Employment Shortages and the Supply Chain

  By Michael Neidle  |    Thursday October 27, 2022

Category: Columns, Expert Advice, Productivity


EMPLOYMENT SHORTAGES. Although the employment rate is at an all-time low, not seen in 70 years,  the number of jobs added is at an all time high, other than the months following the months post Covid. The employment rate for many occupations and the unemployment rate is now negligible. Some companies are paying a premium, sign on bonuses, relaxing experience and even training people for jobs they are not qualified for. This is a curious time and presents an opportunity for those wanting to work, while companies are severely understaffed. This driving up inflation with a bidding war for people across the job spectrum. 

This presents a dilemma for many companies, from high tech to no tech. To navigate this period here are a just a few strategies to consider. But remember whatever goes up will eventually go down, so make sure you are not making a strategic decision which will do you long term damage: 

As the Fed raises the Prime Rate, inflation is here for a while. The most obvious tactic is to increase your wages to both retain and attract employees and pass along most of this (if not even more than the cost itself) to your next level consumer. As we all know inflation is rising, and everyone expects prices to rise. Supply and demand will determine your equilibrium pricing level and no major tax relief expected.  

Rebalance your staffing needs to keep cost under control via: automation, economies of scale, non-taxable perks instead providing raises, reducing overtime, converting hourly jobs where possible into managerial or exempt roles without O/T, using remote staff in lower cost cities, etc. Pencil this all out before you make any decisions to aim begore you shoot. 

Consider those things that you do which are marginally profitable and are labor intensive, which you can do without, concentrate on what you do best and not critically related to these labor issues.

Outsource those functions where you can reduce high labor costs without sacrificing: productivity, efficiency, quality, controls, communications, etc., without damaging your supply chain, discussed next.

SUPPLY CHAIN ISSUES. Just in time (JIT) production scheduling, which tightened up the flow on materials and to a lesser extent labor was great for efficiencies over the last few decades, but this came to screeching halt during the Covid epidemic. It was sort of like the famous poem, ”for the want of a nail a shoe was lost; for the want of a shoe the horse was lost ………. for the want of a battle the kingdom was lost, and all for the want of a nail”. Well, Covid has exposed how vulnerable the worldwide economy is to JIT optimization, without not enough slack in the system to adjust to unforeseen events. We saw huge swings in the GDP, employment, the Stock Market, where those who did not hedge their bets were severely compromised.

It looks like the crises is over, but there may well be another much more severe one in the progress or on the horizon. The one happening now is the energy and food crises precipitated by the Russia’s attack on Ukraine. The latter impacting the so-called breadbasket of the world, supplying 30% of the grain. Who knows the tangential and long-term impact this may have of the world economy and humanity (it’s sort of the want of nail allegory). As to energy, the only good that can come from this is expediting renewable resources. Then we have the secondary impact of the Ukraine war. And that this may spill over into Western Europe either as a direct incursion by Russia into NATO countries, by mistake by one side or another, or in the worst-case scenario the use of nuclear weapons that once unleashed there is no predicting the outcome.

If this was not enough, we have the China-Taiwan problem, only capable of the two largest military forces going into war. For starters, Taiwan supplies some 2/3ds of the world’s electronic chip market.  A military confrontation here would make all of the above issues look small in comparison, but like the Russia - Ukraine war, who knows?

So, what’s one to do given the above: plan ahead, employ contingency plans, hedge your bets, and hope for the best and pray. And we didn’t even bring up Global Warming, the US political unrest/rioting, or UFO’s even once. 

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