Companies across all industries have faced the challenges of the recession, and the survivors have learned how to do more with less. But that approach has a downside as the economy moves toward recovery and as a labor deficit looms on the horizon.

As a business manager, you need to be aware of how shifts in the supply chain labor market will affect your business, and your workforce, in the next few years. To be successful in recruiting new employees, retaining top performers and improving overall labor performance levels, you must be able to respond to a new workplace reality:

• Lower Quality in Available Labor Pool. The quality of the available labor workforce has diminished as a result of companies releasing their unskilled or low producers during the economic crash in order to right-size their business.
  
  
• Reduction in Total Labor Pool. While the unemployment rate is higher than historic norms, there is a gap between the number of retiring baby boomers and the number of new talent entering the labor pool.
  
  
• Rising Health Care Costs.The impending changes to health care regulations will introduce a new economic strain on businesses of all sizes. 49% of manufacturers and distributors expect benefit costs to rise by 4% to 9% in just the next 12 months.
  
  
• Decreased Employee Loyalty. With wages being suppressed and two-income families becoming single income, the workforce will move at will for higher wages. Voluntary employee turnover rates continue to edge upward, and currently stand at over 14% for distribution/warehouse and manufacturing functions.

Since labor is typically the single largest line item on an operation’s P&L, it can have the largest net effect on your overall cost to do business. Labor Management Programs have typically been utilized as a way to control or reduce this expense through the implementation of improved processes and engineered standards, and by giving management visibility to key performance indicators.

It seems clear that Labor Management Programs will increasingly become a necessity for companies in all industries, not only to address the workforce issues businesses are facing today but to forge ahead into the future. The name of the game is not just “How many people do I need?” or “How well are my people doing?” but also “How do I attract and retain top-level talent?”

Employees are your number one asset and without them, little to nothing gets accomplished. But one-third of distributors do not consistently find the skilled employees they need. Therefore, attracting and retaining top-level employees will be vital to running a competitive and cost-effective supply chain in the years to come.