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Supply Chain Frontiers issue #22. Read all articles in this issue

Death and taxes are two of life’s certainties; another is that world populations are aging. The resultant demographic shifts will have a profound impact on the work place and the way firms operate.  

As these age-related changes reshape organizations, supply chain leaders will have to make some radical readjustments. More flexible hiring practices and developing ways to help multi-generational teams to work together are just two examples. The age wave is breaking, and supply chain managers need to be prepared.    About 76 million Americans who were born between 1946 and 1964 – the so-called baby boomers - are reaching retirement age in increasing numbers. Moreover, the pool of U.S. workers ages 35-44 will shrink by an estimated 7% by 2012.    Leading companies are aware of the implications. “Our work force will reflect our customer base,” said Kevin Smith, Senior Vice President, Supply Chain & Logistics, CVS/pharmacy, headquartered in Woonsocket, RI. CVS is a MIT-CTL strategic partner. The number of CVS customers over 60 years of age is expected to grow by 62% between now and 2020, said Smith. “It gets even more dramatic between 2020 and 2050,” he said. “By 2050 we are looking at centenarians shopping in our stores.”  At present about 27% of the CVS logistics work force is over 50, said Smith, “but trends indicate that the demographic will increase in age.”     As populations age there will be less people to fill full-time jobs. A declining birth rate is also shrinking the pool of available talent, noted Smith.    As more retirees head for new pastures, they will take vital skills and knowledge with them, and these gaps will become harder to fill. But there is a silver lining: many baby boomers will stay in the market for gainful employment after they have vacated their executive offices, and this will help companies to make up some of the anticipated shortfalls in talent.     Tapping into the wealth of expertise offered by retired supply chain professionals requires managers to reshape their recruitment practices. These individuals are looking for flexible work schedules, for instance. That might entail working hard for 12 to 18 months in an interim role or on a project and then taking a six-to-nine month break    In addition to filling skills and knowledge gaps, managers will have to bridge the generational gaps caused by the changing demographic makeup of their teams. “We’ve got buildings where there are 900 to 1,000 people working, and the ages range from 18 to 80,” said Smith. As more baby boomers choose not to withdraw from the work place such age disparities are expected to widen.   Multi-generational work teams offer a diverse range of talents, but they can also be hampered by attitudinal differences. “There is certainly a cultural difference between the people who came into the work force in the fifties, sixties and seventies and the people who came into the work force in the last five years,” agreed Smith.    Another issue is how to keep compensation schemes competitive for individuals who have many years of service but want to continue working. “Industries are moving from labor management systems, founded on productivity towards systems based on performance,” said Smith. Traditional labor management programs lack the more sophisticated performance-based rewards that will be needed as age profiles change. “Companies will probably find themselves with a lot of older workers who are doing 100% of what they did before but may not be topping out on incentives,” Smith suggested. That could become a disincentive, particularly for someone who has been a solid worker for 30 or 40 years. “We need to know how to deal with that,” Smith said.     This is an extract from an article to be published in the October 07 issue of Supply Chain Strategy.  Joe Coughlin, head of MIT AgeLab, a unit of the MIT Center for Transportation and Logistics, will deliver a Major Session on disruptive demographics at the Council of Supply Chain Management Professionals (CSCMP) annual conference, Philadelphia, October 23, 2007. MIT-CTL will also host a Hot Topics session on the supply chain implications of changing demographics at the conference later that same day.  For more information go to the CSCMP web site.