3 Imperatives for Warehouse Labor in Your DTC Business

As you evaluate the holiday season and set objectives for the New Year, we think it should be a high priority this year to assess the quality and availability of the workforce in your market. Here are a few top-level factors that indicate to us warehouse labor may become a major issue for our industry:

  • President Trump the Tax Reform Act of 2017 into law. While many of the details need to be codified by the IRS, the legislation brings about significant decreases in corporate tax rates for most business entities. This will allow companies to reinvest and expand.
  • The Dow Industrial Average continues to hit all-time highs week after week. In our experience when the stock market is up, small business owners almost always feel optimistic about their company’s potential and growth.
  • In November, the national unemployment rate declined to 4.1 %, down from 4.9% a year earlier. Our warehouse location studies show some major markets have rates that are even lower. Low unemployment often makes hiring reliable and experienced people for operations much more difficult.

We believe these trends are worth watching and for you to take a proactive approach to your warehouse labor force in 2018. We don’t want to lose competent hourly employees to competitors. That said, here are our 3 business imperatives for success in your warehouse operations in 2018.

Evaluate Performance in Peak Season 2017

How did your warehouse labor force perform during the peak? What are some of the issues you need to address? Starting with recruiting, did you begin advertising for new hires and interviewing early enough? Some clients have used small “refer a friend” bonuses to incent workers during peak season.

Do you need to find an employment agency to partner with? Yes, this comes at a higher cost but it will give you access to a larger pool of candidates. Often you find good people to hire on a permanent basis.

Was there unexpected attrition during peak? Some of our clients have found success with small bonuses for workers with perfect peak season attendance.

Last year, one of the most creative things we heard about dealing with employees in the fourth quarter came from a company that changed its annual review period from spring to early fall. This gave employees increases in time for Christmas shopping, as well as visibility into their pay for the upcoming year.

Conduct Wage and Salary Surveys

Building a relationship with other warehouse operations in your market, regardless of the industry, is the best way to have current data to review your pay and benefit plans. However, it does take time and many companies don’t do it consistently.

The table below shows average wage and benefits for six ecommerce fulfillment centers in 2017. Note that higher skilled positions like order processing, picking, packing and inventory control could be easily $3 to $5 per hour higher.

   Average Wage and Benefits for 6 Ecommerce Fulfillment Centers     

Company Sales (in millions) Average Hourly Wage Benefit Rate
A <$100 $14.50 27%
B >$200 $12.72 30%
C <$100 $15.00 N/A
D <$100 $15.25 25%
 E <$100 $11.33 20%
F <$100 $12.12 N/A

Source: F. Curtis Barry & Company benchmarking

Our recommendation is to approach other, non-competitive warehouse operations in your market about their pay scales. We have found many companies will exchange with you as long as they feel you are open and truthful with them. We would also suggest a simple non-disclosure agreement to protect against having your data shared with other companies.

Be intentional in defining the survey’s intended outcome and accuracy so you get comparable data. For example, are you interested in starting hourly wage rates or the average for all workers excluding management and supervisors?

The same holds true for defining fully loaded benefit rates. In the table above, our definition of benefits includes hourly wages, employee benefit costs, company paid portion of FICA, profit sharing, etc.

Review Employee Turnover

How much does absenteeism and employee turnover cost your DTC warehouse operations? How do you stack up? To identify the problems, do you have formalized reporting of employee absenteeism and turnover? As you research your turnover rate, here are some key points to take into consideration from one of my previous posts.

We hope that 2017 was a great year for your company. Take time to assess these factors to address potential tightening of warehouse labor quality and availability in your market.

Curt Barry is Chairman of F. Curtis Barry & Company