Insight: Supply Chain Protected From Layoffs

Tech layoffs are dominating the headlines with cuts from major companies including Meta, Amazon, Cisco and Twitter due to attempts to save costs.

In the commentary below, Spencer Shute, principal consultant at procurement and supply chain consultancy Proxima, observes that the supply chain logistics sector will be protected from these mass layoffs in the new year — with the exception of some big players.

“Almost every day, we hear about layoffs across industries as companies prepare for an economic downturn and a recession. However, one industry has largely gone unscathed, with the exception of some big players, and is expected to be protected from significant layoffs in 2023. That industry is supply chain logistics.

There have been layoffs in supply chain with a few large names —  Amazon, FedEx, and DHL. However, most of those layoffs were not a precautionary cost-saving consequence, but instead a result of over-hiring to accommodate surging demand during the pandemic.

These companies had the ability to pay top dollar for labor when small/medium-sized companies continued with staffing challenges. Over-hiring was implemented to meet demands, not forecasted as continued or sustained growth plans; therefore, these layoffs should have been predictable, even during a time of much uncertainty.

Why will supply chain logistics avoid mass layoffs? Primarily because labor demand remains high for warehousing and transportation. Labor turnover, limited education and training, physical demand and lifestyle, and retirement (trucking) are all impacting the labor force in this sector.

As we’ve seen with union labor negotiations within the supply chain, quality of life and work-life balance are becoming the top priorities for the labor force. Supply chains have been slow to react and implement change to accommodate the labor force while still meeting consumer demand. Supply chains also struggle to invest in technology and automation in order to relieve the need for labor.

While optimization and automation are being investigated for implementation, these are not short-term, quick solutions that will be implemented in 2023. This means labor demand will still be strong, and layoffs in the space will be minimal compared to other sectors.”