Two weeks ago my blog, “What is Employee Turnover Costing Your DTC Fulfillment Operations?” got a response from a client about their company’s plans to create career paths for all distribution center employees. This is a retailer and wholesaler with $2 billion in sales, 350 stores and more than 1,000 dealers. To service this vast network, they have three large DCs with more than 600,000 square feet of space.
Working with senior management and human resources, DC management has created paths for career advancement while ensuring the highest level of professionalism and productivity.
The business opportunities they identified were:
- Creating new employee grades and pay rates;
- Establishing standard, consistent work rules for all employees;
- Provide a structured path for DC employees to grow in their careers;
- Incentivizing employees to gain new skills, improve productivity and follow work rules.
Project objectives included designing and implementing a system that assigned points for various behaviors and progressively disciplined repeated bad behavior. A second objective was to address wage discrepancies that had happened over time. Key to the new system is a new method and metrics for evaluating employees.
The expected benefits include reduced turnover, elimination of stale productivity, improvement of morale and teamwork and less reliance on temp labor by reducing unscheduled time off and tardiness.
To create the overall career path, DC managers analyzed the various positions and required skills sets. They literally created a spreadsheet matrix with the types of tasks across the top and the grades or employee positions down the left. The company is pleased with the early outcomes.
Let me add a few things to understand the company’s environment better. It is an old-line company and people often stay long term. There are three DCs and the managers in each did not have consistent personnel approaches or career paths for employees. There is also a wide variety of products, from bottles weighing a couple ounces to bulk chemicals and heavy items requiring employees with good physical conditioning. Not your standard small order, pick, pack and ship for sure.
There are some other realities regarding the employment market and filling positions. The national unemployment rate is now 4.9%. In Richmond, VA where we’re located, it’s even lower – 4.1.%. Additionally, millions of people have left the workforce and are sitting on the sidelines. Given these low unemployment conditions it’s challenging to find the best qualified people as you’re often attracting them from other companies and positions.
Here are four points to ponder as you size up your approach to your DTC fulfillment work environment:
- What is your approach to dealing with your employees? Just throwing out two extremes, are you filling vacancies or providing a path to a career?
- Are you calculating your distribution center’s turnover and evaluating what absenteeism costs? In our experience, turnover alone can cost between $3,000 and $10,000 per lost employee. Reducing turnover can have a very real impact on profits and future employee programs.
- What other problems does employee turnover create which hurt customer service and create errors, which often cost $35 to $50 each to correct? How does this affect profitability?
- Is your center a place that encourages employees to grow, develop new skills and stay long term? We may all want to do this but what is the reality of rewarding them financially? Can you increase productivity to make the changes you envision?
Omnichannel companies are highly dependent on motivated employees to deliver high-quality customer service while keeping costs down. It’s worth pondering how these issues apply to your company. What are the costs if you don’t do anything? How do career paths and reducing turnover fit into the fulfillment strategies you envision for your company?
Curt Barry is Founder & Partner of F. Curtis Barry & Company