What Are Companies Doing to Survive the Supply Chain and Logistics Workforce Challenge?

The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

22The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

Introduction

Workforce strategies changed because of the acute labor shortages that existed during the pandemic. It was originally thought that the problem would go away once economies stabilized, but research such as Descartes’ study How Bad Is The Supply Chain and Logistics Workforce Challenge? shows that it has not. As a result, companies are employing new hiring and retention strategies and aggressively applying technology to offset the ongoing worker shortages. Because the workforce problem is pervasive, we wanted to find out exactly what companies are doing to address it. Descartes worked with SAPIO Research to survey 1,000 supply chain and logistics leaders in Europe and North America to better understand the strategies and tactics they were employing to improve recruitment and retention effectiveness and how they were using technology to mitigate the impact of ongoing worker shortages. Our goal for the study was to give supply chain and logistics leaders an in-depth perspective on what actions leading companies are taking to address the challenge.

What are supply chain and logistics organizations doing to improve worker productivity, attract and retain employees and find alternate labor sources

to mitigate workforce challenges today and in the future?

Top Level Findings Below are high-level at-a-glance takeaways from the research1

Automating non-value-added and repetitive tasks (54%) was the top strategy for improving

workforce productivity

Delivery route optimization (54%) and driver mobile productivity (45%) solutions were the top

technology choices to mitigate the labor workforce shortage

Automated real-time shipment tracking (53%) was the top technology choice to

mitigate the knowledge worker shortage

Working time flexibility (35%) and adopting the latest

technologies (34%) were the top strategies for attracting workers

On-the-job training and education compensation (35%) and higher

pay (34%) were the top strategies for retaining workers

33The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

Strategies, tactics and technology to improve supply chain and logistics productivity

Descartes’ study How Bad Is The Supply Chain and Logistics Workforce Challenge? showed that 76% of respondents are facing notable workforce shortages in their supply chain and logistics operations. Most companies have grappled with this issue since mid-2020 when economies started to pick up during the pandemic and it has persisted, even as many economies continue to perform better than expected post-pandemic. So, there has been considerable time for organizations to develop strategies, tactics and technological approaches to mitigate the impact of a continuing tight market for supply chain and logistics laborers, knowledge workers and managers. Here’s what supply chain and logistics leaders said:

Worker productivity The top organizational strategy overall to improve worker productivity was to automate non-value-added and repetitive tasks (54%), which speaks to the many functions in supply chain and logistics that are routine and non- integrated, requiring manual intervention. Comingling operations and centralization were next (50%) and points to finding synergy in consolidating duplicate functions across business units to create scale and efficiency more effectively. Automating non-value-added and repetitive tasks increased to 60% for industry-leading financial performance organizations and dropped to 36% for financially below-average ones. This indicates that better financial performers are more willing to take on the more contentious aspects of consolidation to get to a higher performing organization. From a country perspective, France was the highest for automation (62%), Belgium/ Netherlands for comingling (64%) and the U.S. for centralization (56%).

54%

50%

50%

7%

Automate non-value added and repetitive tasks

Co-mingling operations with other divisions to create scale and synergy

Centralization (e.g., centralized planning)

None of the above

What organizational strategies and tactics is your organization using to improve worker productivity?

44The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

Beyond the organization and geography To address workforce shortages, companies are also strategically looking outside of the organization and geography. Leveraging fleet and common carriers (40%) was the top overall strategy, closely followed by comingling operations with other companies (39%) and outsourcing to logistics specialists (38%). Leveraging fleet and common carriers increased for financially industry-leading organizations (53%) but dipped significantly (30%) for financially below-average performers. For employee turnover, the fleet and for-hire pattern was similar with a much higher figure for companies with better-than-average turnover (46%) than those with worse-than-average turnover (32%). The Nordics and Germany were highest for leveraging fleet and common carrier (46%), Belgium/Netherlands (53%) for comingling operations, the U.S. for outsourcing (42%) and Canada (31%) for not currently looking outside the organization.

Is your organization looking or working outside your organization or geography to address its workforce shortage?

40%

39%

38%

28%

Leveraging fleet and common carriers

Co-mingling operations with other companies to create scale and synergy

Outsourcing to logistics specialists

Off-shoring where there is greater resource availability

18%My organization is not currently looking outside our organizationor geography to address its workforce shortage

To address workforce shortages, companies are also strategically looking outside of the organization and geography.

55The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

The importance of technology to address workforce challenges Most respondents (58%) indicated their corporate executives believe that technology is very to extremely important to mitigating the impact of the current workforce market. The very to extremely important response increased to 79% for financially industry-leading respondents but decreased to 48% for financially below-average ones. The U.S. had the highest number of very to extremely important respondents (68%) followed by Germany (63%).

Do you think corporate executives in your organization believe that technology is important to mitigating the impact of a current workforce market?

21%

36%

28%

13%

Extremely important

Very important

Important

Somewhat important

Not important 1%

66The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

Technology deployment to mitigate the labor shortage Delivery route optimization was the technology most deployed to mitigate labor shortages (54% partially/fully deployed). This result is not surprising since, in Descartes’ study How Bad Is The Supply Chain and Logistics Workforce Challenge?, transportation operations was cited as the area suffering the most from resource constraints. For companies where management views supply chain and logistics as a competitive weapon, the route optimization partially/fully deployed response rose to 63% versus 28% for those where it’s viewed as a necessary evil. Driver mobile productivity solutions also saw a large partially/fully deployed variance, with competitive weapon respondents (56%) having a much higher number than necessary evil ones (35%). Driverless vehicles (25%) and drones (22%) were the least mature options and even those results appear to be high. Germany (63%) was the highest for delivery route optimization and the U.K. had the greatest number of driver mobile productivity solutions (49%).

Which of the following technologies have or will you deploy to mitigate labor market shortages?

Not considering Investigating Planning to deploy Partially deployed Fully deployed Not applicable

9+23+24+25+16+4

10+20+22+24+21+4 12+21+21+26+15+5

8+19+16+2727+4 Delivery route optimization

8%

19%

16%

27%

27%

4%

Driver mobile productivity solutions

10%

20%

22%

24%

21%

4%

Warehouse hard automation

12%

21% 21%

26%

15%

5%

Warehouse soft automation

9%

23%

24%

25%

16%

4%

Warehouse robotics Driverless vehicles Drones

16+24+20+22+12+8 24%

20%

16%

22%

12%

8%

29+20+14+14+11+12 29%

20%

14%

14%

11%

12%

29+17+14139+19

17%

14%

13%

9%

19%

29%

77The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

Which of the following technologies is your organization using to improve the productivity of supply chain and logistics knowledge workers?

Not considering Investigating Planning to deploy Partially deployed Fully deployed Not applicable

13+19+20+26+17+6

8+19+22+25+22+5 8+20+20+27+20+4

8+17+18+27+26+3 Automated real-time shipment tracking

8%

17%

18%

27%

26%

3%

Back-office automation

8%

19%

22%

25%

22%

5%

Advanced analytics

8%

20%

20%

20% 27%

4%

Digital customer self-service

13%

19%

20%

26%

17%

6%

Current generation TMS / WMS solutions

Robotic process automation

AI

11+23+21+23+16+7 21% 11%

23%

23%

16%

7%

16+24+20+21+11+8 16%

24%

20%

21%

11%

8%

14+27+21+20+12+7

27%

21%

20%

12%

7%

14%

Technology deployment to mitigate the knowledge worker shortage Automated real-time shipment tracking (53%) was the technology most cited as partially/fully deployed to address the supply chain and logistics knowledge worker shortage. Without automation, shipment tracking is highly manual and resource-intensive. Back-office automation and advanced analytics were tied at 47% for partially/fully deployed. AI—which leads all other options in market hype—was the lowest partially/fully deployed response (32%). Belgium/ Netherlands had the highest deployed response for real-time tracking (63%), Canada for back-office automation (48%) and Belgium/Netherlands for advanced analytics (53%).

Automated real-time shipment tracking (53%) was the technology most cited as partially/fully deployed to address the supply chain and logistics knowledge worker shortage.

88The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

40% 32% 30% 30%

Warehousing operations

Transportation operations

Transportation planning

Inventory/distribution planning

25%Customer service 19% 4%My organization is not currently investing in technologies

Demand planning

Where is your organization investing in technology to mitigate the impact of the current labor market?

Warehousing operations (40%) was the top area for investment followed by transportation operations (32%).

Technology investment While transportation-related technologies were cited as the greatest deployed to mitigate the impact of the current labor market, warehousing operations (40%) was the top area for investment followed by transportation operations (32%). Only 4% of respondents said that they were not investing in technology to mitigate workforce shortages. The U.S. had the greatest number of responses for warehousing operations (51%) and the Nordics was the top for transportation operations (40%).

99The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

Adapting recruitment and retention strategies and tactics to address the ongoing workforce shortage

Changing strategies Hiring laborers and knowledge workers were the top areas cited (54%) as having been altered the most to address the workforce shortage. However, answers across all categories were very close with the lowest altered to extremely altered response for retaining managers at 49%. Only 20% of respondents said that their organization made no change in strategy for hiring laborers. When it comes to hiring managers, the altered to extremely altered response for competitive weapon respondents was 69% versus 53% for necessary evil respondents. Germany was the most likely to alter hiring strategies for laborers (45%) and knowledge workers (35%).

Because of workforce availability challenges, has your organization altered strategies for the following?

Not altered Somewhat altered Altered Very altered Extremely altered

Hiring laborers (eg, warehouse workers & drivers)

Hiring knowledge workers (eg, planners, managers & analysts)

Retaining knowledge workers

25%

7%

28%

20%

19%

25%

6%

30%

21%

19%

Retaining laborers

Hiring managers

Retaining managers

27%

7%

28%

22%

17%

27%

7%

25%

24%

17%

26%

6%

25%

25%

18%

26%

8%

28%

20%

18%

Hiring laborers and knowledge workers were the top areas cited (54%) as having been altered the most to address the workforce shortage.

1010The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

Tactics employed to attract workers Working time flexibility (35%) was the tactic most cited as used significantly to attract workers, closely followed by adopt latest technology (34%). Both approaches play favorably to millennial and Gen Z demographics. Higher pay was third (31%) for significantly used, and the lowest not used at all (15%). Competitive weapon respondents were even more focused on working time flexibility (39%) and adopt the latest technology (42%) while necessary evil ones were less focused on both, with working time flexibility at 26% and adopt latest technology at 28%. Childcare allowances or at work services were the lowest (23%) used significantly and the highest (36%) not used at all. The U.S. had the highest responses for working time flexibility (46%) and adopt latest technology (44%).

36% 40% 23%

32% 42% 26%

18% 52% 30%

17% 49% 35%

15% 54% 31%

Which of the following tactics is your organization using to attract workers?

Not at all Somewhat Significantly

16% 51% 34%

Adopt latest

technology Higher

pay Working time

flexibility Allow

part time work

Signing bonus

33% 41% 26%

Work from home

33% 44% 23%

More time off

Childcare allowances or at work services

Working time flexibility (35%) was the tactic most cited as used significantly to attract workers, closely followed by adopt latest technology (34%). Both approaches play favorably to millennial and Gen Z demographics.

1111The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

Tactics employed to retain workers On-the-job training and education compensation (35%) was the top significantly used tactic followed closely by higher pay (34%). Almost half (49%) of necessary evil respondents did not offer higher pay to retain workers versus competitive weapon respondents (23%). Work time flexibility was much more likely to be significantly used by competitive weapon respondents (31%) than necessary evil ones (16%). Childcare allowances or at work services was at the bottom overall (39% not at all, 22% significantly). On-the-job training and education compensation and higher pay were dominated by Belgium/Netherlands (48% and 43%, respectively) and the U.S. (45% and 44%, respectively).

20% 50% 30%

21% 52% 27%

26% 45% 29%

13% 52% 35%

17% 53% 30%

Which of the following tactics is your organization using to retain workers?

On-the-job training and education

compensation

Work from home

More time off

Childcare allowances or at work services

Not at all Somewhat Significantly

14% 52% 34%

Higher pay

Working time flexibility

Employ team building

activities

Career planning and promotion program

Retention bonus or rewards program

30% 46% 24%

31% 45% 24%

39% 39% 22%

More time off

Work from home

Childcare allowances or at work services

On-the-job training and education compensation and higher pay were dominated by Belgium/Netherlands (48% and 43%, respectively) and the U.S. (45% and 44%, respectively).

1212The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

Alternate workforce sources Immigrants (37%) as an alternative source for workers had the greatest response followed by people with disabilities (34%). The use of immigrants rises significantly to 54% for financially industry-leading respondents and drops to 27% for financially below-average ones. Not currently using alternative sources was cited by almost one- third (30%) of respondents—a missed opportunity. With historically strong focuses on using immigration to meet workforce needs, Canada (59%) and Germany (54%) were the highest. For people with disabilities, France (37%) was the highest followed closely by the U.S. (36%).

With historically strong focuses on using immigration to meet workforce needs, Canada (59%) and Germany (54%) were the highest.�����������������

37%

34%

30%

23%

30%

Immigrants

People with disabilities

Formerly incarcerated/ Social rehabilitation programs

Refugees

Not currently

Is your organization using the following sources for new workers?

1313The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

Leveraging educational or governmental organizations for labor workers Trade schools (43%) had the greatest response for working with educational or governmental organizations to attract labor workers. Universities followed at 37%. Carrier respondents (55%) were even higher for trade schools. Universities were the top choice (48%) for financially industry-leading respondents. Over one-quarter (27%) of respondents don’t work with educational/governmental organizations and the U.K. was the highest (43%). Responses for leveraging trade schools for laborers were the highest in Belgium/Netherlands (59%) and France (58%). Leveraging universities for laborers was the highest in Belgium/Netherlands (48%) and the Nordics (43%).

43% 37% 30% 15%

Trade schools

Universities

Local high schools

Military

27%We don’t work with educational/ governmental organizations to

attract labor workers

Does your organization work with any of the following educational or governmental organizations to attract labor workers?

1414The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

Leveraging educational or governmental organizations for knowledge workers Universities (43%) had the greatest number of responses for working with educational or governmental organizations to attract knowledge workers. Trade schools (41%) followed closely. Financially industry-leading responses were even higher for universities (54%) and almost as high (49%) were respondents with better-than- average employee turnover. Financially industry-leading respondents were over twice (35%) as likely to recruit those leaving the military. A significant number of respondents (25% overall and 41% in the U.K.) don’t work with anyone, which is surprising given that knowledge workers were cited in Descartes’ study How Bad Is The Supply Chain and Logistics Workforce Challenge? as being the hardest to recruit. The Nordics (50%) were most likely to leverage universities closely followed by Belgium/Netherlands (49%), and Belgium/Netherlands was also the leader for working with trade schools (57%) for knowledge workers.

43% 41% 28% 16%

Universities

Trade schools

Local high schools

Military

25%We don’t work with educational/ governmental organizations to

attract knowledge workers

Does your organization work with any of the following educational or governmental organizations to attract knowledge workers?

Universities (43%) had the greatest number of responses for working with educational or governmental organizations to attract knowledge workers.

1515The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

Sourcing temporary workers External agency was the top choice (47%) for the recruiting channel used most often to acquire temporary workers. Private network/word of mouth increased to 38% for better-than-average employee turnover respondents but dropped to 31% for worse-than-average employee turnover ones. The U.K. (56%) had the highest response for using agencies with Belgium/Netherlands (40%) having the highest response for private network/word of mouth.

47% 35% 17%

External agency

Private network/Word of mouth

University collaboration

Which recruitment channel does your organization use most often to acquire temporary workers?

External agency was the top choice (47%) for the recruiting channel used most often to acquire temporary workers.

1616The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

Conclusion

The results show that the continuing workforce shortage has changed how supply chain and logistics organizations are thinking and acting to improve worker productivity and be more effective at attracting and retaining talent.

Productivity improvement has become part of workforce strategies as it reduces the dependency on hiring workers. Most supply chain and logistics operations are littered with non-value-added and repetitive tasks that consume the workforce. This is why automation was cited as a top response as it frees up workers to perform more value- added functions. It also reduces the dependency on hiring temporary workers during peak season. The automation opportunity is not only for laborers, but also for knowledge workers who spend an inordinate time preparing data and running reports rather than conducting higher-value analysis and planning.

The drive to improve workforce productivity is an important factor in getting corporate executives to understand that technology is critical to mitigating the impact of workforce shortages. The better financial performers were even more convinced of the value of technology in this area. With transportation operations suffering the most from workforce shortages, leveraging driver productivity improvement technologies, like route optimization and mobile apps, makes the most sense given the positive impact on customer service and delivery capacity. Following the theme of automation to eliminate low-value and repetitive tasks, real-time shipment tracking addresses the growing demand from customers for shipment visibility while eliminating highly manually-intensive and latent calls, emails, etc. that have been used in the past gather shipment status updates.

While the focus has been on improving transportation-related capabilities, the greatest area of investment is warehouse operations, as warehouse operations was cited as the function suffering the second most from the workforce shortage.

The workforce shortage has caused over half of respondents to make significant changes to hiring strategies for laborers and knowledge workers. However, hiring and retention strategies across laborers, knowledge workers and managers were similarly impacted. The areas most altered reflect the importance of attracting millennial and Gen Z workers. While supply chain and logistics technology is typically not considered “fashionable”, legacy solutions are not only impacting supply chain performance, but they are also a significant hiring deterrent. Following the younger worker theme, investing in workforce skills is also very important to retaining workers in this demographic and employer concerns about wage pressures are reinforced by their retention strategies, as outlined in Descartes’ study How Bad Is The Supply Chain and Logistics Workforce Challenge?.

With a tight workforce market, finding alternative sources of workers has become more important and better financial performers have done a much better job at looking to immigrants to help meet their needs. The situation is similar for sourcing knowledge workers as better financial performers are much more likely to be working with universities.

Overall, the study confirms that most supply chain and logistics organizations have made changes to their operational, technology, recruitment and retention strategies to address workforce challenges. The winners in the talent war going forward will recognize that, unless there is a severe downturn in the global economy, the battle is here to stay and that they must continue to evolve to get most they can from the resources they have and focus on more than money to hire and keep them.

1717The Descartes Systems Group, Inc. | www.descartes.com | Surviving the Supply Chain and Logistics Workforce Challenge

Appendix: Respondent demographics summary

Footnote: 1. The use of standard numerical rounding conventions may make the summation of some charts appear to be off by 1%.

Responsibility

Country of residence

Total respondents: 1000Demographics

Business sector

Gender & age

225

Company sectors: Manufacturing, distribution or retailer: 55%

Logistics services provider: 20%

Carrier: 25%

Role type

Size of company

# of employees 20 to 49 50 to 99 100 to 499 500-999 1000-4999 5000+

% of respondents 10% 14% 26% 20% 15% 15%

150 150 150 75 75 175

11% of respondents held Owner positions 19% of respondents held C-Level Executive positions 15% of respondents held Director-level positions 56% of respondents held Manager-level positions









 73% of respondents were male and 27% female  62% of respondents were between the ages of 25-44

 42% of respondents are responsible for managing logistics and the supply chain

 32% of respondents are heavily involved in managing logistics and the supply chain

 26% of respondents are somewhat involved in managing logistics and the supply chain

About Descartes Systems Group

Descartes (Nasdaq:DSGX) (TSX:DSG) is the global leader in providing on-demand, software-as-a-service solutions focused on improving the productivity, security, and sustainability of logistics-intensive businesses. Customers use our modular, software-as-a-service solutions to route, track and help improve the safety, performance, and compliance of delivery resources; plan, allocate and execute shipments; rate, audit and pay transportation invoices; access global trade data; file customs and security documents for imports and exports; and complete numerous other logistics processes by participating in the world’s largest, collaborative multimodal logistics community. Our headquarters are in Waterloo, Ontario, Canada and we have offices and partners around the world.

Learn more at www.descartes.com and connect with us on LinkedIn and X.

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