When you consider the total cost of an order – management, direct and indirect labor, benefits, facilities, packing costs excluding shipping costs – more than 50% of it is labor related. Given this, do you measure ecommerce fulfillment center labor productivity by department and individual?
More than half the ecommerce fulfillment center operations we do assessments for do not have accurate and consistent standards for warehouse labor productivity and measurements. Without it, how can you determine how changes in processes or automation will impact your labor costs?
To help you get there, here are 5 steps you can take to improve your warehouse labor productivity:
Measure Productivity and Process
Ultimately you want to have productivity measures in all departments. However, don’t try to measure everything at once. Where are you spending the most money? Tackle those one at a time. Recognize that you need to have methods and technology for recording time worked including cross-departmental functions and units of work (e.g. orders, units, cartons shipped, etc.). Picking and packing take more than 50% of the labor in most centers.
Picking: We often see pickers working at twice the rate of their peers. Are you paying the more productive, error-free worker a considerably higher wage? Slotting approaches with shortened pick distances for better-selling products cuts walk time way down. Do you reevaluate your SKU sales velocity several times per season to validate the slotting of new products relative to overall assortment?
Replenishment: Replenishment is an example of a process that affects picking. Be sure it’s executed before order picking is started. If a picker goes to a slot and the product isn’t available, the order is suspended. Someone must find out why the product is unavailable; the slot must be filled and before picking is resumed.
Packing: What governs the speed of packing in your ecommerce fulfillment center operations? Is your workstation design efficient in terms of top size, availability of inserts and sufficient storage for cartons at each one? Can you justify automation such as envelope insertion or box building?
Increase the Work Pace
How can you increase the work pace in your ecommerce fulfillment center? Once you start measuring, how can you reasonably raise the productivity goals? One of the main benefits from applying technology and automation is a dramatic increase in the work pace, whether it’s voice picking, robotics or tilt tray sorting.
Manage Today’s Workload
Are you managing the workload such that you process and ship all orders on the day of receipt? Or are you simply filling whatever orders you can, or a percentage of them, by the end of a shift? Do you have the labor flexibility and ability to manage to this level every day? Most ecommerce fulfillment centers should make this a priority in order to meet customer expectations. Work toward filling all orders rather than against the clock.
In some larger, well-managed ecommerce fulfillment centers we see monitors and system displays that tell department managers and employees how many orders are in their department and how many need to be completed before the end of the shift.
Gauging the Quality and Availability of Labor
As our economy pushes toward full employment, what is the quality and the availability of the labor pool in your market? In May the U.S. Bureau of Labor Statistics reported national unemployment for nonfarm workers was at 3.8%, compared to 4.3% a year earlier. In many ecommerce distribution markets, the unemployment rate is below that average.
The latest BLS survey showed the labor participation rate unchanged at 62.7%. What does it take to attract workers that have voluntarily stayed out of the workforce? Part of it is their desire for full-time work instead of multiple part-time jobs with no benefits, but some of it will be pay. In our small town on the coast of North Carolina, Hobby Lobby is advertising $15.75 an hour plus good benefits for sales associates. In the same retail strip center, a newly renovated McDonald’s advertised $8.50 plus benefits. We advocate doing pay and benefit surveys regularly with other employers to be sure you’re not losing ground.
Creating More Effective Management
The most important aspect of getting more from your labor dollar is the quality and effectiveness of your key department leads and the fulfillment manager. They not only need the ability to manage their team but have to be continually on the lookout for ways to reduce costs and improve the customer experience.
The labor component in ecommerce fulfillment expenses is key to providing a cost per order that makes your business more competitive. Increasing labor costs means businesses must find ways to boost productivity. Putting the principals in these 5 steps into practice will be a start toward greater workforce efficiency.
Brian Barry is President of F. Curtis Barry & Company