Forecasting and staffing the warehouse for your fourth-quarter rush is always a challenge for retailers. But if you arm yourself with the right metrics and formulas, you can make this year your most efficient yet.
To hire the correct amount of order pickers, packers, and shippers you need to understand two things: Product demand/sales forecast, and how many orders your warehouse can ship per labor hour. Using these metrics, you can determine how many people you need to get all the orders out the door on time. Then you just need to hire those quality applicants.
Forecasting products demand and sales
Before you can figure out how many people you need to add to the warehouse, you need to know how many orders you expect to receive. E-commerce as a whole is expected to grow about 14% this year, according to some reports.
Your business may be above average. How much so? To find out, I like to merge numbers from Google AdWords, Google Insights for Search, Google Trends and the number of products we’re selling. The three Google products give you ballpark growth trends by product or category.
Look at the demand growth (this could be search queries, ad impressions, or clicks) for your category from 2008 to 09 and 2009 to 10. Then compare those numbers to your actual sales numbers.
As an example, let’s say search query volume was up 5% from 2008 to 2009 and 10% from 2009 to 2010. But your actual sales were up 10% and 12% respectfully. This tells you to tack on a couple extra percentage points to the query volume report of 2010 to 2011—if Google Trends is forecasting a 12% increase this year, you know to really expect just under 14%.
In my seasonal business (party supplies), there is a relationship between the number of products stocked and order volume. For instance, a 10% increase in SKU count could cause an 8% increase in sales. Look over your inventory histories to see if you can find your ratio.
By combining historical Google predictions with actual sales increases (or declines) and adjusting for SKU count changes, you can arrive at a pretty solid sales forecast.
Calculate shipments per manhour
The next component of our equation is shipments per warehouse labor hour. This will tell you how many minutes it takes to get an order out the door and how many people you need in the warehouse to process your forecasted sales.
Some retailers watch this number on a daily (or hourly basis), while others have never attempted to calculate this efficiency metric. As the old management maxim says, you can’t manage what you don’t measure.
The good news is if you don’t already track your warehouse’s shipments per labor hour, it’s pretty easy to get. Grab some old UPS bills (UPS Online Billing is much faster than attempting to add up your paper invoices) over a representative time period.
Add up the total number of shipments. Run a time clock/payroll/HR report for that same time period for hours worked in the warehouse department. Divide the two numbers and to get your shipments per manhour.
Now that you know how many sales you expect and how many sales your warehouse can process per hour, you can establish how many additional order pickers, packers, and shippers you need to hire.