Labor Shortages Challenge Supply Chains to Automate While Retaining Employees and Their Trust

This labor deficiency has been building for some time — since even before the pandemic — and it is not expected to moderate anytime soon. In a recent survey that Protiviti conducted with the Oxford Global Centre on Healthcare and Urbanisation at Kellogg College, in which we queried global executives about the future of work, 83% said that retention and turnover would remain a top concern over the next decade.

Consequently, companies are increasingly considering adopting automation to fill in the gaps to improve global supply chain operations. It should not be surprising, therefore, that 85% of global executives in the Protiviti-Oxford survey said that artificial intelligence (AI) and other emerging technologies would radically transform their businesses over the next 10 years.

Warming to Automation

Over the past decade, industry has become well acquainted with the potential benefits derived from implementing automation technologies, including greater efficiency, reduced costs and greater profits, and enhanced safety, to name a few. But many organisations have been reluctant to pursue the solutions because of widely held perceptions that the technologies would replace workers. To take the automation route would erode employee trust, the thinking went.

But in many cases, the pandemic lockdowns and restrictions forced organisations to adopt automation in order to keep producing and shipping goods to customers. Now that the genie is out of the bottle, more firms are beginning to investigate and implement technology solutions, particularly manufacturers, many of whom are considering returning production from foreign shores to the U.S. or locations nearby.

For companies taking actions toward automation — and for those still hesitant to broach the subject — here are three considerations to keep in mind during the journey.

Building Trust

While employees may bristle at automation initially, operators of machinery who perform rote and low-skill tasks often end up embracing technology because it allows them to learn new skills. If an organisation gives someone the ability to work with virtual reality tools on the plant floor, or the capacity to programme machines versus simply turning knobs to operate the machines, for example, that person is likely going to have a greater sense of satisfaction and responsibility.

When determining where to implement automation, organisations frequently focus on where technology can maximise supply chain efficiency, cost savings and labor availability in any particular facility. Alternatively, they may want to use automation to plug talent gaps.

Adopting automation can help onshoring or nearshoring efforts, which are being pursued to mitigate the risk of supply chain disruptions occurring on the other side of the world or during a 60-day boat ride while remaining cost-competitive with other markets. Companies undertaking this strategy may want to target processes integral to the production and distribution of their most premium merchandise or those that are the most challenging from the perspective of hands-on labor.

Change Management

Companies recognise that employee retention is just as important as recruiting — and, in fact, that it is easier to keep workers than hire new ones. That puts the onus on organisations adopting automation to implement change management programmes and other initiatives that feature robust communication channels with employees to mitigate the risk of disengagement and attrition.

The central message that organisations must convey is that automation does not equate to workforce reduction; rather, the goal is to adopt new technologies that can help supply chains flow during good times and bad times alike. To avoid distrust, companies must make clear their intent to upskill employees and to move them into more meaningful roles.

This approach can help convince people to stay versus looking for greener grass. Additionally, initiating listening strategies, encouraging employees to share job security concerns or even the desire to change employers, and emphasising a culture that values its workers can help create loyalty, especially in small rural areas that lack the population to support emerging manufacturing hubs. In many cases, first-line managers who tend to have strong relationships with people on the floor can play a pivotal role in these efforts.

Enhancing Resiliency

Over the past three decades, organisations developed supply chains to be efficient and cost-effective, putting little emphasis on resiliency or flexibility. But business interruptions over the past two years have forced organisations to adjust their focus. Rather than viewing supply chains as cost centers, executives are now beginning to apply a revenue assurance model to the operations.

This approach includes looking at previously ignored costs associated with business continuity management, logistics changes, delays, unhappy customers and other risks. The model also tabulates the value that can be generated by a redesigned and more resilient supply chain that incorporates automation. Companies interested in bringing back production to the U.S., for example, may be looking at higher wage costs, but with automation, employees here will not be doing the same low-skill tasks being performed in other markets. Therefore, the cost discussion shifts from one focused solely on labor to one that considers total costs and risks.

Plan for Success

Labor shortages are plaguing all industries, but along with two years of unprecedented economic disruptions, they are hitting supply chains particularly hard. Automation can help organisations solve some of the challenges associated with tight labor markets. But companies that choose that route — and that want to maximise their chances for successful results — need to reassure existing employees that they will be the recipients of more meaningful work and not pink slips, incorporate the technology in a manner that optimises the supply chain, and take an expanded view of supply chains to better assess cost, risk and value while enhancing flexibility and resiliency.