Innovating Leadership:
Co-Creating Our Future
Hosted by Maureen Metcalf
Conversations with global thought leaders on leadership, culture, and innovation—designed for executives navigating complexity and building resilient organizations.
Lasting Solutions for Labor Shortages
Episode Description
Labor shortages are reframed as a leadership and operating model challenge rather than simply a recruiting problem. Drawing on supply chain and transformation expertise, the discussion explores how organizations can reduce dependency on scarce labor by redesigning work, expanding workforce accessibility, and creating environments where employees choose to stay. Sustainable workforce performance is linked to system design, organizational adaptability, and long-term value creation rather than short-term hiring tactics.
Key Takeaways
- Labor shortages often expose underlying weaknesses in organizational design and workforce strategy.
- Redesigning work can create greater value than continually competing for the same talent pool.
- Employee retention improves when organizations create meaningful and differentiated work experiences.
- Workforce resilience depends on expanding access to talent through innovative employment models and support systems.
- Operating models that were once efficient can become liabilities as labor markets and business conditions evolve.
Why This Episode Matters
It challenges leaders to move beyond tactical staffing solutions and address the structural workforce issues that affect long-term performance, scalability, and competitiveness.
Featuring
Episode Topics
Podcast Air Date
Episode Duration
Watch the episode
Episode Content:
Labor Shortage? Your Employees Experience One Company. Your Org Chart Another.
When conditions change, the systems that once created an advantage can become the systems holding you—and your hiring ability—back.
Leaders live in a world of contradictions. For example, not long after the Bipartisan Policy Center warned of major labor shortages in the next decade, Microsoft announced 3,200 layoffs at Xbox.
In times of disruption, the short term often blinds us to the long term. But wise leaders look beyond quarterly earnings; they’ll start preparing now for the staffing shortages they’ll encounter down the road. Indeed, for some industries—such as distribution/logistics—labor shortages remain an annual concern.
Boosting wages, lowering hiring standards…these are temporary solutions at best, yet most organizations’ typical fallbacks. The problem is that your competition can take the exact same steps, so you fight over the same limited labor pool.
Supply chain veterans Will O’Brien and Dave DuBose see a better, long-lasting solution. And it starts with you: abandoning your assumptions from the old world and redesigning for today’s real labor market.
Throw Efficiency to the Wind. Sort of.
First, let’s face today’s reality. Employees are after more than just higher wages. And, realistically, any employee value proposition that your competitor can copy or improve by adding just $2 an hour is clearly not a durable competitive advantage for you. The best people will simply hop around to whoever pays the most in a given quarter.
Second, the major factor in staff morale (and, thus, how tempting those extra $2 become) is working conditions.
Leaders tend to diminish the human factor, relishing efficiency instead. And for good reason! We streamline processes. Consolidate operations. Standardize work. Reduce redundancy. Optimize networks. Eliminate excess capacity.
But those efficiencies are designed for the world at the time they were created. As time passes, they become operational habits. But when the environment changes, the very system we optimized becomes the system that constrains us. To paraphrase the Beach Boys, it just wasn’t made for these times.
Consider the traditional distribution center. For decades, conventional wisdom favored concentrating fulfillment in highly efficient facilities. Scale created advantages. Processes could be standardized. Labor could be deployed efficiently.
That logic was sound…at the time.
Then the assumptions underneath it began to change:
- Labor became harder to find.
- Customer expectations accelerated.
- E-commerce changed fulfillment patterns.
- Transportation economics shifted.
- Technology created new alternatives.
- Amazon reset expectations for speed and convenience.
Efficiency was no longer the root issue; it was whether so much work should go through a distribution center in the first place!
This should be tickling a nerve for you regardless of industry. Every organization has processes that were designed for conditions that may no longer exist:
- Office requirements built around a different workforce.
- Approval structures built for a slower market.
- Job descriptions built around outdated technologies.
- Benefits built around what employees used to value.
- Management systems built when talent was easier to replace.
In short, your org chart and ops manual reek of yesteryear, and reflect a very different company than what your employees (and maybe you) actually experience.
Create What Competitors Can’t Copy: The Sticky Employer
Redesigning the work and environment addresses one side of the problem. The rest is more human.
If good people are difficult to find, keeping them becomes invaluable. But the knee-jerk reaction is to offer more money. Of course, competitive wages are foundational; if you underpay people, no amount of culture will compensate for it. But as we mentioned earlier, it holds a strategic limitation: your competitors can easily copy it. So make it harder to duplicate.
You do it by becoming what Will O’Brien calls a sticky employer. The strategy behind it is more sophisticated than simply making employees happy.
A sticky employer creates forms of value that are genuinely important to its workforce and difficult for competitors to replicate quickly. That requires something many organizations say they do (but most often do only superficially): Understand your people.
Start with very basic questions:
- What makes their lives difficult?
- What creates unnecessary friction?
- What causes good employees to leave?
- What do they value that your current benefits package assumes they should value differently?
- What problem could you solve that would materially improve their lives?
The answers are rarely what leadership expects. Most have designed the employee experience around an imaginary person.
In today’s world, standard benefits—from healthcare to a 401k—are not equally valuable to every employee. These days, for example, married couples often both work…so an employee whose spouse provides health insurance may value something else more. Working parents will see childcare as enormously desirable. Others may value predictable hours more than a modest pay increase.
The point is not that every organization should offer every benefit, but that retention strategy should be designed around the workforce you actually have and the workforce you need, not some generic employee persona created in a conference room or HR’s new AI system.
Oh, Won’t You Stay Just a Little Bit Longer?
There is an important distinction here.
The goal is not to make leaving difficult through restriction, fear, or dependency. It is to make staying valuable. Those are very different leadership philosophies.
One asks: How do we reduce turnover? The other asks: What would ensure talented people actively choose us?
The first produces a competitor-replicable retention program. The second can change the entire organization for the better. It may affect job design. Benefits. Scheduling. Technology. Workplace culture. Physical facilities. Even the operating model itself.
Your Operating Model and Employee Experience Now Converge
Organizations often treat operations and people strategy as different conversations. Operations focuses on how to move faster; HR on retention; Finance on costs, and so on. To the employee, though, they’re all experienced as one single system.
A process that wastes an employee’s time is an employee-experience issue. A technology implementation that creates more frustration is an employee-experience issue. An unpredictable schedule is an employee-experience issue. You get the picture.
This is why planning for today’s warnings about tomorrow’s labor scarcity cannot be entirely delegated to HR or recruiting. It is a leadership and organizational design challenge.
If You Build It, They Will Come
Even in some of the largest corporations, many CEOs still plan for yesterday. But yesterday’s conditions—cultural, consumer, economic, technological, or political—are not coming back.
The stronger approach is to design an organization that can prosper under the conditions we actually face. How that works depends on your particular sector and culture. But three considerations are universally critical:
- Question efficiencies built on outdated assumptions.
- Understand what your people genuinely value.
- Create reasons to stay that competitors cannot easily buy.
With that triple play, recruiting ceases to be an issue. The best of the talent pool will be coming to you. And great people (including you!) will have more reasons to stay.
Thank you for reading our newsletter, where we bring you thought leaders and innovative ideas on leadership topics each week.
We strive to elevate the quality of leadership worldwide. Are you ready? If you are looking for help developing your leaders, explore our services.
Resources:
Learn more about Dave & Will’s work at their company website, https://truenorthgrowthpartners.com/.
Our host Maureen Metcalf posts a newsletter every week on LinkedIn. You can subscribe here.
Maureen’s latest book is Innovative Leadership & Followership in the Age of AI. You’ll find details about it at https://bit.ly/LeaderInAI, or check out the Kindle version at https://amzn.to/44buVz8. The audiobook version is now available at https://amzn.to/4dTCleZ.
Her other 10 books are available on Amazon here.
Other episodes you’ll enjoy:
- Looking at Labor Yesterday, Today, and Tomorrow: The International Labor Organization with Kevin Cassidy and Christopher Washington
- What Leaders Miss in the Talent Shortage Myth with Doug McCollough
- Developing Future-Fit Employees with Faris Alami and Christopher Washington
Guest(s):
Guest(s) Bio:
Will O’Brien is a Partner at True North Growth Partners and an executive leader and advisor with more than 30 years of experience in operations, supply chain, and business transformation. His career includes executive leadership roles in industry and consulting, including Lowe’s and Sedlak Supply Chain Consultants. Will helps organizations improve operational performance, align people, processes, and technology, and build the capabilities needed for sustainable growth.
Dave DuBose is a Partner at True North Growth Partners and an executive advisor and transformation leader with more than 30 years of experience. His career includes leadership roles with Pepsi Bottling Group, Accenture, Limited Brands, IBM, and Sedlak. Dave helps organizations align strategy, operations, people, and technology to execute complex transformations, improve performance, and achieve sustainable business results.
Want to be a guest on the Innovating Leadership Podcast?
Want to sponsor the Innovating Leadership Podcast?
Our Podcast Team:
Maureen Metcalf
Host & Executive Producer
Dan Mushalko
Editor & Producer
Jenna Reik
Guest Booking Manager
Love the show?
Leave us a review and rating:
Transcript
(auto-generated)
Maureen: [00:00:00] Today we’re gonna talk about lasting solutions for labor shortages, and our guests are Will O’Brien and Dave DuBose. Will’s a partner at True North Growth Partners, where he works with organizations on supply chain and operations side of their businesses. As an executive at Lowe’s Home Improvement, he helped to lead development of the supply chain for the big box retailer during a period of rapid growth.
Dave DuBose is a senior supply chain professional with more than 30 years of professional experience. So between the three of us, we have 90 years of experience. Let us hope we’re smart.
Dave: Or more.
Maureen: Yeah. So let’s start with the labor shortage for DC centers. How significant is the labor shortage, and how many people work in a typical DC?
Will: It’s very significant. Columbus, where we are today, is at about three percent unemployment, and I think functional full employment is between four and five percent.
If you look at some government numbers, [00:01:00] there are over seven hundred thousand jobs that are open In excess of applicants for those jobs.
Maureen: So what happens if I run an organization and we just don’t have enough people? Do I not ship stuff? Do people work longer hours? What do we do? Yes.
Will: Yes and yes, and to some extent you’re a little too late, but that doesn’t keep an organization from scrambling.
Okay. So they’re gonna be working on wage increases, they’re gonna be working on giving bonuses to stay or to sign on. Mm. There’s gonna be overtime, and that’s where the leadership is really stressed in terms of how good of leaders they are because a lot of times that ends up being taken out on the people.
Maureen: I remember working for a client, and it was the hourly workers in a manufacturing facility. Right. Mm-hmm. And they had issues of people sneaking out of their shifts to pick up their kids from daycare.
Will: Right.
Maureen: Mm-hmm. Things like that because they had compulsory overtime, and you’re choosing between your job and your kids.
Will: Correct.
Maureen: And those are pretty untenable choices.
Will: So the earth is shaking when that happens, and there are a lot of [00:02:00] retailers that lose
Dave: sales. We’re in Columbus, so Will just cited the statistic about 3% unemployment. So we’re in a tight situation. If you live here, you realize this is a distribution hub, one of the great distribution hubs for the United States.
In particular, we have a number of different industries, but in particular we have a lot of retail here. Specialty retail in particular tends to have a severe spike at holidays, something like 3 or 4x to 1. In fact, my old employer, one of the sayings was, “A day is a week, and a week is a month.”
So when you’re talking about the volume compression that hits, the wave rather, that hits starting around Thanksgiving. It actually starts more like November 1st now. Okay. And it extends through, you know- January
January. And the companies that are out there are very, very well aware of this. Mm-hmm. They’re all competing for the same resources. We’ll talk some more about that. But they basically have a plan to go out and just acquire those temporary [00:03:00] and seasonal resources- Mm-hmm
because they know they’re gonna have this enormous spike.
Maureen: Distribution is a global issue because the components used to manufacture everything we use come from around the world. Absolutely.
Your shirt probably has buttons from one country, thread from another country- Right … fabric from a third country, and they may actually stitch it someplace else.
Will: Correct. And China’s becoming more expensive even as a manufacturing point because there’s so much demand coming out of there. They’re getting, getting a middle class.
They’re becoming more expensive. As China gets more expensive, a lot of that production starts moving to Indonesia and other markets.
Dave: If you look at the overall supply chain, it is very integrated, it is definitely global-
Will: Right
and there’s definitely a ripple effect that goes all the way around the world.
Maureen: Okay.
Will: We used to consider where we were gonna put the next distribution center for a number of reasons: balancing transportation costs, but we’d always look at labor market as well.
You could be 25 or 30 miles away and nominally be neutral, overall cost-wise, so you’d look at the relative labor markets. And you used to know some markets were good labor markets than others. There’s not a good [00:04:00] labor market anymore.
Maureen: Specifically in the US.
Will: In the US.
Maureen: Okay. Yeah. And I’m assuming there are other entire countries that have similar dynamics.
Will: Correct.
Maureen: Okay.
Will: Correct.
I talked to one executive, and he said, “Will, I spent my whole career in this market,” that he was in.
He said, ” I never had trouble getting employees. Last year I had trouble, and this year I’m having worse.” And that was, that was actually, it was about two years ago that we had this conversation, and it’s just gotten worse each year since then. It’s a challenge kind of across the board.
Maureen: What happens to DC operators when there aren’t enough workers to fill the open roles?
Will: So think about it. I’m in a situation where I need to get 300 to 400 people to fulfill my peak season.
If I blow fourth quarter, which is the peak season, i’ll blow the financials for the whole year. That’s a lot of corporate pressure coming down on you. I’m gonna pay whatever I have to pay to get the people in here.
And to the extent that I fail at that, I risk losing a lot of sales, and there are no shortage of retailers that have gone out of business because Christmas didn’t show [00:05:00] up, and part of that is because- Mm … they couldn’t fulfill. Right?
Maureen: And if I have to pay whatever it costs, that eats into my margin.
Will: Now I’m selling unprofitably, right? I’m also reducing the standards that I hire by. So I’m pulling people in, they can’t pass my drug test.
Who’s got the backbone to stand up under that pressure I described and to say, “No, I’m not gonna hire this person when this person’s willing to unload a truck for me.”
I talked to an operator, and he said, “You know, Will, I hired 12 forklift operators.”
“
Will: A week later, I only had three.”
Maureen: Now, those guys you want to be sober.
Dave: Yes. Most, most, most definitely.
Maureen: That’s machinery.
Will: Sober, and there is some- Yeah … some skills necessary- Mm
’cause you’re putting things up, 20-something feet in the air, a very heavy pallet of product. Mm-hmm. Right? Mm-hmm. So there’s some skill to it. Okay. And he’s having such trouble. He only kept three a week later. I don’t know what happened in weeks two or three. I mean, those three he kept, but “I had to hire 12 to have three a week later,” and I thought that was terrible, and I thought maybe that’s just, specific to him.
Then I talked to somebody in a whole ‘nother [00:06:00] part of the country, and his answer was, “
Yeah, that’s about right.”
Dave: Yeah. we’re laughing a little bit because some of it is, a little bit funny, but you do have to really think about and contemplate these issues and do it in a very planful way, and it’s difficult. There’s a danger of getting into, I’ll call it the fire of peak season. We’ll hit on this probably a time or two, but your options are expensive and few at that point in time. But you still have to do something, because, to Will’s point, you don’t wanna risk missing holiday and going out of business. It’s a tough problem.
Will: So now year two and three, a lot of folks, they’ll say, “Yeah, we’re gonna be ready because I’ve already prepared the organization to increase wages in September.”
Again , the other six buildings that you’re competing with are increasing their wages in September, too. And I bet you Amazon will increase them more.
Maureen: I wonder about people moving from one industry to the next. So say I’ve got a robust construction industry in the summer, and I need people to work in my DC in the winter.
Mm-hmm. Is there a transition [00:07:00] between labor fields where I can draw from people who are directing traffic during road work, and they work in a DC in the winter.
Will: Yeah. And there’s jobs that lend themselves to just about anybody can show up. Okay. Because unloading a truck is moving a box. And so there’s other jobs that you’re interacting with a screen and you have to be able to take instruction, you have to work at a certain pace, right?
Maureen: Yeah, you have to be literate. Right. And we still have people who-
Will: Correct …
Maureen: aren’t.
Will: Or you can design your systems for that, and that’s- Okay … a whole nother topic- Okay … is, is there are people with mental and other challenges that you- Okay … can design a lot of interfaces for- Ah, okay … that enables them to work from graphical images.
Another subject, but it’s a great workforce.
Dave: Expands your employee pool too, frankly.
Maureen: And it’s great for our communities.
Will: 100%. It’s great. Yeah. Talk about stickiness, that’s, that’s one of the things, because when you give them that, you give them some independence, you give them some wellbeing that they never thought or their parents never thought that they would have.
Walgreens is a pioneer of that. And a lot of them, it’s about screening them into the right job- Mm-hmm … so they can work at productivity levels [00:08:00] well beyond what your typical productivity levels are.
Maureen: I understand we’re not limiting it to just DCs, but maybe the broader supply chain.
Dave: Yeah, we’ve been using the term distribution, which is I think a very accurate term. I would broaden it probably a little bit more to logistics. So we’re talking about physical movement of product, and we’re focusing heavily on the distribution center and what happens in the distribution center.
Some people call it a warehouse. But really it is probably a little bit broader than that because you’ve got needs, that are outside of that up and down the supply chain. The DC and the logistics within the DC I think are really kind of the critical element here because you run into a problem with just being able to get enough qualified people and keep them and retain them.
Will: and it happens to manufacturers as well, so it’s manufacturing. Last week my wife took a picture in the grocery store and sent it to me because she was appalled that there was a huge display of candy for Halloween. This was middle of July with Halloween displays [00:09:00] already out in the stores.
So think about why that happens, because what happens in the store in October has to happen in the distribution centers six to eight weeks ahead of that, and happens at manufacturing six to eight weeks ahead of that. So your Halloween candy’s already been produced. So it’s just time phased, but they’re all phasing it, and if it’s employee intensive business- same fundamental.
Dave: You mentioned manufacturing, and things do get produced. There’s a lead time. China, or more broadly, Asia, is really the world’s factory, right?
Yeah. Gets made over there, gets shipped over in containers on ships. That stuff’s gotta have some place to go. It comes into the Port of Long Beach or wherever it comes into, gets into various distribution centers across the US, but you could expand that globally.
Yeah. And they’re gonna get full.
And they’re gonna ship out to stores. So you got your Halloween candy early, you know, dynamic, or- And bathing suits in February … or bathing suits in February kinda thing. And you could say the same thing about online, where the DC is your store basically, but it’s gotta have a place to go.
Mm-hmm. It can’t just sit there. Mm. It’s gotta move. And with [00:10:00] lead times being what they are, and manufacturing cycles being what they are, that’s what you end up with.
Maureen: Supply chain, the job, I think, is to make it as efficient as possible and take all the cost out. Mm-hmm. Uh, which then leads us to which part do you optimize?
Dave: You optimize the whole thing. That’s what makes it a tough problem, and that’s uh, basically our lot in life
that’s our lot in life, right? I mean, that’s what we do. And it’s, and it’s a tough thing, and it’s a tough equation. There’s just a lot of variables- snowstorms happen, you’ve got an economic downturn, you got environmental factors, you got disasters, you got whatever.
There’s a lot of things to factor in.
Maureen: So what are some DCs doing to solve the problem? What have you seen that’s worked?
Will: Well, before I hit what’s worked, let me tell you what tends to be what really happens, right? Okay. So you’ve probably heard the analogy of Wayne Gretzky didn’t skate to the puck, he skated to where the puck is going to be.
Maureen: Right.
Will: A lot of distribution and manufacturing operators I would say are skating to the puck in terms of- Mm … okay, they got their fingers burnt last year, [00:11:00] so I’m gonna hire earlier this year, and I’m gonna set my organization up that we’re gonna have higher wage increases, and I’m gonna have retention bonuses for people that stay past December 25th.
Maureen: All for Black Friday, or there is no Black Friday anymore. It’s all the sales start-
Dave: It’s, it’s, it’s more of what I
Will: like to call- Yeah, September …
Dave: yeah, Gray November.
Sort of the Gray
Will: November is what,
Dave: it’s a good way to
Maureen: think about it.
Well, we, which
Will: If you’re the only operator taking those actions, you’d be ahead of the game. But when all the people that you’re competing with to hire 3 or 400 people for peak, when they’re all doing that it just moves the problem around a little bit, but doesn’t really solve it. So we distinguish between health and wellness and emergency care.
Maureen: Okay.
Will: If I’m being pinched right now for employees next week, next month, or this peak, and the peak is coming on you- it may be too late, and your options are fewer, and they’re more expensive. So you’re probably gonna come to the point where you’re gonna use a lot of temp agencies. You’re gonna be paying a lot of money, whether it’s retention bonuses or wage increases or meeting what [00:12:00] Amazon’s gonna pay or whatever it’s gonna be.
They’re gonna have some level of effectiveness, but you can survive.
But I think you need to aspire for more than survival.
Maureen: What else can I do?
Will: If you need help on an emergency situation, that’s one type of medicine. We’re talking about skating to where the puck is. We think that there’s kinda three fundamental things that somebody can work on, and then I call this more on the health and wellness path.
So you can be prosperous in the long term, and you can have a loyal workforce that you get a lot out of.
And you can control your destiny that way.
Um, I kinda grouped them into things that reduce the work content at the DC.
So how can I support the demand that I have and do it in a way that reduces the number of people? And we’re gonna talk about equipment, material handling equipment. We’re gonna talk about robotics. We’re gonna talk about a few things there.
The other kinda group of things that I would suggest is be a sticky employer.
There are things that an organization can do for its people if it really seeks to understand them. Just like they sell [00:13:00] to their customers, sell to your workforce and put together in a relationship if you designed it so somebody’d be crazy to ever wanna leave you.
And then lastly is get the most out of your people.
Some of that is software technology, but a lot of that is just plain leadership.
Maureen: Some of this isn’t surprising. It’s running your business well and being proactive.
Will: Correct. Yeah. Being a good leader.
Dave: It’s important to really start very, very intentionally with a focus that is months, months ahead of things, right? Okay. So y- you know, if you get kinda smacked in the face and say, “I’ve gotta just start hiring a whole bunch of people-” Mm-hmm … “Holy canoli, this is gonna be a problem,” that is a way of dealing with it.
It’s not a particularly effective one. Really what’s-
Maureen: This is, this is what we call poor leadership. This is
Dave: called poor
Maureen: leadership. Reactive
Dave: leadership. Yeah. Really what you wanna do is bake this into your overall strategy.
HR, as well as your logistics and distribution leadership gotta play critical roles in doing this, because you gotta really think about your workforce, what it is you’re trying to do. You’ve gotta think about your plan for [00:14:00] inventory, and everybody has this- Mm-hmm
as time goes on. And then what is it really gonna take just mathematically to meet that? And then I’ve gotta think about what are my options, and really just get out ahead of it. Okay. I mean, so a lot of it is just being very planful and thoughtful and executing well.
Maureen: Conceptually, these are not new ideas.
The tactics you’re using may be very different given the change in the ecosystem that now I go to my friend Jeff Bezos every time I wanna buy something and Lowe’s doesn’t have it.
Dave: Right.
Maureen: Or my local pet food store doesn’t have it.
Will: Two avenues of newness to hit at what you’re asking about. Mm. Number one is technology is available today. The other is orchestrating a more complex, a more comprehensive view towards how do I give care and feeding to my people so my people never wanna leave?
Maureen: And in a time of less than full employment, my people didn’t wanna leave- It’s even more important … at the rate-
Will: Right …
Maureen: that they’re leaving now. Right. At this point, you said 3% here.
Will: Yeah.
Maureen: That’s lower than structural unemployment. Sure. [00:15:00] That, that’s, I’ve gotta pull people out of the air.
Will: Right.
Maureen: And hoping they can pass a drug test.
Dave: Yeah, basically. But it’s have a playbook, put the right plays in it, and execute the heck out of those
Maureen: plays.
Dave: So, so it is a combination of things, right? There were some sort of tried and true, this is not exactly rocket science, just good leadership, good planning, good strategy and execution. There’s, there’s that piece of it. The way you do it, there’s some secret sauce to that. Right. But yes, there’s that.
And then the other piece is, to Will’s point, is there is technology that is available today-
thank goodness, that does provide different options than we had you know, 10, 20 years ago.
Certainly.
Maureen: I talked to someone from P&G yesterday, and he was talking about the way they’ve blown up parts of their business- Mm and one is supply chain. Mm-hmm. And the use of technology has completely upended how they think about, yet they still manufacture things overseas. They still come over in boats. Then they put them on trains. So some things remain constant.
Dave: In a very simple model, you can [00:16:00] think of it as sort of the plan, make, move, sell, deliver, return. And that’s a very linear set of processes, right? The change with today’s world is- Those really have to happen pretty much in a very overlapping, if not parallel, manner, to be able to be effective and to work in this kinda high clock speed environment that we live in where if I don’t have it in an hour, oh my God- I’m going out to my house … what am I gonna do?
Will: Yeah, exactly. You know? An example of where fundamentally it’s the same, but you get under the details, it’s different.
It’s not unusual at all for an organization to have one fulfillment center in the United States.
Give it to FedEx, UPS, whomever, and get it out to everybody in the country, and it comes at a certain cost- Mm-hmm … and a certain speed. Now, Amazon setting expectations for speed and fulfillment.
They’re putting fulfillment centers virtually in every metropolitan area. They’re getting increasingly close to the customers.
So if I’m a brick-and-mortar retailer, what’s my play? My play might be use my stores as fulfillment centers. Doesn’t mean every store in my [00:17:00] chain, but if I have a store in St. Louis, does that make sense for fulfilling St. Louis online demand, right? And we’ll talk about some of these things. Mm-hmm. But fundamentally, it’s just fulfillment.
It’s just picking an item, giving it to the postman, and sending it to Mrs. Smith. But it can be done very, very differently.
Maureen: Well, in places like your former employer, Lowe’s- Mm-hmm … which is my most frequent shopping experience. I can now go online, click stuff, and go pick it up at the front door.
Will: Right.
Sure.
Maureen: It’s things like that. Right. Right. Now, I personally actually happen to like walking around Lowe’s, but that does increase my spend.
Will: Correct.
Maureen: And so what do you suggest has to happen for an organization to effectively deal with the labor shortage in the long term, not scurrying about every year-
Will: Right
Maureen: and panicking?
Will: We think about three things: reducing the labor content in a DC. In fact, let’s talk about that now. Reducing the labor content, there can be uses of automation… traditional material handling equipment and [00:18:00] robots. 70% of a worker’s time is spent walking. It’s not unusual to find someone called a picker, someone that goes down the aisles and picks the unit or picks the case, to walk 13, even 15 miles a day. So, that’s a place where some automation is happening, if somebody’s walking. We can have something that we’ll talk about in a minute called AMRs or AGVs or the type of robots that will take the goods to person.
There are scenarios, particularly if it’s at peak, depending on who your customer or your destination is, maybe you analyze the product flows- Mm-hmm … which is a very analytical exercise that we do all the time, and understand this vendor or this product group would be smart to just skip the DC altogether and go direct to customer.
Or skip the DC altogether and go direct to store, because the store when it’s changing season, has its greatest need for inventory of that item if it’s a seasonal type of a thing. There’s ways to do a DC bypass.
Another thing is, and a lot of folks are doing this, there are certain items that they wanna show online [00:19:00] that they don’t carry in the store or in the DC. They’re slower. Size 14 shoe might get passed to Under Armour or Nike or Adidas- Mm-hmm, mm-hmm
or whomever to be fulfilled, right? ‘Cause they don’t sell so much. Or a strange color of a shirt.
So that’s kind of a norm, but again, if you’re preparing for the peak and you need to carve off some of that demand, maybe you can do analysis that would look at product categories or vendors, and you have to compare is that vendor capable, and what’s their cost of doing that? But there’s some demand that you can just carve off and not have that product flow through the DC.
Maureen: And that’s the value of working with someone like you who’s had that experience and go in with already a reasonable point of view.
Will: It’s a hypothesis and a lot of data analysis of items, of orders…
Dave: I used to work with a guy who called it, ” you’re trying to solve the pig through the python,” which is sort of not a great image, I know. But basically it’s you’ve got this slug of inventory, products that are coming in, all different kinds of items, and it’s huge.
[00:20:00] And are there ways that you can take pressure off of your system by just avoiding the DC altogether? That’s great if you can. Mm-hmm. It balances your what we call the logistics network and it also takes pressure off the
Will: labor situation.
Those can be permanent flows or they can just be flows during peak season. Mm-hmm. Or transition periods of a season.
Another is store-based fulfillment, using stores for fulfillment, and that took a while to come and is starting to become more common.
Not everybody is willing to do it. Some folks are completely averse to the potential that a customer that’s walked into the store won’t be served properly. Others say, “We just don’t have back rooms.” Large enough to do this, right?
Maureen: So that means my grocery store, I can go pick it up at the curb.
Will: Perfectly good example. Okay. Mm-hmm, a couple flavors here are BOPUS is an acronym for buy online, pickup in store.
Maureen: Okay.
Will: And it’s exactly what you described.
Maureen: Cause I know I want X numbers of apples and whatever, and I don’t necessarily need them to come from Amazon.
Will: Correct.
Maureen: I’m out, I’m driving home from work anyway.
Will: Give them your [00:21:00] number. They put it in your truck, than to have it sitting on your doorstep.
Dave: Instead of a distribution center employee doing that, you’ve got somebody in the store who’s doing this. You’ve just shifted that labor to another resource that may be hopefully less stressed at the time, less taxed in terms of workload on that individual. Okay. That’s basically what you’re doing. You’re just shifting it.
Will: It’s another thing that Amazon has driven. Okay. So historically, you would hear supply chain professionals say, “You’re gonna pay way too much in fulfillment costs ’cause you fulfilled it at the DC and at the store, and, the world is going to come to an end if you try to do something like that.
Your inventory’s gonna go way up because of the square root of N,” which is- Mm-hmm … a technical inventory management term. The reality is Amazon is pushing the competitive for speed, for quality, and for local. Okay. Which has changed the environment, which makes some answers that I might not do in the past I’m willing to do-
Number two- if you really analyze transportation and freight and handling, and if you take a nice sliver of items that [00:22:00] you’re willing to do that for, it’s not necessarily at a cost disadvantage. In fact, that last mile, that putting something in UPS or FedEx from Memphis to San Diego can be pretty expensive.
Or I could have it go on a full truckload or an LTL in my most economic mode to my store, my remote store, and that transportation is now much more economical, and I just have to do a local courier. So you gotta net all those things out. That’s that analysis that we were talking about.
Maureen: Or you’re shifting it to me, the customer, to go pick it up for the last
Will: mile. Or
Dave: you can pick it up. Yeah. Again, distribution centers are built all around efficiency- Mm-hmm … and being very, very efficient. So that conventional wisdom was, well, gee, you always wanna do it at the distribution center.
But with labor and with the impact of peak season and- Mm-hmm … all the things that have happened okay, maybe it makes sense to still do it at the distribution center, or maybe it makes sense for you, the consumer, to do it or somebody to do it in the store because what didn’t seem to make sense before may make a lot of sense now just because would you rather miss the sale?[00:23:00]
Will: No. Of course not, right? You can’t miss. That’s, that’s a cardinal sin, right?
Maureen: Well, and we as consumers have now changed our expectations as well.
Dave: Yeah, absolutely.
Maureen: I love that I can go search online, find the most efficient thing, and then see if it’s in the store. Instead of driving around town for my multiple trips a day, I’m online for five minutes.
Will: It’s a very common- Sure … consumer behavior that’s happening.
I had an executive from DSW speak on a panel that I was moderating at a conference once, and he said, “We are 20 minutes away from 70% of our customers.”
Maureen: 20 minutes away from 70% of our customers.
Will: Right, if you look at our stores, we can’t afford to not use our stores for that type of fulfillment.
Maureen: Well, and we’re paying for the stores, and we’re paying for the employees- Right … to show up in the stores.
Will: Correct. Yeah, correct. Right.
20 minutes away, so , what’s the Amazon effect? “I’ll get it to you fast. I can get it to you economically.”
I’m gonna use those stores. They don’t even have to use all of their stores. Let’s just use St. Louis as our example. They can understand the store volume and have [00:24:00] inventory there for the stores, the online demand back to that size 14 shoe. Mm-hmm, they will ship in those items that they can forecast are gonna sell in the St. Louis market. They’ll try to get it to the right store- Mm-hmm … but if they don’t- the person is told, “Don’t go to Northland, go to Southland.”
But they won’t do that, say, with a size 14 shoe because that doesn’t have anywhere near enough demand.
Maureen: Right.
Will: Right? So- Okay … they’re doing some pretty innovative work there.
Maureen: So you’re telling me about now how I manage the content of the facility. You’ve also talked about other tactics like being a sticky employer. What exactly does that look like?
Will: Being a sticky employer is putting those things in place that are gonna be very hard for somebody else to replicate.
So some of the things that are not hard to replicate is making sure that you’re paying a competitive wage, and we’re not saying that retention or sign-on bonuses are wrong, just make sure that they fit in the portfolio in the right way.
For some people in this strata of employees, some of them value 401k, you know, paying for education, career [00:25:00] progression.
Some of them, that’s not significant for them. Mm-hmm. Or insurance. Mm-hmm. Some spouses provide the insurance, so it’s not important to this person. So that is kind of assumed. But there’s some other things that aren’t so easy to replicate.
Couple of those are: think about food service. What do they come in to eat? Sometimes they have to brown bag it. Sometimes there’s just a vending machine. Sometimes it’s the same old food that’s always there. Mm-hmm. And some cafeterias are really pretty, pretty good, and sometimes they’re subsidized.
And healthy. And healthy, right?
Maureen: Yeah.
Will: And sometimes they’re subsidized. So back to understand what your workforce would like, would value, and what you can pull off. If you haven’t built a building, you have a lot more latitude on a cafeteria.
Maureen: So if I run a facility that’s focused on fitness, I’m probably gonna provide healthy food over a kegerator.
Will: Correct. Patagonia does daycare, and that’s a really hard thing to replicate. They do it in their DC as well as in their corporate environment.
So they have found a 25% reduction in turnover for people who participate in childcare. [00:26:00]
Maureen: Wow
Will: That’s significant.
Maureen: That’s better than the $2 raise. Correct. Probably way less expensive for me as the provider.
Will: The convenience of I take my child to the same place I go to work. The convenience of if a fever is run, I don’t have to get in my car and drive somewhere. I can just go over. Some people say, “Well, how do you pay for it?” And so Patagonia did a pretty good job of analyzing how you pay for it. And they have offset about 90, I think they said 91%, which is a pretty precise number, right? So let’s just say 90% of the costs have been offset; about half of it just comes from tax benefits. Okay. There’s tax credits they’re eligible for, and 35% of costs incurred in a qualified program can be taken off of their taxes. Right? That’s part of the retention issue. They get skilled up, they get very productive, and then they’re gone, and I gotta get somebody else.
Maureen: Now I gotta hire somebody else. Right. I’ve got lost time, lost productivity- Sure … and then the training time and expense. Correct. Yeah, you got
Dave: a learning curve and … exactly. They’re not as efficient as that person who just walked out your door. Right.
Will: Yeah. And the other’s just associate engagement was where they gave about 10% of the [00:27:00] benefit from offsetting this.
Maureen: So the other thing you talked about was employing people with varying kinds of what we would, I guess, consider disabilities or different strengths.
Will: That- Physical or cognitive challenges. Right? And we’ve put the program in at Lowe’s Home Improvement as well, and it becomes a matter of there’s some local agencies- Mm-hmm … that will help with this and the job training, and it’s a mindset of screening people in, not screening people out.
And it is absolutely a change the life for somebody business. There’s examples where they might not take in information by reading, so okay, the station you’re at is the Jet. So the screen has a Jet, and they go, “And I know I’m gonna work at Jet today.”
“And I’m gonna receive product.” And they may receive product all day long. Mm. Receiving product is looking at it, has it got integrity? Okay, and I put this label on it, and I pass it on. And they’ll do that- Mm-hmm … over and over and over again. Mm-hmm. It is what they do, and, and you can give the instructions through a GUI, graphical user interface.
And you just learn, you know, there is a training involved to get [00:28:00] them there. Yeah. But they are of a very loyal, very productive, and I know the people that are real innovators on here said there’s no freebies in this. They don’t get a lower wage. They don’t get lower expectations.
They don’t get anything like that. They are competing for work more effectively than most people in the building, because they become very productive at what they do. A great workforce.
Dave: It’s a positive thing, absolutely.
Maureen: We’ve talked about facing labor shortages. You’ve talked about the three main solutions to get more out of the work, and that has to do with the content in the facilities, being a sticky employer, getting the most from your workforce.
What did I miss?
Dave: I think just in terms of getting the most from your workforce, there are some great new tools out there in the realm of automated material handling equipment, robots, fancy stuff like that, frankly.
Also IT kinds of tools that use artificial intelligence- Mm-hmm … to help manage your labor standards, and really just make you much more [00:29:00] efficient. And supports what I’ll call the human workforce a better way.
Will: And there are some partners that… Upshift is a partner that you can have which enables you to tap into a completely different temporary workforce, kind of like Uber keeps you from having to use a cab. Ah.
You have a completely different driver that’s monetizing the times of their week or their day when they wouldn’t normally be able to make money. They give examples of having executives and lawyers going in and working in a effectively a blue collar type job because that’s the way he’s gonna pay for his golf without taking it out of the family budget.
There’s a lot of women that have kids, and there’s a period that their schedule just doesn’t make them particularly employable for a conventional. But Upshift is kinda like Uber, where the employer posts what they need.
“I need somebody on Tuesday at 3:00,” and I can say, “Okay, I’ll take that,” and you go in there. It’s a great deal that’s growing rapidly.
Maureen: So for our listeners, if you’re facing labor shortages, [00:30:00] a lot of this will translate to the broader environment.
Will and Dave, how would our listeners get in touch with you, either learn more about you and what you’re doing, or ask you questions?
Will: Well, we’re both part of a firm called True North Growth Partners, and our website is truenorthgrowthpartners.com. You can definitely contact us that way.
Maureen: Okay. They can connect with you on LinkedIn, I’m assuming.
Absolutely. Correct. Okay, great.
Dave: We’d love to hear from you.
Maureen: Thank you very much for joining us today, and please join us again in the near future.