in 2009. Kevin is a former president of the College-Industry Council on Material Handling Education and is Editor-in-Chief of the recently published U.S. Roadmap on Material Handling and Logistics.


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