efore the holidays last year, Daniel Adam, director of Operational Excellence at Sealed Air Product Care, flew to Romania to meet with his customers in the consumer goods industry. When he asked them what was keeping them up at night, each one had the same answer: skilled labor.
So he wasn’t all that surprised when the 2016 Global Resource Challenges report found skilled labor was the top resource challenge facing the consumer goods industry. Overall, 45 percent of consumer goods executives say they are facing labor challenges.
“I would actually expect that percentage to be somewhat higher based on what I’ve heard,” Adam says. “At the same time, opportunities exist for those companies to make their labor more efficient and to keep skilled labor within their organization.”
Every region has its own unique labor challenge and way of handling those difficulties. When U.S. retailer and e-commerce warehouses need labor, they need it quickly for a short period. They typically expand their operations tenfold for the six weeks around the holidays each year. As a result, the labor sought after is very task-oriented, and companies fill their needs by using temp agencies. Investing in long-term solutions is not seen as cost-effective due to short-term needs.
Meanwhile, unemployment continues to drop in most European states, and therefore, companies focus on hiring employees who are retained and trained to work across the organization in multiple functions. In India’s growing consumer goods industry, cheap labor is plentiful, but finding the right skills presents a bigger challenge.
“India’s e-tailers are often limited by the physical size and location of their warehouses, so there are constraints to adding more labor while maintaining safe working conditions,” Adam says. “Now, they are trying to bring in some automation to manage capacity and finding skilled technical labor locally is tough.”
In the Global Resource Management Index scores of 0 and 100 represent the lowest and highest possible score, respectively, as measured by the index criteria. Scores are normalized from 0 to 100, where a score of 100 represents the most sustainable resource management.
To maximize their labor efficiency, many companies provide productivity-based incentives to produce or package more goods per hour. However, that temporary increased productivity is not sustainable nor can it be the long-term strategy to keep pushing employees to work faster. The motivation eventually tapers off and increased benefits diminish.
“The labor and skills shortages that we are facing in consumer goods are mostly self-induced,” Adam says. “There’s so much more we could do to mitigate the issue. Companies should reevaluate the process in which those people work—cutting the waste and focusing on the value that each employee brings.”
Repetitive work should always be eliminated or minimized through automation. Then workers should focus on value-add tasks in a safe and ergonomic environment, rather than overwhelmed by the ever-increasing volume of orders to fulfill, according to Adam.
Improving the workplace will boost employee retention and make companies less vulnerable to turnover. Then companies can focus on developing their employees better, and their products will be produced and delivered faster and right the first time more often.
“Having a valuable individual in a broken process is just as disastrous as designing an optimal process with an untrained workforce. In the end, everyone suffers, especially end-customers.” Adam says. “Everything needs to come together by design, not by chance.”
Optimizing the process requires investing in integrated systems with the right level of automation. Such systems have provided a competitive advantage to some of the most successful companies in the industry. Everyone can track where each order is, how close it is to being delivered, and when it will reach a retailer or customer. A higher level of efficiency can be achieved when the order fulfillment process is seen as a manufacturing line. The customer order is the widget being assembled.
Automation enhances the customer experience by standardizing how goods are packed and shipped. It provides a predictable and repeatable process that allows companies to meet the growing demands of their customers.
Humans and robots working together in unison complement each other, driving efficiency and growth in our global economy. Investing in the workforce and the optimal level of automation can also help solve some labor challenges by removing the repetitive work, improving retention and transforming the balance of low- and high-skilled employees in a workforce. Employees are then freed up to do higher value tasks that could benefit their company.
Investing in technology remains a low priority for some companies as they focus on short-term returns rather than the long-term benefits for the business. Those companies will continue to face labor challenges as competitors focus on optimizing the process and developing their workforces.
“If the majority of businesses today changed their paradigms on labor and saw the full potential, they would be immune from outside factors such as our customers in Romania are facing,” Adam says. “Most companies say that they are facing labor challenges but, in reality, they are sitting on goldmines just waiting to be developed.”
Learn more about how your company can find solutions to its labor challenges.