3PL Perspectives
Stephanie Mansfield | Transportation Intermediaries Association
Fans of the union-backed “Fight for $15” won a significant victory on October 1, 2018 when Amazon announced it would raise its minimum wage to $15 an hour for approximately 350,000 of its employees. The boost will give the already disruptive trillion-dollar retailing giant an edge over rivals such as Walmart and Target in the competition for increasingly scarce workers.
It will also affect the 3PL industry, as an all-out bidding war continues for the same pool of warehouse workers. Thanks to the e-commerce retail explosion, warehouses and distribution centers will add 452,000 workers in 2019, according to CBRE, an investment and market research firm.
Will 2019 see a rise in robots and increased public support for driverless trucks? Some “futurists” forecast increased productivity to be as much as 46 percent with automation. And recruiting workers from other industries has proven to be effective: government data shows the 66 percent increase in workers moving to the transportation and warehouse sector from other industries from 2011 to 2015 exceeded the gain rate of any other industry.
But e-commerce only promises to get bigger, and labor accounts for more than 20 percent of total supply chain cost and up to 75 percent in final-touch distribution.
Local TIA members with warehouses close to Amazon distribution centers have already begun to plan for 2019. Competing for workers means bracing for an economic impact.
“Amazon raising their minimum wage to $15 per hour means that other employers competing for the same labor will need to raise their pay also,” said Alec Gizzi, CTB, President of JBS Logistics & Warehousing Inc. in Naperville, IL. “There is a 1 million square foot Amazon warehouse down the street from JBS, however, we have always paid an above average wage to attract good talent, so we will not be as affected as those who do not. JBS and Amazon realize that to attract good labor, you need to pay a decent wage. In the long run, you save money and improve efficiency when you hire qualified employees.”
Optimists hope the “Amazon Effect” will have a nationwide impact and help push lawmakers to almost double the federal minimum wage from $7.25 to $15, which is already a hot-button issue with fast food workers. Target has committed to a $15 hourly wage by 2020, Walmart already raised its hourly pay to $11 an hour and Costco jumped to $14 an hour in June 2018. Walt Disney World (whose workers are unionized) announced it would raise its minimum wage to $15 by 2021.
“They [companies] are competing for the same workers to do almost the same thing in fulfillment centers within hundreds of yards of each other,” said Mark Muro of the Brookings Institute. “That gives the worker some leverage.”
“I also believe that the low employment rate is more responsible for the raise in pay than government intervention or corporate governance. Capital markets will always move faster than legislators or board rooms,” Grizzi said.
According to the September CBRE report, labor is a chief concern among warehouse owners and operators. Retailers, 3PLs and delivery companies can react to the labor crunch in any or all of three ways: recruiting more workers from other industries, investing in automation to enhance labor efficiency, and expanding into markets with ready and available workforces.
“Warehouse users,” said CBRE’s Global Head of Industrial and Logistics Research David Egan, “will want to ensure that access to qualified labor is a priority in their considerations for expansion.”
“My opinion is that this is broader reflection on the entire labor market,” said Geoff Turner, CTB, CEO Choptank Transport, Inc. of Preston, MD. “The value of qualified employees in all fields is at an all-time high. Employers that can continue to differentiate themselves with more things than just base pay, will thrive”
“One thing is certain,” said Kristin Sexton, Senior Managing Director of CBRE Analytics, “Labor is a critical resource for most modern employers, especially those in the rapidly expanding and evolving field of distribution and warehousing. Effectively operating in this industry will require smart analysis of labor sources for many years to come.”
Stephanie Mansfield is the Director of Marketing and Communications for the Transportation Intermediaries Association. She can be reached at [email protected]
