The Ferrari Consulting and Research Group through its affiliate the Supply Chain Matters blog shares select individual prediction snapshots that are included in our annual 2023 predictions for industry and global supply chains research advisory.
Background
The Ferrari Consulting and Research Group has annually published a series of supply chain management focused predictions since its inception in 2008. They are produced to advise our clients, sponsors and the broad global supply chain management community as to what to anticipate in the coming year.
Our research advisory report for 2023 begins with a review of the themes of our prior three years of predictions and the derived learning for the supply chain management community. That includes an overview of our themes for 2023 which were shared in a previous two-part series published on Supply Chain Matters. We further include our ten specific predictions for the coming year addressing areas of business, process, people, technology and other key areas.
Our complete detailed research advisory report will be made available on a complimentary basis in the Research Center menu that will appear on the top panel of our two web sites on January 20.
In a previous postings, we published Part One of this series which highlighted our first prediction, that supply chain management teams should anticipate a considerable amount on uncertainty and that a significant challenge will be to avoid complacency in strategies and actions.
In Part Two of this blog series, we provided highlights our third prediction, that supply chain management teams will continue to exercise more direct control of direct materials sourcing, and these efforts will be a prominent element of business strategy for CSCO’s and CPO’s this year.
In this posting we highlight our fourth prediction.
2023 Prediction Four: Talent Requirements, Skills Development and Employee Retention Will Again Take Center Stage but with Different Priorities.
Prediction Background
This prediction area is a holdover from our 2022 Predictions advisory but in updated and more focused nuanced dimensions. We noted that this particular area had become one of the most concerning in the ability to achieve supply chain transformation objectives.
The termed global “Great Resignation” effect led to millions of operational and control workers resigning because of the overall pressures that the pandemic placed on work and life balance and on increased demands for added performance and productivity amid an overall shortage of more highly skilled workers. The post pandemic product demand surge that occurred throughout 2021 and into early 2022, included long hours of continuous work demands and added stress which compounded the resignation wave. Highly skilled but aging employees possessing years of inherent supply chain experience elected to take retirement during this period.
Human resource experts now point to an evolving “Great Regret” period with workers becoming more concerned with their financial well-being with continued high inflation and the threat of economic recession occurring.
Acronyms aside, while there is likely hesitancy to make employment moves, employees still seek stability but also the notions of an employer willing to support added flexibility in roles and improved quality of life outside of work in terms of job requirements. This includes shunning mandates as to where they are required to work and providing flexibilities and/or accommodations for remote work, when needed.
As industry supply chain teams enter 2023, a survey focused on supply chain logistics managers sponsored by Global Business Network CNBC in December 2022 indicated that labor challenges, in regard to burn out (65 percent), shortage of employees with the right skills (61 percent) and hiring to address skill gaps (75 percent) were top of mind for managers. Other published survey reinforce such concerns.
Yet, data from the International Federation of Robotics indicates that the total population of industrial robots reached an all-time high of 3.5 million in 2021. That number is expected to expand when 2022 deployment numbers are available.
Three years of online commerce growth, coupled with needs to be able to flex hundreds of thousands of customer warehouse fulfilment workers during surge fulfillment periods clearly caught the attention of robotics technology and online platform providers these past two years. Added developments in the areas of robotics applications applied to operational processes made significant strides in pilot deployments during 2022, but technology has not as yet mature enough to provide meaningful automation in replicating the picking-up and placement of various sized goods.
Under the leadership of Andy Jassy, Amazon has placed a special emphasis on addressing what industry players characterize as the “holy grail” of robotics, namely technology that can replicate the dexterity and adaptability of human workers in order picking and packing operations. The umbrella of these efforts has been characterized by Amazon as providing automation that can lower worker injury and high turnover rates. The reality is much broader in the potential savings of direct labor costs.
Areas of operations and customer fulfilment automation being addressed in various trails are order picking, package sorting, multiple package lifting and unloading of trucks or containers. These efforts will have broader Amazon and industry deployment trials in 2023 and beyond.
On the staffing and technology side, steadily decreasing online commerce volume declines in 2022 have led to Amazon’s announcement of layoffs involving thousands of staff.
Prediction Implications
Talent skills retention, reskilling or development must again take center stage in 2023 for both business and supply chain operations, control and management areas.
With the overall management focus turning to an economic recessionary stance of likely added cost control and cash preservation actions, CFO’s and Chief Supply Chain Officers will likely have difficult decisions to make during 2023.
As noted earlier, C-Suite survey data in late 2022 reflected that one of the three top concerns related to running the business and meeting growth objectives was the quality and availability of skilled labor needed to accomplish business transformational needs. Thus, decisions related to headcount reductions will likely be rigorous, forcing C-Suite executives to weight commitments to short-term shareholder expectations, with those with ongoing business transformational talent skills availability and development.
In early January of this year, The Wall Street Journal cited data from more than 1,000 surveyed companies compiled by Mercer Consultants indicating that firms have budgeted for more salary and wage increases in 2023 than they have in the past 15 years. This is because such firms still cannot find and retain adequately skilled workers. Further cited was data indicating that workers who stayed in their jobs are securing their heftiest pay raises in decades since business leaders feel they can still pass along higher wage costs in increased prices for products and services. Whether such trends transpire in the coming months will be dependent on respective industries or specific businesses.
From an opportunity perspective, this same environment provides prospects to be able to selectively recruit needed technical, control and data management talent skills that often becomes available as other companies encounter profitability or business challenges. A case in point is the many layoffs that have been occurring in the technology sector in late 2022. A published report by The Wall Street Journal in late December cited ZipRecruiter data indicated the most laid off tech workers were able to readily obtain new roles, the majority in three months, amid a tight labor market for highly skilled employees.
Increased Worker Demands
The year 2023 will further present challenges in worker demands for added compensation and work-life benefits after over three years of continuous demands for extraordinary worker performance.
This was already manifested during 2022 in labor contract dynamics involving major global ports, logistics, trucking and rail providers along with operational manufacturing work teams. Bloomberg cited data indicating that there where at least 38 instances of protests and labor strikes affecting port operations in 2022, four times that of 2021.
After the existing U.S. West Coast labor agreement expired in July 2022, there has yet to be a firm timetable for agreement entering into 2023. That is likely to motivate supply chain management and procurement teams to want to continue to route shipments from Asia to other U.S. ports to avoid the risk of a worker slowdowns or a work stoppage. Hopefully, that will motivate the negotiating parties to want to seek a more timely joint agreement in early 2023.
In the coming year many employers will face labor contract renewal negotiations, added labor union organizing activities and other demands as workers seek economic relief from the effects of high inflation, and increased cost of living, coupled with demands for a broader voice in workplace strategies including working remotely.
The fostering of added diversity, equity and inclusion (DEI) in supply chain workforce composition across multiple supply chain organizations remains an ongoing requirement for supply chain management teams in 2023 as is succinctly defined career paths at all levels.
Targeted Process Automation
We anticipate that select areas for process automation will again be prominent on the senior management agenda, but investment funds for wider scale, broad supply chain automation will likely be limited primarily by overall business investment restraints, along with continued maturity of certain robotics and automation technologies.
Automation will thus be focused on the most pressing operational or supply chain planning and control areas where technology enabled processes can springboard efficiency, effectiveness and obvious cost savings. The need remains for the ability to free-up existing workers from day-to-day transactional, planning or reporting tasks and refocus employees into analytical, prescriptive and insights driven work activities.
Flexible automation as a service models such as those offered by autonomous mobile robot (AMR) or collaborative mobile robot providers will continue to garner increased adoption by businesses because of the need to support periodic seasonal surges in customer fulfillment activities, thus keeping direct labor budgets stable.
This concludes our Supply Chain Matters Part Three posting of individual 2023 Predictions for Industry and Global Supply Chains.
We will feature two additional individual predictions next week so keep your browsers pointed to Supply Chain Matters.
We welcome additional client and reader feedback to this series and to specific predictions they feel should be included. Our contact information is noted on our web sites.
Bob Ferrari
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