The looming federal mandate on COVID-19 vaccines for large employers could make hiring goals more difficult to reach for warehousing and distribution operations, which are already short on employees, some supply chain experts say.
The U.S. Department of Labor's Occupational Safety and Health Administration's upcoming rule, which will require employees be vaccinated against COVID-19 or be subject to weekly tests, applies to businesses with at least 100 employees. The rule is expected to be issued within weeks, and legal challenges are likely, law firm Gibson Dunn said on its website.
Some large companies are still evaluating what the in-development rule means for their operations. A spokesperson for UPS, which wants to hire more than 100,000 employees for peak season, said the company is reviewing the order but "continues to urge employees to get vaccinated." DHL also said it is evaluating the order in a statement.
Business groups' reactions have been mixed.
- The American Apparel & Footwear Association applauded the vaccine mandate, saying in a statement that "recent supply chain disruptions and factory closures due to the Delta variant have stymied our economic recovery" and that the mandate will help protect workers.
- National Association of Manufacturers President and CEO Jay Timmons said in a statement that vaccinations are "an economic imperative," but the group wants to work with President Joe Biden's administration to make sure "undue compliance costs do not burden manufacturers, large and small alike."
- The Consumer Brands Association asked for clarity on how to implement the requirements, raising questions like what vaccines meet the mandate and if there is a single testing standard that must be met.
Mandate announced amid labor shortage
Jeremy Tancredi, a partner in West Monroe's Operations Excellence practice specializing in supply chain management, said the mandate could have "an undesirable impact," as some unvaccinated workers push back and look for opportunities at companies who are not subject to the same requirements.
People opposed to workplace vaccine requirements are in the minority, according to a poll from The Associated Press-NORC Center for Public Affairs Research. Half of American workers are in favor of vaccine requirements at their workplace, while about one-quarter of workers are opposed, the poll found. But Tancredi added that warehouses can't afford a further shortage of labor with consumer demand still high.
"It is almost impossible to find workers," Tancredi said. "We know we have a lot of clients who are running north of 50% temp labor right now, which is just a crazy high number."
Businesses typically like to have their temporary labor percentage at 20% or less, Tancredi said, as these workers lack the operational familiarity veteran employees have. Another hurdle for warehousing and distribution operations is the upcoming peak season, which furthers the need for labor as demand climbs. A GlobalTranz and Edelman survey in August found 9 in 10 supply chain leaders said they need to increase hiring to meet peak season demand.
Many major companies aren't mandating vaccinations for their frontline workers as a significant portion of the U.S. population remains unvaccinated. About 63% of the U.S. has at least one COVID-19 vaccine dose, according to the latest data from Mayo Clinic. Amazon and Walmart are encouraging, but not requiring, that their warehouse workers get vaccinated.
"Supply Chains are struggling – high costs, scarce capacity and raw materials, etc. – and the mandate is another constraint to be managed," said Raj Patel, senior director of 3PL global industry strategy at Blue Yonder, in an email. "Retailers and employers will have to prepare for the added logistical costs of weekly tests, which could compound issues for already struggling companies."
Outside the warehouses, the mandate could affect employment levels in the trucking industry, which has long highlighted a truck driver shortage. American Trucking Associations President and CEO Chris Spear said in a statement the mandate will create unintended consequences and threaten to cause further supply chain disruptions.
"If these mandates are designed to protect Americans, then why the discriminatory 100-employee threshold, picking winners and losers for both employees and employers?" Spear said. "As this proposal moves forward, ATA is examining all options and will choose a path that protects our industry—so that it can continue delivering on behalf of our country."
But Tom Goldsby, Chair of Logistics at the University of Tennessee's Haslam College of Business, said in an email that some truck drivers could move from large carriers to smaller ones not covered by the mandate, or become owner-operators, which "would not necessarily take capacity out of the market."
"Capacity would be lost, however, if drivers decided to pursue opportunities outside of logistics," Goldsby said.
Short-term pain, long-term gain
Some employers were already in the process of implementing mandates before the announcement. Tyson Foods announced in August it would require all its U.S. employees to be fully vaccinated by November, with exceptions for "workers who seek medical or religious accommodation," despite challenges in the meat processing industry to hire frontline workers.
"We've studied the data, we've researched it to the nth degree, and we're confident in doing that, and so we mandated that because we thought it would be irresponsible not to do that and irresponsible not to protect our team members in every way that we could," said Tyson President and CEO Donnie King on the company's Q3 earnings call. "Now there could be some short term impacts, but I think they certainly will be offset by long term benefit in doing this, so that's the position that we have taken."
Patel summed up the federal mandate in a similar way. He said the mandate's "aim is good, but there will likely be short-term pain for long-term gain" as companies try to overcome "the already dire labor shortage."
"Companies will have to get more creative with incentivizing their employees to get the vaccine to avoid the hefty penalty," Patel said, pointing to sign-on bonuses as one incentive.
For companies that are able to sway their employees on vaccinations, Tancredi recommended that workers not get vaccinated all at once. He said some clients had workers that needed a day off to recover from side effects.
"If you are going to do any big push to get your team vaccinated, look for ways to spread that out," he said. "Don't try to vaccinate half your shift on a certain day, because the next day, you could be looking at 25% to 30% call-offs."
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Correction: A previous version misstated the size of the business required to comply with the mandate. It applies to firms with 100 or more employees.