The Growing Trend to Overcome the Labor Shortage

It was Wednesday March 11, 2020, and my wife and I were out to dinner with friends at a local sports bar.  As we waited for our food, one of the TVs was showing the broadcast of the NBA’s Oklahoma City Thunder playing against the Utah Jazz.  This TV quickly garnered the attention of everyone as an announcement was made that the NBA would suspend the season because one of the Utah Jazz players had tested positive for COVID.  Players walked off the court and fans were asked to exit.  In short time, other major sporting events were cancelled, schools were closed and shelter in place orders announced.

Up until that day, COVID was on my radar, but was only something happening on the other side of the earth.  This was the moment for me when COVID-19 became real.  We all have that moment.  In some ways it feels like yesterday, and in others a distant memory.  What happened over the next two years has seemed like a continuous stream of change and challenges. No international travel, no in person events, working from home, video conferencing, curbside pickup, social distancing, the list goes on.

The pandemic has lasted far longer than most of us probably anticipated. As we transition back to a (hopefully one day) COVID free world, the challenges caused by the COVID disruptions continue.  Currently, one of the big challenges is the shortage of labor and the subsequent supply chain issues. Estimates have shown that if trends remained as they had in March of 2020, the United States would have 2.4 million less retirements than where we are at today.  These trends, coupled with job growth that is exceeding forecasts, and we have a labor shortage we haven’t seen since World War II, according to Goldman Sachs.

Many believe this is not a temporary problem, but an acceleration of a looming trend that existed prior to the pandemic.  Since 76 million Baby Boomers were born between 1946 and 1964, the birth rate has been on a steady decline.  This leaves us with fewer workers to replace retirees, a problem that has always been there however it has gotten significantly magnified and accelerated by the pandemic.

Surely there are numerous reasons nationally, regionally, and locally contributing to the labor shortage but regardless the reasons, employers and consumers are feeling the challenges of this gap.  Depending on the source and industry, economists have predictions that this labor shortage could last a few more years and some say it could last up to a decade. We are in a situation where “Help Wanted” signs, increased wages, and better benefits will not solve the problem, because there simply are not enough people to fill the need.

Across the United States, companies are turning to a philosophy known as Lean Six Sigma to examine and reinvent their business processes in order to reduce the non-value added work that is occurring within their organization.  Lean Six Sigma is a blend of two improvement philosophies: “Six Sigma” which focuses on reducing variation in processes to achieve high quality products and services.  “Lean” is focused reducing non-valued added work to reduce the time and effort it takes to execute a process.  We can recognize non-value added work as rework, errors, delays, searching, redundancy, etc.  It’s the work that costs us (labor) time but doesn’t move the product or service closer to fulfilling the customer’s need.

The results companies are experiencing are shorter lead times, greater employee efficiency, and increased market share, all with the employees they already have. In fact, some organizations utilizing Lean Six Sigma have discovered in certain situations, they didn’t need the unfilled positions they were actively recruiting to fill. They were able to stop recruiting because they were able to eliminate so much non-value added work.

Interestingly enough, the thinking that is the source of what is known as Lean today was developed in Japan after World War II, when the economic conditions were strikingly similar to what they are today.  After the war, the Japanese economy was devastated.  Two of its major economic centers were destroyed by the atomic bombs – the country’s supply chains and infrastructure were in complete chaos, raw materials and goods of all kinds were in short supply, and inflation was rampant.  When the government took action to control inflation, it reduced consumer demand and dried up commericial credit.

Due to financial pressures, a third-rate auto manufacturer known as Toyoda Motor Company (it used to be spelled that way) was forced to reduce their labor force by 25%.After the reduction they had to figure out how to do business differently – they needed to deliver value to the marketplace consuming as few resources as possible because they literally had no choice.  They began involving every employee in process improvement activities and created a cultural mindset of “doing things right the first time” and “doing them better the next time”.

This cultural pursuit of perfection evolved into what became the “Toyota Production System” and is known as “Lean Manufacturing”, “Lean Business”, or simply “Lean” today. It was this cultural shift that enabled Toyota to rise up and challenge General Motors as the world’s largest vehicle manufacturer and deliver some of the longest lasting, most reliable vehicles on the road.

Using Lean Six Sigma as an organization wide problem-solving approach engages everyone from the front line to the board room to examine work processes, identify the sources of errors, delays, or bottlenecks, and then work together to implement solutions to streamline the process. Through the efforts of streamlining a process, efficiency gains of 30% to 50% or more with a single focused improvement project is common.  This simplifies the work and reduces the needed labor so employees can devote more time to other value-added work.

For years, organizations have used Lean Six Sigma as a business strategy to do more with less.  In the current labor shortage environment, we already have less.  Companies are struggling to do even the same amount of work as in past years.  As we move forward, savvy organizations are looking to all avenues to resolve their labor needs.  Lean Six Sigma, coupled with an automation and technology strategy is a proven path toward lightening the labor need and is enabling these organizations to outperform their competitors in quality, lead time, and customer experience.

As consumers we all know the companies that best meet our needs attract more of our business. With change comes opportunity, and we all have seen a great deal of change these past two years.  The organizations who seize the opportunity will emerge in a stronger position than back before anyone even heard the word COVID.

For more information about how Lean Six Sigma can help your organization, contact Chris at [email protected]