– Supply Chain Insight –

Warehouse Labor Shortage? Here is how to fix it

Warehouse labor shortage
  • A warehouse labor shortage could be self-inflicted – staffing requirements should be continuously evaluated.

  • Attracting and retaining quality labor is a recurring and significant challenge for distribution executives.

  • Aside from lowering labor costs, appropriately staffed shifts drive better working conditions, higher productivity and less turnover.

  • An optimized distribution environment inherently requires less staff due to reduced waste in areas such as selection travel, replenishments, fingerprinting, and rework.

  • Apply the golden ratio by dividing your weekly output by your total direct payroll hours and use this number as your baseline.

  • Dig deeper into the details and remove guesswork from the process.

  • Act on improvement opportunities

WAREHOUSE LABOR SHORTAGE? HERE IS HOW TO FIX IT

Having had the opportunity of working closely with numerous supply chain executives across the continent over the last few years, one recurring challenge that seems to come up consistently, regardless of the industry or size of the organization: is both attracting and retaining labor.

What is worse is it does not just reoccur; it seems to continue to grow.   The COVID-19 pandemic has extenuated this challenge, of course, when you consider the added complexity of the various required safety measures and sporadic demand, but it is something that seems to be on the minds of supply chain executives – and HR professionals – even at the best of times.   

This shortage also does not seem to discriminate between the different types of labor functions either.  All types of direct labor from transportation to warehouse staff for fulfillment operations have been affected.  For some, automation has helped fill the gap; however, automation is not always the right choice, and it is not always in the budget.

TIPS FOR RIGHT-SIZING YOUR STAFF

When it comes to overcoming this challenge, here are some tips and best practices that are sure to help you – and your HR reps – get better sleep at night.

Review your staffing requirements.

Labor shortages are sometimes self-inflicted.   This means your labor shortage problem is often as big as your staffing requirements.  As it becomes harder to find qualified – and long-term – staff with strong work ethic, it is critical to shift away from the “throw-labor-at-the-problem” trap and into a more inquisitive mind-set. 

In the event you are short-staffed, you have some options:

First, you need to look at all potential sources of waste in your operation with a fine-toothed comb.  I know, it is easier said than done.   

When I talk about sources of waste, I am mostly referring to direct labor tasks like unnecessary pallet moves, excessive selection travel and other redundant work that may be taking place in the operation. 

Another important consideration, though, is reviewing alternative material handling systems. As mentioned previously, although automation is not always the solution, it should be evaluated as there are many alternatives on the market these days that fit within even the strictest of budgets.  Keep in mind, too, that it is not always a move from conventional to automation.  I would even go as far as to say it is always better to maximize what you have before investing in something different.  Only invest when it brings value to your operation.   Sometimes, even adding an additional slot type, or revising how you handle your slower moving items, or even adding some mechanization, will do the trick with minimal investment.

Now, what about if you have more staff than you need? 

This is not easy for shift supervisors or even managers to notice with the naked eye, but it usually results in low productivity and/or low shift utilization. So, how can you tell?

1. Evaluate your overtime percentage.

Whilst not a silver bullet – as they do not exist – looking at your overtime spend sometimes helps.  If it is considerably lower than your industry average – and your productivity levels are average – it most likely means you are overstaffed.

The best way to know is by calculating your direct labor throughput and comparing it to others in the industry.  This may not tell you exactly how to improve but it will at least tell you whether your staffing requirements are higher than they should be based on low productivity.

2. Optimize your operation first.

When it comes to evaluating labor requirements, you can look at it one of two ways.   You can look at your requirements against your existing operation – layout, equipment, processes, etc.  Let us call it the status quo.  You can also look at what your requirements should be if you eliminated or reduced areas of consistent waste.  Why plan your labor requirements to compensate for this waste when you can optimize and reduce the need for the labor in the first place!  

ADVANTAGES OF APPROPRIATELY STAFFED SHIFTS

Let us talk about the many advantages of appropriately staffed shifts – aside from the impact to the bottom line, of course.

a) Better working conditions.

Unnecessary resources and added stress are eliminated.  Aisle and dock congestion is reduced, providing a safer work environment.

b) Higher productivity.

By definition, appropriately staffed shifts have maximized individual productivity rates.  This usually frees up the budget to create an incentive plan leading to higher earnings for associates therefore better morale.

c) Less turnover.

The right amount of people may also mean less turnover. When staff is achieving goals at the right pace, there is more time for training, development and as I mentioned previously, better morale to boost staff retention. 

Let us go back to the second point for a moment and review what is called the golden ratio.  In this case, we are talking about the ratio of units per hour.

Staffing fulfillment operations works as a system of tensions between workload, available time and the rate at which work is completed – referred to as productivity.

Time is typically the window you have to fill the orders – be it a shift, day, or any amount of time acceptable within your customers’ expectations.  

This window has become a highly competitive space as companies continue to drive customers’ expectations towards ever shorter order turnaround times.  Let us just say that, if time travel is to be discovered, it will be by a supply chain executive.

With the accelerated adoption of e-commerce, this time window has shrunk even more and companies like Amazon are able to dominate many markets based solely on the convenience they offer combined with impossibly short order turnaround times.

Workload is often expressed in units of finished orders – usually quantified in either units, cases, or pallets. Activity drivers within the fulfillment operation however, go deeper than that.  Operations can be further broken down into looking at cases picked, miles traveled, pallets replenished, pallets put away, cases finger-printed, and more.  Only at this level of granularity are you able to see the minute trade-offs that exist in every operation.

Productivity, along with safety and quality, is one of the most important indicators that every fulfillment executive should follow closely.  Why?  Because workload, which is based on demand, and time, which is based on customer expectations, are not always within the operators control.  Productivity, on the other hand, is.  Your staffing levels typically grow with an inverse relationship to your productivity, and so will your labor shortage challenge.

HOW TO RIGHT-SIZE STAFFING REQUIREMENTS

So, how do you determine appropriate staffing levels for your operation?

1. Calculate your golden ratio.

Determine your weekly output in cases, units, or order lines (whichever is more appropriate for your market) and divide that by your total direct payroll hours.  This will serve as your baseline.

2. Determine how you compare with your industry.

Once you determine your baseline, you need a benchmark.  This will give you an idea of what the opportunity is and what the most efficient operators in your industry are achieving.  This will help you set out a goal.

3. Dig deeper.

This is the most important step.  It is not enough to know that your productivity is 10 or 20% higher or lower than your peers.  Executives that stop at this step are not likely to act as the conversation often turns to justification or anecdotal evidence as to why they are where they are.   The opportunity typically gets explained away with – let us face it – guesswork.   

Understanding the details of not only what to change, but how those changes will impact your operation, can be the difference between a successful project and another bad review meeting.

Where can you start today?

With most opportunities, this one is time sensitive.  Every overstaffed – or understaffed – shift is costing you money.  Just as every shift operating within a sub-optimal operation is wasting valuable time and draining valuable dollars from your budget.

Check out our free resources below and get in touch with us if you have any questions or need more help.  We have helped hundreds of organizations just like yours optimize their operations and we are passionate about it.

Free Opportunity Estimate – Compare your warehouse productivity to your industry peers

Strategic Opportunity Assessment – See exactly how much time, movement, space, equipment and resources you’re wasting, and what you can do to stop it.

Case Study – See how others have overcome this challenge.

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