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Don't overlook demographics

Comment
Changes in population can have a profound impact not only on long-term supply chain strategy but also on day-to-day operations.

Three years ago, Supply Chain Quarterly published an article titled "Demography has spoken." In it, economists Dr. Chris G. Christopher Jr. and Anna Kovalenko outlined the potential impact on supply chains of two demographic trends—aging and "urbanization," or the global shift of populations to urban areas. The world, they concluded, "will need fewer diapers and more health care, hospital services, and food productivity in the coming years. ... Supply chain managers will be forced to consider the distribution and logistics issues associated with meeting these changing demands, and they will have to respond accordingly to both the challenges and opportunities they present."

We don't often think so far ahead or on such a grand scale, though. As the economist Dr. Walter Kemmsies, managing director and chief strategist of JLL's Ports, Airports, and Global Infrastructure group, recently pointed out, U.S. transportation infrastructure "was designed based on projections for population that turned out to be way short of the mark." The result is road congestion and productivity bottlenecks that will only get worse, he said in a presentation at the Coalition of New England Companies for Trade (CONECT) Northeast Cargo Symposium in Providence, R.I. "We simply haven't planned for this massive increase in the number of people" in the world's increasingly crowded cities, he said. Population trends will also have a noticeable impact on international trade lanes, he said, citing projections that by 2050 India and Southeast Asia will host a greater percentage of the world's population—and, therefore, its consumers—than any other region.

Broader demographic changes can also affect day-to-day operations in a supply chain. Last month, David Maloney, my counterpart at our sister publication DC Velocity, and I traveled to Japan to visit several warehouses and distribution centers (DCs) where our host, Daifuku Co. Ltd., had installed sophisticated automated material handling systems. One thing we noticed very quickly: a significant portion of the workforce in these busy facilities consisted of older men and women, many of whom looked to be of retirement age. We also noticed that there was more automation than you would typically see in the United States. For example, where a comparably sized U.S. DC might have a single automated storage and retrieval system (AS/RS), in Japan there could be two, three, or even more. We also saw a heavy emphasis on robotics, light-directed picking, and goods-to-person conveyors and sortation systems.

There's a connection between those seemingly unrelated observations. When we asked the distribution center managers why they had installed so much automation, they all mentioned Japan's rapidly aging population. Distribution centers in Japan are having trouble finding and retaining workers. Unlike their grandchildren, older folks there are willing to work repetitive jobs like picking and packing. They are reliable and loyal, but they lack the strength and stamina required in traditional warehouse jobs. Automation, the DC managers said, was a way to reduce the physical strain on older workers while meeting demands for throughput and productivity.

These are just a few examples of how changes in demographics could impact both long-term, strategic planning and day-to-day, tactical operations. To help prepare your supply chain for the future, keep an eye on population trends and consider how they might shape demand—and, by extension, what it will take to meet that demand.

Toby Gooley is Editor of CSCMP's Supply Chain Quarterly.

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