There is no way to dodge the ongoing labor shortage issues

Whether you are going to get a meal, buy something at the mall or super market, or go to an event, or just about anything else, for that matter, it seems that one thing that remains pretty clear is that the issue of labor availability remains a constant.

To be sure, it is a significant byproduct of the ongoing COVID-19 pandemic, which, as we all know, has seen many Americans stay on the sidelines, collecting stimulus checks, which, in some (many?) cases have led to people making more, or enough, to not work than to actually work. This is a major driver for the issues being seen in securing labor, for companies of all sizes, like the small coffee shop in your neighborhood, or a large global freight transportation and logistics powerhouse like FedEx. Regardless of the size of the business, this labor shortage truly does not discriminate.

For the latter, the impact of the labor shortage was made very clear in its fiscal first quarter earnings announcement last week, with FedEx explaining that its quarterly operating results were negatively impacted by an estimated $450 million annual increase in costs related to a constrained labor market that impacted labor availability and resulted in network inefficiencies, higher wage rates, and increased purchased transportation expenses. 

Even for a well-capitalized company like FedEx, that is a significant number, to say the least.

“The competition for talent particularly for our frontline workers have driven wage rates higher and pay premiums higher,” said Raj Subramaniam, FedEx President, Chief Operating Officer and Director, on last week’s earnings call. “While wage rates are higher, the more significant impact is the widespread inefficiencies in our operation from constrained labor markets.”

And he added that overcoming these staffing and retention challenges is the company’s utmost priority as they not only affect our cost structures and operational efficiency, but also have a negative impact on service levels.

“As such, we are taking bold action across the enterprise to hire and invest in our frontline team members as we prepare for the peak season ahead,” he said. “These actions include targeted paid premiums particularly for weekend shifts, increased tuition reimbursement, sponsorship of a national hiring day on September 23 as we seek to higher 90,000 additional positions ahead of peak, detailed volume and demand planning with customers to drive additional sorts to alleviate congestion and expanding network capacity.”

Not surprisingly, the FedEx plan to bring on 90,000 new employees for Peak Season is in line with the hiring goals of its biggest competitor, Atlanta-based UPS, whom earlier this month rolled out a big part of its Peak Season playbook, announcing that it expects to hire more than 100 essential seasonal employees, in an effort to support an anticipated significant uptick in package volume, from next month through January.

UPS said the openings it will be filling are for various positions, including: full- and part-time seasonal positions—primarily package handlers, drivers, driver helpers and personal vehicle drivers—adding it is offering competitive wages across multiple shifts in hundreds of locations across the country.

What’s more, a UPS official told LM that A UPS spokesperson told LM that the company's approach to seasonal hiring is somewhat different when compared to pre-pandemic times, in that it has had high levels of demand and volume, going back to the onset of the pandemic in March 2020, while describing UPS’s Peak Season as absolutely unique.

“Our volume goes from an average of about 20 million packages per day to somewhere close to doubling,” he said. “And there is still a peak after the holidays, due to holiday gift cards that contribute to post-holiday sales and also returns. We keep our seasonal hires through January, which is unique, as most retailers typically cut their seasonal help loose on December 24.

OK, so the fact that two of the most prevalent names in the business are bringing on seasonal staff is expected, of course. But, it is likely that filling them may not be as much of a slam dunk as it was in pre-pandemic times, too.

An article in The Wall Street Journal made that case, observing that logistics services providers are doing things like increasing pay and adding flexibility to shifts, in an effort to bring more help on board. Other steps being taken, as noted in the article, include things like signing bonuses and tuition assistance, too.

A case can certainly be made that getting seasonal staff in place for this year’s Peak Season is more important than ever, given the myriad supply chain challenges, including: still-low inventories, over-the-road congestion, tight truckload capacity and driver availability, port congestion still at never-before-seen levels, and the steady flow of e-commerce activity (to put it mildly). In short, things are much different now than they have ever been, and more staffing is needed to help ensure things run well and efficiently at the busiest time of the year, which is getting closer by the day.

How smooth will supply chain operations and throughput be in the 2021Peak Season and beyond? It is still too early to tell, but, even without a crystal ball, it is pretty clear that help is wanted.