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5 Ways to Combat Demographic Change

By: Dennis Ramers, JBT Germany

Dennis is a Sales Manager with JBT. He manages all sales within the DACH region of Europe. 

The shortage of skilled workers is on everyone’s lips in the logistics sector. Throughout the last ten years, the boom in exports and e-commerce has led to an economic upswing and a sharp increase in the demand for logistics workers. Plus, the baby boomers are slowly but surely retiring. These retirements have accelerated, at least in Germany, as a result of the pension at 63. Now, shortages of truck drivers, forklift drivers, and order pickers have taken a toll on the labor market. In addition, the demand for age-appropriate jobs continues to rise as the average working age rises. Market responses to this change include things like more ergonomic forklift trucks. Nevertheless, labor demographics still represent a great strain on the economy in Germany and in Europe.

To stay competitive and curb the impact of these demographic changes, companies need to develop a plan of attack. Let’s explore 5 possible strategies.

1. Changing Geography

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One possible approach, hiring employees from abroad or even relocating processes can help to mitigate the impact of these changing demographics. While moving operations can help ease the burden, it often proves too costly to undertake, especially when considered in the context of fewer available truck drivers. Meanwhile, the hiring of employees from abroad has been successfully practiced for many years. Logistics centres line the German-Polish border, and other facilities have dedicated bus routes to their eastern neighbours.

With the increased economic power of eastern European countries, it has become more and more difficult to solve the demand for labor this way. Salaries are rising disproportionately; more attractive local jobs are being created; and unemployment is already very low. The will to go to Germany is dwindling. For example, the Czech Republic had an unemployment rate of only 1.9% in February 2019.

2. Stocking up on Labor

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Some companies have also decided to higher more employees than necessary to prepare for future challenges. With the wave of refugees entering countries like Germany, more logistics workers have entered the labor pool. This has helped expand the market and has curbed the impact of the demographic changes. Even though hiring refugees presents other challenges, specifically a lack of language skills and of qualifications, organizations see this as a short-term problem that can be overcome with enough time.

However, the cost-effectiveness and sustainability of the approach can cause serious problems. Keeping a lot of people employed isn’t cheap, especially when not all of them are actually contributing to your company’s bottom-line. I would argue that more organizations cannot afford to do this. Plus, there are no guarantees that employees will remain with the company in the long-term.

3. Automation as a Savior

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Although there are multiple solutions to the demographic issue, most experts agree that automation and digitization is the best route to take. This has already proven true in logistics.  Automatic container and/or pallet storage has deeply penetrated this sector and continues to inform the way that new processes develop.

With that said, automating existing facilities and complex picking processes can be complicated and difficult. These challenges can raise the barrier of entry into automation. However, in response to these difficulties, suppliers within the market have – and continue to –  develop new, simpler and more cost-effective solutions. For example, Magazino has launched a complex order picking robot designed for e-commerce and manufacturing. Driverless transport systems like this “pick” from the shelf like humans and are easily deployed in existing facilities. But the development of this technology is an ongoing process, and most don’t believe robotics will completely replace human labor – at least not for another 10 years. Despite this projection, robotic picking still represents the future of automation within logistics.

4. Automated guided vehicle (AGV) systems

Though driverless systems are the future, this doesn’t mean that they’re new. They’ve been inside facilities for over 50 years and have automated long transport routes and the delivery of goods to lineside. Systems like this have already enabled employees to exercise their strengths – like picking smaller parts or reacting to unexpected situations.

And even though driverless systems are proven technology, they’re still improving. Powerful computers, better software, and massive improvements in sensor technology enable vehicles to do more than horizontal transport.

In fact, companies specializing in AGV systems have helped manage entire warehouses – even block stacking – completely autonomously. Advancements in the last 10 years include:

The price-point on these systems is an advantage as well. They work around the clock, prevent damage to your products, and do not take holidays. As a result, labor costs drop, and calculated over a six-year period, the vehicles cost less than 5€ (~$5.50) per hour. The systems also operate for at least 10 years, and often longer, because of their controlled, consistent movement. The longer a system lasts, the lower the hourly wage drops. Plus, these wages are fixed and don’t rise with inflation.

5. More Complex Fields of Work

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Another advantage of driverless systems? They meet the demands of the new generation of workers. Fewer and fewer people entering the workforce want to become forklift drivers. In part, the increase in the number of college graduates has driven this change. Think about it: the youngest generation tends to be more education than their fathers or mothers – and a lot of employees who are now retiring.

Monitoring, repairing, optimizing or “managing” a fleet of automatic driverless transport systems appeals more to young employees. Plus, this work justifies the higher wages that this generation demands, given their educational qualifications. The number of academics is also on the rise, and they can be better attracted and retained with employment of this nature.

Gradual Change – Starting Today

Driverless systems thus allow a step-by-step transition to fully-automated logistics processes. This technology helps address the current and growing shortage of skilled workers. These scalable systems, which are evolving with the times, allow us to absorb demographic change and give the next generation of employees a perspective.