The conversion from sales forecast to operations budget is not difficult, but it does require a strong understanding of your operations. You also need to know and measured performance standards or reasonable expectancies for each labor activity performed within your warehouse.
First, the sales plan, often expressed in sales dollars, must be converted to orders and units of sale and interpreted by accounting period by week; this is usually accomplished using historically accumulated data indicating average sell per order and average units per order shipped. When the projected weekly volume is identified as units of work, you can set about converting the forecast to labor hours and labor dollars planned to forecast sales; and subsequently to full time/part time associates required seasonally. Thus you will have created a fiscal year staffing plan which will help you plan hiring and training of new associates in advance of peak volumes or in reducing staff in down cycle volume.
Second, identify the job activities performed in your facility, including but not limited to: receive, inspect, put away, pick, pack, ship, inventory management, equipment operators, prep/support staff, quality, supervision/ managers, administrative, etc. At this point you will identify there are both variable and fixed labor job activities. Variable being the labor required to satisfy the forecast and varies with the volume (picking); and fixed being a minimum number of associates required to satisfy the forecast (supervision). Each variable activity requires at least a reasonable expectancy or standard of hourly performance such as picking is performed at 100 units per man hour, or if a fixed labor activities as supervision, you will identify you need minimum three to operate effectively.
Next develop a spread sheet to calculate weekly labor. Down the left side list each variable job activity performed in your fulfillment center, leave a space of a few lines and list the fixed labor activities. You will calculate each month or accounting period separately (you can either calculate the weekly forecast here or as a separate breakout of the monthly calculation, the format is identical). Across the top of the spread sheet, the second column is the forecast units of work (pick/units, receive/cartons, etc.) for the period being calculated and the appropriate number is located next to each job labor activity. The third column is your reasonable expectancy or standard for variable labor activities and the number of associates for fixed labor activities. Next column is the calculation of forecast units divided by the reasonable expectancy, and is titled man hours required. For the fixed labor activities, the entry is an extension of the number of associates required at 40 hours each per week. Column four is average wage rate for the variable job activities and usually the total known compensation for fixed job activities; and then column five is the extension of variable hours multiplied by the hourly rate as well as the fixed activity labor dollars. Total the variable and the fixed labor hours and labor dollars for each period calculated and you have generated an effective operating plan to forecast exclusive of benefits.
You can use the same format to identify supplies as packaging materials, material handling equipment, batteries, etc. to generate an effective labor budget and a complete operating plan for your fulfillment center.
Gary Conrad is a vice president at F. Curtis Barry & Co., a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com