Refocusing on talent as North American labor faces generational transition

By Michael Burnette

Editor's note: In November, the University of Tennessee Global Supply Chain Institute published its latest white paper, “Unlocking the Potential of the Gen XYZ Labor Force,” by Michael Burnette and Ted Stank. The paper summarizes research by the Advanced Supply Chain Collaborative, a think tank partnering faculty experts with industry professionals to enhance business performance, enrich teaching, and cultivate supply chain excellence.

This article first appeared on the University of Tennessee, Knoxville’s Global Supply Chain Institute’s blog. It is being reprinted with permission. You can read the original post here.

The field of supply chain management evolved significantly in 30 years. Even greater changes are expected, driven by broad megatrends impacting supply chains and the external geopolitical, social, demographic, and economic environments in which they operate. These changes will challenge supply chain managers to proactively grasp new requirements and capabilities to deliver economic and societal value. 

The COVID-19 crisis that disrupted global supply chains provided a stark example of the volatility supply chains must absorb. The bullwhip effect from supply and transportation closures and reduced consumption caused ripple effects globally. The resilience of supply chains and their leaders will continue to be tested. Primary challenges will likely stem from broad shaping forces such as climate change, global geopolitics, social and demographic changes, and disruptive technology. However, unplanned disruptions resulting from or related to the COVID-19 pandemic will continue to emerge.

These challenges have caused supply chain managers to make very different decisions regarding network design, material sources, talent management for hourly and salaried employees, and automation. Best-practice supply chains are now focusing on developing new, breakthrough capabilities, including:

• Digital investment
• End-to-end supply chain integration/synchronization
• Supply chain network design re-invention
• Agile and resilient supply chain capability

While each of these capabilities promises improved service and reduced costs, an existential challenge to supply chain success lies in the availability of talent. Therefore, a refocus on talent management—from recruitment through retention—must be foremost among new capabilities. The talent challenge is exacerbated by changing generational perspectives on work.

Impact on supply chain labor results

A significant shift is quietly occurring within the supply chain. Baby Boomers have largely retired and been replaced with workers from the X, Millennial (or Y), and Z generations. This shift creates opportunities and challenges for supply chain managers hoping to utilize younger talent to overcome significant 21st-century challenges. While the opportunities are clear, the beginning of the road has been rocky for even the best organizations.

In the Global Supply Chain Institute’s (GSCI) applied research on productivity and retention challenges, benchmark supply chains have pointed to generational change as a primary cause. Beyond generational challenges, benchmark companies identified three additional factors impacting supply chain personal productivity, retention, and hiring gaps.

Tight labor talent market driven by flat population growth

The COVID-19 pandemic exacerbated the talent crunch worldwide as many Baby Boomers and those needing to remain home due to the collapse of child and elderly care left the workforce. Many of those workers have yet to return to the workforce. This highlights a forthcoming struggle in the industrial world, where births have slowed over the last 40 years, ensuring retirees will outnumber younger working generations. Automation may promise some relief from this labor crunch, but companies must focus on ways to get ahead of the trend. Immigration policies, later retirement age, attitudes toward second careers, etc., may need to change to compensate for the population decreases expected over the next 50 years.

Low birth rates and a lack of immigration reforms across the industrialized world have exaggerated this trend. Just look at the demographic distributions of youthful populations (with an abundance of potential workers) in countries like Nigeria and India versus those with aging and aged populations in the U.S., Germany, and China.

A perceived shift toward an “entitlement culture”

One important generational characteristic that differs between boomers and younger generations is a shift in focus from team to self.

Supply chain leaders generally perceive employees from younger generations as entitled. But the truth is more complex. Younger workers are growing up at a time when the need for strong social institutions is great, but the ability of those institutions to improve lives is under intense skepticism. On one hand, they demand more of traditional institutions. On the other, they are willing to abandon those not living up to promised values.

Younger generations are highly engaged with issues they care about, especially environmental sustainability and personal authenticity, and expect the companies they work for to support these values as well. They also take a pragmatic approach toward their work life, prioritizing individual autonomy. As a result, younger workers tend to be skeptical of official narratives and long-term promises.

Recession followed by hyperinflation

After more than a decade of economic expansion, the US went into a steep but short recession in March and April 2020. Three large government stimulus packages shortened the pandemic/post-pandemic recession. However, these packages, in combination with other macroeconomic factors, fueled inflation.

The implication for supply chains went beyond increased starting rates and wage costs, as we experienced significant levels of job switching (primarily to seek higher wages and benefits) and leaves of absence (utilizing stimulus money or benefits outside the workplace). Many benchmark companies believe inflation was the secondary cause of lower retention rates and increased hiring costs.

Demand for labor and higher wages post-COVID allows workers to trade up to better-paying jobs. At the same time, government policies support workers’ ability to be selective. Sharp rebounds in hospitality, retail, and other service sectors increased competition for hourly workers. At the same time, corporate demand for highly skilled workers generated fierce competition for professional talent.

Starting wages, both hourly and salaried, have increased. Even so, employers continue to report significant turnover and labor pressure. In part, turnover is driven by workers trading up for higher pay and better benefits elsewhere. These factors have allowed workers to cap their time investment at work and expand their time investment in other areas of their lives. This is especially true of younger workers, who are more willing to forego additional compensation for value-aligned activities outside of work. On top of these trends, a generational shift, with many older employees exiting the workforce, has helped drive lower retention rates and increased hiring costs during the post-COVID period.

About the research

This applied research in our paper focuses on identifying generational best practices to improve productivity and talent results. It was based on the region and area of the supply chain with the highest potential value creation. Technicians (hourly paid employees) in large supply chain operations (e.g., manufacturing, large warehouse, and distribution centers) were selected based on their representing the majority of supply chain resources in operations across most industries. North America was selected based on the leadership perception that this region had the highest personal productivity gap versus historical goals.

Our research team interviewed senior supply chain executives, plant managers, human resources executives, and experts in 15 leading companies across six industries. The interviews were conducted with North American and global supply chain leaders. One benchmark Fortune 500 company in Asia was included to triangulate the data. The interviews focused on generation-based labor best practices implemented or proven to drive productivity and talent results for the next decade. The six industries represented include food and beverage, information technology, consumer packaged goods, power, automotive, and construction.  These interviews generated six primary generational best practices.

To learn more about how your company can partner with us to explore advanced concepts in supply chain management, visit ASCC.

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