– Supply Chain Insight –

Why is my direct labor turnover rate increasing?

Over the past 5 years, The U.S. bureau of labor statistics has typically put the annual turnover rate for warehousing employees at between 40% and 49%.  Of course, during the pandemic, that number shot up to just under 60%, making it one of the highest turnover rates in the private sector, and one of the most visible and far-reaching challenges for supply chain executives and operators alike.

U.S. Bureau of Labor Statistics – Annual total separation rates by industry and region

Expecting to turn half of your labor year in and year out is one thing, but what happens when your rate starts to rise over the average mark?

It could be due to rising competitiveness of your geographic market.  It could also be due to falling labor availability for those operations situated in less populous markets.

Barring either of those external forces – or others – it could be caused by forces within the operation itself.  Before I discuss those, however, I want to touch on why you should care about an increasing turnover rate.

It’s expensive.  The cost of hiring a new employee is generally known to be up to 50% of the associate’s total annual salary.  This would cover things like background checks, recruitment, as well as on and off-site training.   These costs add up, especially if new hires don’t last long on the job.

It lowers overall productivity.  A major influence on overall shift productivity (or order throughput) is the experience level of your floor personnel. Numbers vary industry by industry and, of course, employee by employee, but some estimates suggest that it can take up to 12 weeks for a new hire to reach full productivity.

It negatively affects morale.   Whether due to your existing staff constantly having to work extra shifts (or put in overtime more often) to pick up the slack, or because of the unstable culture that a high turnover rate would cause, overall morale – or the team atmosphere that most operations strive for, usually suffers, only exacerbating the problem.

So, what can you do about it?  Luckily, although there are a number of external forces usually at play that keep the turnover rate relatively high, there are a few things you can do within your own operation(s) to ensure your rate doesn’t eclipse the average and more importantly consistently retain your top workers.

Related: Fishbone Friday – 16 Potential Root Causes for a High (or Increasing) Turnover Rate

Safe working conditions.  Of course, the warehouse floor can be a dangerous place, with pallet-jacks and forklifts continuously on the move. There are some hazards that are not overly visual to the naked eye but no less important to the well-being of your employees.  One of those hazards is picking ergonomics.  Most operations will have a theoretical weight restriction for items being picked out of non-ergonomic pick locations but, those restrictions often go astray during busier times of the year, or as capacity becomes more constrained.

Poor picking ergonomics – or using non ergonomic pick locations to begin with – not only lowers productivity but can cause injury to your workforce over time.

Simple processes.  Having clear and simple processes not only reduces training time for new hires but it also allows them to achieve productivity goals and become proficient much quicker in their given roles.  This is especially important if you consider that 43% of new employees who leave, do it within the first 90 days.

Positive goal-driven culture.  One of the most impactful things an operation can do to reduce staff turnover is to promote a positive, goal-driven, culture. It goes without saying that a successful and productive employee is a happy employee, and one that is rewarded for performance.  Executive and floor leadership has a big influence on this but an operation that is fully optimized toward high performance is critical.  This means utilizing the right technology, equipment, racking, and also streamlining unnecessary productivity drains like excess forklift activities or excessive selection travel.

As turnover rates seem to be normalizing from the influence of the COVID-19 pandemic, now is the time to ensure your workforce investment is maximized, not just for retention but to get the most out of every dollar spent. 

See how a fulfillment optimization system can help increase order throughput, reduce your labor costs, and promote a positive goal-driven culture geared towards workforce retention.  

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