Could Lack of DC Workers Crimp eCommerce Sales for Some Retailers?

The number of distribution center jobs continues to grow at a rapid pace.

The US added another 8400 DC jobs in September, according to data last week from the Bureau of Labor Statistics. That is the strongest pace in more than a year, as companies start bulk up staff as the start of the peak season nears.

Supply Chain Digest Says... An interesting dynamic is that with the continued rapid rise in ecommerce, those retails and etailers that can't recruit enough workers may find they will lose sales and market share as a result. What do you say? Click here to send us your comments Click here to see reader feedback

Distribution centers have also added more than 50,000 jobs over the past 12 month.

The challenge o finding additional peak season workers – or indeed any workers at all – was complicated last week after Amazon announced it will now raise the minimum wage it pays for its fulfillment center workers to $15.00 per hour.

In some areas, that tops starting wages by $2-3.00. While Amazon is offsetting some of the additional expense by getting rid of certain incentive pay and stock compensation programs for FC workers, it's likely many potential workers will just look at the hourly rate – and many DCs still pay below $15 bucks.

Randy Tucker, chief executive for the Americas for 3PL Geodis, told the Wall Street Journal the company has raised associate pay by about 20% over the past three years and will respond if the Amazon increase ends up raising the market rate for DC labor in regions where Geodis operates.

"You're flanked on both sides," Tucker said, between "the labor market that's shrinking and an industry that's needing more labor."

In January, Walmart announced a new $11 per hour across-the-board minimum wage, along with a new relatively generous parental leave policy. Target soon did Walmart one better, making $12 its floor and charting a path to $15 by 2020.

But Amazon is offering the $15.00 minimum immediately.

The move is probably the result of the growing challenge for almost all DCs to attract and retain workers – and also the growing criticism against Amazon pay and working conditions that's been cropping up in social media posts and some newspaper articles in recent months – most suggesting that world's richest man, CEO Jeff Bezos, can do better.

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"We listened to our critics, thought hard about what we wanted to do, and decided we want to lead," Bezos said in a statement. "We're excited about this change and encourage our competitors and other large employers to join us."

"It's causing a lot of buzz with my clients: How do we address the issue of a $15 minimum wage?" Craig Rowley, who leads the consumer practice at the human resources consultancy Korn Ferry, told CNN. "Here's a major employer announcing they're going to $15 an hour - not in two to three years, but right now."

An interesting dynamic is that with the continued rapid rise in ecommerce, those retails and etailers that can't recruit enough workers may find they will lose sales and market share as a result.

In just the Dallas market, Amazon says it intends to hire 3,000 full- and part-time workers at fulfillment center for the 2018 Holiday season. That is a lot of new demand for a single metro market.

What impact if any do you see Amazon's wage hike having on DC labor? Let us your thoughts at the Feedback section below or the link above to send an email.

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