The effects of the labor shortage and supply chain disruption experienced in 2020 and 2021 are still challenging for many businesses. What started as “unprecedented” has become a new normal where delays, costs, and surpluses are being handled differently than they were before 2020.
With the halfway point of 2022 quickly approaching, many continue to wonder when labor shortage and supply disruption may subside. The New York Times quotes economist Phil Levy as saying, “it’s unlikely to happen in 2022.” The financial barriers experienced by suppliers and manufactures have created a new burden on many businesses when it comes to supply chain. How do we manage these situations? How can we better prepared?
In this blog post, we will discuss how to combat labor shortage and supply chain disruption with technology. You can use the numbered links to skip to specific sections.
RF-SMART recently joined SourceDay and two of our customers to cover this topic. Click here to watch the webinar.
Combatting Labor Shortage and Supply Chain Disruption with Technology
The Evolution of Supply Chain in the Last Decade
Supply chain has many variables from finance to product manufacturing to distribution. Before the events of 2020, companies would purchase product based on many details including:
Historical data (how much did we sell last year?)
On demand inventory (build to order)
Overall human understanding
Businesses could also more accurately predict when there would be factory shutdowns. For example, Chinese New Year was a main holiday that distributors would plan around because they knew manufacturing facilities would be shut down for a period. These days, however, entire factories and businesses have shut down due to illness. As the world adapts to include more digital and remote work, businesses are turning to cloud technology solutions to help them order inventory and run picking tasks without setting foot in a physical warehouse. Regardless, having enough inventory on hand has become a new challenge that many businesses are facing.
The Inventory Model Shift
In today’s world, many companies no longer plan when they are going to buy. In many cases, companies are re-evaluating their inventory model because they do not know if or when the product may become available again. Two of the most common models are detailed below:
Just in Time (JIT or “lean manufacturing”) is a management strategy that aligns orders from suppliers directly with production schedules. Companies employ this inventory strategy to increase efficiency and decrease waste by receiving goods only as they need them for the production process.
In the Just in Case (JIC) inventory model, manufacturers reorder stock before it reaches the minimum level to continue to sell inventory while the suppliers are supplying the good. JIC keeps a minimum level of inventory in case of emergencies, which can lead to waste if inventory doesn’t sell or there are additional storage costs incurred. This practice can eliminate risk.
JIT and JIC both have their place, and many companies are considering adopting a hybrid of the two to increase resiliency in their supply chain. The first step to determining what model will work best for you is to do an inventory analysis and classify essential items, while determining how easy it is to acquire it. In a hybrid model, JIC can be applied to items that are quick to turnover while JIT might work for less popular items.
The Pandemic’s Effect on Purchasing and Labor Shortages
The shift from JIT to JIC is not the only change that supply chains have seen in the last 2 years. Pre-pandemic, companies would often put a deposit down with their manufacturer that would range from 25 to 50% in upfront costs. Post-pandemic, some manufacturing companies require buyers to put down 75 to 100%. This change has driven CFOs to re-allocate funds to ensure they can secure product to sell. In addition, most companies experienced very high costs for transport and are experiencing the effects of inflation. McKinsey reports that “Companies…are also experiencing considerable challenges, such as transport rates increasing by up to 30 percent.”
Additionally, skilled employees are in high demand, causing problems like a manufacturing labor shortage. Forbes reported that, “manufacturing employment has dipped by nearly 400,000 from pre-pandemic levels.” It is becoming more difficult to find and retain great talent. There is also a warehouse labor shortage, partially due to high turnover rates in the industry. It is becoming increasingly important that the technologies supporting inventory are user friendly and easy to train.
For example, Peace Coffee sought a WMS that would be easy to implement and train. “RF-SMART is straight-forward and easy to use,” said Joel Lueders, Inventory Specialist at Peace Coffee. This differed from their previous solution, where there was a lack of consistency across the meaning of keys and functions, making training a lengthy and complex process. With RF-SMART, their training time was reduced and made onboarding new staff members easy.
“RF-SMART is intuitive, only requiring a few training sessions. Our staff adopted it quickly.”
How NetSuite Customers are Solving these Challenges
Full supply chain visibility is key. It is imperative that NetSuite users choose a built-for-NetSuite inventory management system. Having one system of truth is the best way to understand the costs of your business. Additionally, turning to warehouse automation has helped many companies identify areas where they could improve and update their current supply chain practices to ease the impact of the warehouse labor shortage on their operations. The New York Times writes:
Companies may reduce reliance on labor across the supply chain over the long term through…automation. Furthermore, automation could help companies improve employee engagement and satisfaction. More than 40 percent of employees spend at least a quarter of their time performing manual and repetitive tasks. In some cases, automation can help not just reduce labor demand, but also allow employees to spend more of their time on higher-value, meaningful work.
Here are some of the ways NetSuite & RF-SMART users are choosing to solve these challenges:
Some NetSuite users are opting for domestic or in-house manufacturing to avoid overseas costs. Kevito Group, a manufacturer of ChaTime teas, opened a new domestic warehouse, but recently decided to add RF-SMART Manufacturing to their technology arsenal to have visibility into their product from start to finish.
Pet manufacturer, Thunderworks, implemented RF-SMART’s Pick Manager to help automate daily picking tasks and allow their staff to focus on higher-value tasks.
One RF-SMART customer, STH, chose to align with other companies in the same industry to pool inventory. This lessens the struggle for companies to get product, as the inventory is already available onshore.
Petshop.co.uk is using the analytics available through RF-SMART and NetSuite to gamify their employee’s work, allowing them to provide a bonus to employees that are meeting their goals and bolstering their employee retention.
GEM Products is investing in powerful ASRS automation that increases their picking accuracy and speed – allowing them to get more work done while maintaining their current staff.
Supply Chain and Labor Shortages: Addressing the Challenges
While the supply chain may look different than it did a few years ago, there are a lot of opportunities for businesses to continue to make improvements and add efficiency to their warehouse. Better warehouse technology and software can help the people you do have get much more done in the same amount of time. Automation can also help make their jobs easier and more productive, increasing employee retention across warehouses and supply chains to reduce the impacts of the labor shortage.
For more insights, check out this webinar hosted by RF-SMART and SourceDay.
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