Here’s a figure you can relate to: labor is typically about 65% of the operating costs of the average warehouse according to this article in the May 2008 issue of Inbound Logistics. On top of that, 20% of your warehouse workers describe themselves as “disengaged” from the process. Sobering enough to think about, if your business depends on storing, stocking, shipping and receiving to please customers.

The first thing I think of when I see those kinds of numbers is that the cost of labor in a warehouse isn’t something that must stay at 65%. Sure, we all understand that the cost of people in any operation will be at or near the top of your cost lists. Warehouses aren’t special in that regard. The problem is one of productivity per worker. Due to computerization, offices have seen excellent per-employee productivity gains the last twenty years. Some of that has translated to the warehouse or plant floor, but certainly the revolution that has swept the office hasn’t translated entirely to, say, a picking and shipping department. WMS has come for some, sortation systems for others, and those things have made a difference in companies like Robroy who have deployed them correctly.

One of the core values we stick to here is that “you can’t improve what you can’t measure.” In that spirit, here is what the Inbound Logistics article says are the top ways to monitor and improve warehouse productivity:

• Measuring Productivity: This is based on the tru-ism that “what gets measured gets improved.” This doesn’t have to involve time-consuming studies. Workers can measure the lowest hanging fruit and compare performance over time. As the article states:

“At the start of their shift, warehouse workers see a report on the previous day’s performance. If everyone falls into the report’s ‘green zone,’ we had a great day. If workers fall into the ‘red zone,’ we look into why they didn’t meet the benchmark. We peel back the onion, figure out what they were doing to cause the non-RF time, and work with them to improve.”

• Setting Labor Standards: This simply means that standards are set (you can get as complex of as simple as desired). Facility managers and employees can create standards by which they measure the operation. It can be something like on-time shipments, or number of shipments, cycle times. In the article, companies that do this often invest in labor management systems. Workers are given incentives to beat the established standards and can enhance their incomes with excellent performance.

• Implementing Gainsharing Programs: If a gainsharing program is well structured, the majority of workers can and do earn some level of bonus. A small improvement, as little as five percent above the acceptable minimum performance. Workers must adhere to quality and safety standards to achieve the gainsharing, which typically is an hourly raise for an entire month. That can add up, but for one company it was a small price for a huge gain…

“Productivity improvements saved more than 66,000 hours over the year, equivalent to 32 full-time employees,” Hounsell says. “The company’s share of savings for that facility totaled nearly $1.07 million.”

• Training Workers for Results: Obviously, a trained staff will outperform a less-trained one. In particular if you can close the loop and retain those trained workers. The article talks about Tractor Supply, which trains employees not just on nuts & bolts issues on their particular job, but also on things like ethics, integrity, and accomplishment. The company can see a connection between the bottom line and the training it provides. Because its workers are so well-trained, Tractor Supply can maintain a worker to manager ratio of 20-to-1. Of 12 distribution facilities, only three require a full time manager. Lead warehousemen do the rest. That’s a real cost savings, and it provides value in terms of quality and turnover, as well.
• Promoting Safe Practices: It’s well-established that safety and productivity go hand in hand. Safe working environments are also productive ones. “People want to do a good job but they can’t if you supply them with broken tools or a dangerous work environment,” says Mark Richards, vice president, Associated Warehouses Inc. in the Inbound Logistics article.

The Inbound Logistics piece is well worth a read and full of details. Check it out. As it concludes, much of this isn’t new. People were doing it before there were LMS, WMS and enterprise systems, or computers. The important thing is the willingness to measure and adapt to your particular situation.

Tags: distribution centers, labor, order fulfillment, productivity, Supply Chain, warehousing

Scott Stone is Cisco-Eagle's Advertising and E-business Manager. He is a 17-year veteran of the material handling industry. He publishes the award-winning Material Handling Tips & Information Newsletter and works on all aspects of the company's communications, marketing, and advertising efforts.