Innovating Towards Unemployment

In my day job I work as an analyst with a very large Fortune 500 company. The part of our business that I work for involves helping clients manage their supply chain. As part of that work we maintain nearly 8 million square feet of warehouse space here in Louisville. That space obviously requires staffing and we employ about 3,000 people in various warehouse positions. These kinds of jobs are fairly blue-collar, with an overwhelming majority of our employees having a high school education only. The pay is competitive but it is still a lower-middle class wage. The work they do does not require any special skill set in advance and they are all trained on the job. What this also means is that because of their lack of skills and their lack of education they are unfortunately among the most vulnerable members of America’s workforce.

About three years ago I visited one of our buildings where we were in the first year of a ten-year contract with a customer I will call Acme Cellphones. As the account was ramping up we were slammed with work. In this early stage many of our processes were very manual which required large pools of labor to perform. Not wanting to take on a large burden of permanent payroll, benefits, etc for employees we would not need in the future, we relied heavily on temporary labor. This is S.O.P. for us in all of our client implementation projects. We have to be conservative on hiring because as the project moves forward we get faster and more efficient at doing the job for the customer which means we will need fewer employees. A typical implementation takes about 18 months for a large customer and we will see as much as a 50%  reduction in workforce from the highest-point of labor during implementation to the start of normal operations. At the time I visited this account they were at the high-point. The operation reminded me of a beehive with employees scurrying about everywhere. It was organized chaos. Of course this meant a higher failure rate for servicing the customer which is also very normal for the early stages of a project like this.

This customer has been somewhat unique in that chose to make a large investment in automation as part of giving us their business. We like these kinds of investments because they signal a longterm commitment but they also require hundreds of hours in planning and installation. This was all completed about a year ago and when I toured the facility again yesterday I was amazed at the change. There are now roller lines and conveyor belts traveling all over the building. Boxes of product zip around using automated systems to direct them to the right location. Efficiency has reached a high level and errors have reduced to one of the best performance percentages in our entire operation.

The temps are gone now. We can flex them back in when the next hot phone hits the market and demand soars for a temporary period, but right now things are steady. Our estimation is that the workforce has reduced by nearly 70% from three years prior. We are doing more with less and making fewer mistakes in doing it. Technology is giving the customer a better experience and helping us with our bottom line. But it also feels a little bit scary.

I am, generally speaking, a believer in the free market. I don’t like the ‘living wage’ movement and I was certainly no fan of the Occupy movement. But as a parent and someone who will need to remain employed for the next 30 years or so, I can’t help but fear for the day when innovation might someday make me obsolete. This isn’t a new problem though. John Henry was replaced by the steam hammer. They say the trick is to stay ahead of technology or a find a profession that can never be automated. This is the dynamic facing so many American workers today. When the economy dips companies figure out how to make do with less. When better times return they realize they can get by without those employees and innovation helps them get to that decision. It is the Western way but I’m not 100% sure it’s always the corect way. In our Taiwan facility the joke is that if there is a job we can do with one person in America, they will do it with three. They do less real work (and make less) but they take home a paycheck. Combine that with a few relatives’ income and you can afford an apartment and good food on the table. The American independent streak will not allow for that. Each man is an island and our pay must represent our status as king of that island. The problem is when there is a computer that can easily replace us. Then all bets are off.