The massive surge in volumes and the ongoing labor shortages in the U.S. have many warehouse and distribution center managers concerned.
According to a new survey from Instawork, which provides flexible staffing to businesses of all types including those in the warehouse and distribution, 75% of light industrial businesses don’t feel fully prepared for 2022, and 60% struggled to keep pace with increased demand last year. The report, the State of Warehouse Labor: Staying Flexible in 2022, found that 58% of businesses saw an increase in fulfillment volume over the past 12 months while another 19% saw the same levels.
After its rapid growth, e-commerce sales have settled a bit, rising 14% in 2021 year-over-year, reaching $871 billion. That is down from the 31.8% growth seen in 2020, but still represents about 19% of total U.S. retail sales. Overall U.S. retail sales were up 19% in 2021 over 2020’s level.
Conversely, while retail sales and business inventory levels have remained strong, the labor market has lagged. According to the Bureau of Labor Statistics, warehouse jobs rose by 13,400 positions in January to 1,728,200 jobs in the country, but understaffing persists.
“On a seasonally adjusted basis, truck transportation, courier and messenger, and warehousing are at record employment levels as of January 2022,” Jason Miller, an associate professor at Michigan State who watches transportation data closely, said in an email to FreightWaves.
There remain concerns among warehouse operators, though, that the volume surges that have led to increased staffing needs may not last, driving some businesses to adopt more flex worker models to try and fill immediate needs. In the Instawork survey, 48% of businesses said this uncertainty and variability in volumes is what is driving their interest in temporary labor.
“Variability may settle down, but the labor shortage isn’t going away anytime soon — so your business can’t afford to brush off an agile staffing strategy,” Instawork wrote.
Overall, 73% of businesses said they have problems attracting employees, up from 26% in the 2021 survey, Instawork said, but less than half are responding to workers’ top request — flexible scheduling. With COVID restrictions disrupting work and school schedules, more workers are seeking jobs with flexible scheduling, as evidenced by the fact that 25% of U.S. workers are engaged in gig economy jobs. Only 44% of warehouse operators, though, are investing in building flexible scheduling options and career development paths.
“Flexibility and career development are becoming critical factors for workers, yet many employers fail to invest in these areas — creating a major opportunity for those that do step up,” Instawork wrote.
The company noted that 54% of light industrial businesses reported using more temporary workers now than prior to COVID, but despite the fact that 84% of them use two or more staffing vendors, only 6% were able to get the required workers they needed.
Many businesses have worked to improve retention practices, the survey found, as they compete to keep the workers they have. Forty-seven percent have implemented or improved worker retention programs, and 40% have relied on temporary staffing to fill gaps. Just 39% have actually increased headcount, however.
The majority of businesses — 72% — said pay increases are the top tactic to improve retention, with 52% citing awards and recognition programs and 48% adding bonuses. The average wage increase was $2.54 per hour, Instawork said. Nearly 20% of companies raised pay $3 per hour, but 14% didn’t increase pay at all.
“With such significant gains, however, wages may well be nearing their limit,” Instawork said. “After all, operating margins can only allow for so much of an increase in labor costs. And with so many of the major players increasing compensation to attract and retain workers, offering alternatives can help businesses stand out.”
“The past couple of years have tested warehouse and distribution operators in a way it never has been before — but the silver lining is that many businesses have challenged norms and experimented in their quest to adapt. If light industrial businesses continue to show the same resilience as they’ve demonstrated thus far, along with a touch of innovation, they’ll be poised to thrive in 2022,” the survey concluded.