Managing Labor in a Tight Retail Market: A Tale of Two Supply Chains

Several factors have come together to compel retail executives to tighten up their future plans and their balance sheets. Nervous about recent shipping disruptions, retailers prepared for peak season unusually early. They’re also under greater financial scrutiny; despite a deceleration in inflation, costs overall remain high. Unwilling to miss any revenue opportunities, they’re making sure their forecasts and inventories are as accurate as possible, and — last, but not least — trying to optimize their workforces.

Indeed, labor is more expensive than ever, with minimum wages increasing all across the country. And while the Great Reshuffle is slowing, hiring and retention for low-paying, in-person jobs — common in the retail sector, as well as hospitality, food services, and transportation — remain a challenge.

Given these conditions, retailers should be taking a hard look at how they can increase the productivity of the labor they already have, starting with their supply chains. Let’s walk through a tale of two hypothetical retail companies — Company Omega and Company Alpha, each with very different supply chain operations — to see the direct impact of supply chain management on labor productivity.

Company Omega: A Supply Chain in Chaos

First, let’s take a look at a day in the life of Company Omega, whose unsophisticated approach to supply chain management is leaving its workforce in shambles.

Today, Omega’s problems started on the road. Three trucks were supposed to arrive at its distribution center at two-hour intervals. But the first truck arrived late and pushed into truck two’s time slot. So, in addition to the idle time waiting for dock space, Omega ended up sending the first two trucks on their way half-full, missing its on-time-in-full (OTIF) metric.

And the third truck? It just never showed up — caught in a storm. A storm that Omega had no idea was coming, and therefore didn’t have time to secure a backup driver. Now it has wasted significant labor resources picking, packing and staging all that inventory, which will just take up space in the dock until the storm passes. And if another truck arrives before then, those employees will have to move that inventory out of the way or the cascading impact of delays will only continue.

The picture is no rosier at Omega’s retail locations. Employees are left scrambling to restock shelves at odd hours once the trucks finally arrive, and many shelves are left empty due to unshipped merchandise, with no ability to tell shoppers when items will be restocked. This is nothing new for Omega’s warehouses and stores, which always seem to be either understocked or overflowing, leaving its workforce scrambling, frustrated and burned out.

How can we explain what’s happening at Company Omega? There is a rhythm to supply chain orchestration — and as soon as something falls out of that rhythm, the whole arrangement falls apart very quickly. Omega has failed to make the necessary investments to get its supply chain on the same beat, and keep it there.

Company Alpha: A Well-Oiled Machine

Now let’s take a look at Company Alpha, a similar retailer to Company Omega — but one whose supply chain runs like a top.

Alpha’s day started in much the same way as Omega’s. Alpha runs tight operations, scheduling slots down to the hour. One of its trucks also ran behind, however, Alpha had full visibility into its supply chain, including transportation data for inbound and outbound, carrier data, supplier data, and more. Alpha caught the delay in real time and its dispatchers identified another truck to pick up the load, preserving OTIF metrics.

Alpha also knows about the coming storm. No trucks stuck for hours. No inventory sitting idly on the dock. And no hurry-up-and-wait for its employees at the yard or storefronts.

Unlike Omega, Alpha has information about its entire supply chain, as well as the external factors that might affect it, at its fingertips. This rich data automatically feeds its orchestration decisions, keeping the entire operation running efficiently.

The data also feeds Alpha’s investments. Alpha recognizes that the answer to retail’s labor challenges isn’t more hiring; it’s automation. In contrast to Omega’s employees running haphazardly around the distribution center, Alpha supplements its streamlined workforce with automated systems, guided vehicles, pallet movers, and more that pull the right inventory at the right time and can handle last-minute prioritization.

Going From Omega to Alpha

If you’re feeling pangs of sympathy for Company Omega, don’t worry — all is not lost for it, or any other retailer. Omega has every opportunity to emulate Company Alpha once it realizes that supply chain orchestration is inextricably linked to labor productivity and, therefore, to its bottom line.

Where can retailers begin? Here are a few critical strategies and technologies worth considering:

• Real-time order and shipment visibility is helping retailers understand where their high priority orders are at all times. This might include technology that tracks the weather, congestion, or other disruptions to accurately predict when an order might arrive.
• Retailers are also increasingly relying on analytics that integrate order data. This data can help retailers know when their orders will arrive on-time and in-full, with inventory planning systems to monitor risks to stock rates. Data can also help retailers understand what suppliers, carriers and transportation routes under- or overperform within their supply chains, helping them improve those partnerships and buying decisions.
• Lastly, automation is going a long way in helping retailers boost their productivity. This could look like notifications of when changes to an ETA happens or when disruption events happen, enabling appropriate teams to take quick action. IoT devices are available that continually monitor temperature, location and other metrics to verify compliance and take corrective action. By connecting order and inventory prioritization and real-time transportation data to this automation, retailers can instantly reprioritize delivery schedules and yard tasks in service of operational goals. Connecting with international shipment information can ensure empty trailer pickup schedules automatically prioritize containers nearing detention “last free day” thresholds. And computer vision connected with transportation visibility can automatically check in and out deliveries to facilities, with images to support carrier audits.

In today’s tight labor market, retailers can no longer afford to leave their supply chains in chaos. By powering up supply chain operations with smart data and automation, retailers can boost their workforce productivity and better navigate the challenges of today’s market.

Seth Frederickson is vice president of product management at FourKites, a real-time supply chain visibility platform.