The Manufacturing Labour Shortage Isn’t That Big of an Issue

when compared to the logistics labour shortage in the trucking industry.

The SCIDigest Editorial staff might have painted a grim picture in their recent article on how the labor shortage in manufacturing really is getting worse, but SI believes this grim picture is only temporary, whereas the logistics labour shortage is poised to continue getting worse for some time. Before SI explains why, let’s examine the current situation.

The SCDigest Editorial quoted a recent Fortune magazine article that said that companies that make tangible products are struggling to find candidates for about 237,000 job openings — a number that is 89,000 more than the total number of jobs created by the U.S. Economy in September. To make matters worse, nearly 80% of the manufacturing workforce is over the age of 45, and over 33% are over 55 and not far away from retirement — and the number of young workers (under 30) entering the sector is shrinking significantly, with one study reporting that only 5% are 25 or younger.

Basically, the majority of young people just don’t see manufacturing work as an attractive option — which it isn’t if you are talking about old-school 1980’s shop floor manufacturing which was hard work for low blue-collar pay.

Turning our attention to logistics and trucking, new estimates put the driver shortage at 240,000 drivers, as SI reported back in March. With 100+% turnover a year, one third of drivers reaching retirement age this decade, and an average graduate age from driver training schools of 54, the trucking industry is in dire straits!

In comparison, manufacturing has it easy. Young professionals enter an industry in which they see opportunity, typically defined as a mix of growth potential in their career and their salary, and given two equal options, many will choose the industry with the higher starting salary. Taking this into account, we see that manufacturing is in much better shape.

First of all, factory jobs are not what they were in the old days. Most of the tedious, menial labour has been replaced by automation and the only manual labour done by shop floor workers are high-end speciality tasks as most of the work on the shop floor is focussed on maintaining the robots on the automated assembly lines. In comparison, in trucking, you’re still driving a truck. The only difference is instead of driving an old pollution producing rig, you might get to drive a new hybrid that uses electricity and biofuel or clean diesel and is equipped with enhanced catalytic converters.

Secondly, the opportunity for advancement is great. Factories need senior engineers for each task, floor managers, and plant managers — there is a career path for a bright engineer. In comparison, in trucking, unless you can be a dispatcher, you’re still driving that truck in 20 years.

Thirdly, due to the sophisticated high-end nature of the work in manufacturing, most of the jobs are for skilled engineers who will often start at 50K to 60K a year, and have the potential to climb to 100K a year or more as an engineer progresses, whereas the trucking jobs require one skill — the ability to drive a truck — and salaries, adjusting for inflation, have not increased and typically don’t increase much more than inflation on an annual basis (if the driver is lucky).

Manufacturing can easily solve their labour shortage by

  1. enhancing their image and
    which could be as easy as the NAM producing the right PR campaign (with prime-time airings on traditional and online media); a
    manufacturing equivalent of the “Got Milk” campaign could rejuvenate the industry
  2. implementing their own apprentice-type programs
    which take community college graduates (for the more traditional jobs in welding, machining, etc) and even university graduates (for the newer jobs in robot maintenance, etc.) and teach them the skills that colleges and universities don’t

In comparison, logistics is out of the frying pan and into the fire between a rock and a hard place. With little advancement opportunity and limited earning potential, how do you make trucking advantage to anyone who has other options? Unless you’re targeting fast food workers (tired of asking “would you like fries with that”), interest is going to continue to wane.

You Need Analytics. You Need Intelligence. But Do You Need Visualization?

Probably not. Especially if all that visualization does is significantly jack up the cost of your analytics solution.

As a Procurement Pro, you need to know who is buying what, from which supplier, at what price, and in what quantity, and you need to present the relevant aggregate summaries to department managers and overall summaries to the CPO and the C-Suite — who will want to see the data graphically. Since even Excel has a plethora of charts and graphs at your disposal, it’s a safe bet that any decent spend analytics platform is going to have just about every standard graph and chart imaginable.

But just because you need charts and graphs, does this mean you also need interactive graphics that form the cornerstone of modern data visualization solutions? Kind of yes but mostly no. Interactive tree-maps, that are already built into leading spend analysis solutions, that allow a user to click on a quadrant that corresponds to a category and drill down into sub-category spend to understand why a certain category represents such a significant percentage of spend are quite useful, but 3-D rotating graphs, hyperbolic category hierarchies, network models, etc. are not that much use when it comes to understanding spend.

SI really likes the straight-forward answer to the question of does your company actually need data visualization given by Bill Shander over on the HBR Blog Network.

Given that data visualization can be expensive, especially if it involves large amounts of data and complex algorithms or deep interactive experiences, you need to decide if it’s worth the investment. If you’re selling straightforward solutions to simple problems, data visualization is probably not worth the money. Consumer packaged goods firms Coca Cola and Nestle don’t need interactive graphics to explain their products, just as Playboy and Playgirl don’t need to educate the opposite sex much about their centerfolds.

If a vendor is trying to convince you of the value of their analytics solution, they shouldn’t need rotating cubes to demonstrate that they can do sophisticated analysis, just like you shouldn’t need 3-D graphs to point out that a certain department’s refusal to adopt the corporate contract is increasing costs 15% and costing the organization 1 Million a year.

Simply put, if the analytic solution at your disposal has some advanced data visualization capability that is useful, use it, but don’t spend a lot of money for fancy graphics that don’t convey any more information than you can package in an Excel bar chart!

The Somali Pirate Song

Yesterday, we indicated that, with the current state of affairs, the limited Somali economy, and few options for many Somali men of working age, that Somali piracy is likely to remain strong for quite some time. Today we present one view of what you might hear if the Somali pirates were asked to put their story to song. SI thinks it might go something like this:

The Somali Pirate Song

I used to be a fisherman, and I made a living fine
I had a little cutter boat, and trawled the tuna fine
Government fell and though we tried, our borders were soon lost
The trawlers came and took our fish and we were at a loss

I looked for every kind of job, the answer always no
“Hire you now?”, they’d always laugh, “its the war, you know?”
The government, they can’t get the country under thumb
And I don’t want to get shot next time I take a run

And since no one gives a damn about this Mycenaean
I’m gonna be a PIRATE on the Ocean Indi-ian

And it’s a heave-ho, hi-ho, comin’ down the coast
Stealin’ oil and iPhones and all the modern gold
It’s a ho-hey, hi-hey merchants bar yer doors
When you see the power boat fleets
on Africa’s eastern shores!

Well, you’d think the local shippers would know that I’m at large
But just the other day I found an unprotected barge
I snuck up right behind it and I caught them unawares
I boarded their ship, ransomed it, and then I stole all their wares

A port outside of Cairo ends a mighty canal
Captains leave with so much fear that their crews have no morale
Cause they know that Pirate Big Mouth’s waitin’ at the pass
I’ll take the bridge and knock them cold and sail off with their gas

And it’s a heave-ho, hi-ho, comin’ down the coast
Stealin’ oil and iPhones and all the modern gold
It’s a ho-hey, hi-hey merchants bar yer doors
When you see the power boat fleets
on Africa’s eastern shores!

The merchant navy chased me, they were always at my throat
They monitored the shoreline with their little cutter boats
But cutbacks were a’comin’, and the sailors lost their jobs
So now they sail with me, they’re the modern Salty Dogs

An AKM, a skull-and-bones and pleasant company
I never pay salary tax and screw the TFG (Screw ’em)
Sailin’ down to Cape Town, the terror of the seas
If you wanna reach the FTZ, you gotta get by me

Cause it’s a heave-ho, hi-ho, comin’ down the coast
Stealin’ oil and iPhones and all the modern gold
It’s a ho-hey, hi-hey merchants bar yer doors
When you see the power boat fleets
on Africa’s eastern shores!

Well, Pirate life’s appealing but you just don’t find it here,
I hear in Bangladesh there’s a band of buccaneers
They roam the Bay of Bengal from Yangon to Colombo
And you’re gonna lose your cargo if you have to pass their gunboats!

Well, winter is a’comin’ with cruise ships on the way
My pirate days are over once they take over the bay
I’ll be back in spring-time, but now I have to go
I hear there’s lots of plunderin’ off the coast of Mexico!

Cause it’s a heave-ho, hi-ho, comin’ down the coast
Stealin’ oil and iPhones and all the modern gold
It’s a ho-hey, hi-hey merchants bar yer doors
When you see the power boat fleets
on Africa’s eastern shores!

With apologies to The Arrogant Warms from this Last Nova Scotian Pirate.

Will The Day of The Last Somali Pirate Come?

Doubtful.

Even though some somali pirates have been retiring, as nicely summarized in this recent article on Somali Piracy in The Economist, piracy is just too damn lucrative. Especially given the other employment options available to the pirates.

As per the Economist article, the average ransom for a ship between 2005 and 2012 was $2.7 Million. Each pirate involved in the hijacking received between $30,000 and $75,000, with a bonus of up to $10,000 for the first man to board a ship and for each man who had their own weapon. Think about that. On average, one hijacking earned a man more than he would earn from a full time job in the US (where the average man earns approximately $45,000 a year). Now it is true that pirates are charged considerably more for loaned goods and services than they are worth and often have to pay $20 for $10 of mobile-phone airtime, but even at 100% mark-ups, pirates are still earning a hundred times more from a single hijacking than they would earn otherwise in a country where the average income is in the dollar-per-day range.

And it’s not just pirates, and the financiers that organize the missions, that make a killing. Cooks (who feed the crews), pimps, lawyers, merchants (who can provide banknote checkers to detect counterfeit), militia (who control ports and can provide details of cargo and patrol somewhere else on the day of the attack), and even government officials (who can look the other way when ransoms are illegally being flown into a country) also make off quite well. Piracy is a thriving business sector in Somalia, adding 50 M to 100 M annually to an economy that legitimately produces less than 1 Billion in GDP. With no employment opportunities that are nearly as lucrative and no sector with the possibility to create the same level of wealth in the country as piracy, it should be pretty obvious that piracy is not going away any time soon.

Especially since many men don’t have any other choice. Many pirates used to be fisherman, an age-old family trade passed downed from their fathers and grandfathers, and they were happy with that life. They learned to cast nets, pull them up, sort the fish, and go to the market to sell the fish for a modest, but acceptable, price at a very young age. But then, as explained in this article on “Terror on the Seas” on realtruth.org, in the early 90’s, civil war broke out, the government collapsed, and maintaining order became impossible. The borders, and the territorial waters, went unprotected and foreign fishing trawlers emptied the waters unchallenged. The once tuna-rich waters were now as fish-free as a dead pond and the fishermen had to do something (or starve). They tried to form their own coast guard, but how much can a few fisherman with the odd dinky do to protect a 2,000 mile coastline against large international vessels. They tried, but up against improbable odds, got desperate, and aggressive – eventually storming a vessel and demanding money for its release. The ransom was paid, and they realized they had found a new livelihood which was not contained to fishing vessels. After all, who has more money, a small fishing company or a large international oil company?

What else are the pirates supposed to do? They can’t fish, there’s only so much farmland available in a country that is mostly desert and semi-desert, and it’s not exactly an outsourced manufacturing or service center. As one pirate said in a 2008 Newsweek article, “… when evil is the only solution, you do evil. That is why we are doing piracy. I know it is evil, but it is a solution.” Until they have another viable option, another solution, piracy is going to remain strong.

While You’re Celebrating Your Thanksgiving in the U.S.

Think about what you can do to make the rest of the world, including the 870 Million people in the world who are chronically under-nourished, thankful as well.

As Procurement Pros, you have a lot of control over the global food supply whether you realize it or not. Money does talk, and with enough pressure, the supply chain will walk to your marching orders. And if those orders are appropriate, maybe we can prevent half of the food being produced going to waste.

According to The Food and Agriculture Organization (FAO) of the United Nations, roughly 1/3rd of the food produced in the world for human consumption every year, approximately 1.3 Billion Tons, gets lost or wasted — due to losses during harvesting, storage, transport, and processing. This loss is almost four times what would be needed to feed all of the chronically under-nourished people in the world, and part of the reason food reserves are at an all time low.

And to make matters worse, the growth, and partial harvesting, storage, transport and / or processing produces 3.3 Billion tons of CO2 emissions and wastes precious water and energy resources. So, not only are people starving when there should be enough food, but we’re wasting limited fresh water and energy in the production of the food that is being wasted.

In developing countries, 40% of this loss is occurring at post-harvest and processing levels due to financial, managerial, and technical constraints in harvesting techniques as well as storage and cooling facilities. Additional infrastructure investments would solve the financial and technical issues, and getting smart people on the ground would solve the managerial issues. If a large grocery chain decided to invest on the ground, and reduce loss from an average of 35% to 10%, it would effectively increase production by almost 40% and lower the cost per unit by almost 30%. (Production levels go from 65% to 90%. 40% of 90% is 36%. 30% of 90% is 27%.) This is not a hard problem to solve. And it wouldn’t take too long before the grocery chain saw ROI.

In developed countries, more than than 40% of losses happen at retail and consumer levels. Faster transport, better storage, and better inventory planning could have a big impact at the retail level. The only thing a Procurement Pro can’t really control is consumer waste.

So think about what changes you can make in your organization to minimize food waste and encourage investments on the ground in the regions, and on the farms, you depend on. And when costs go down, your organization will have something to be thankful for too!