Warehouses are struggling to make optimal use of labor and space, while ensuring that efforts to control cost don't compromise their commitment to top-notch customer service. Bob Heaney, senior research analyst for supply chain management with Aberdeen Group, describes the challenges they face.

With the economic downturn, companies engaged in heavy cost-cutting, which led to a severe contraction of the labor force. Warehouses were particularly affected. Now, as sales and shipment volumes begin to recover, manufacturers aren't necessarily keeping pace in their hiring. That shortfall "puts more pressure on managers to do more with less," says Heaney.

In assessing the capacity of their warehouses, companies need to get a handle on trends in customer demand and product volumes. They also need to assess the limits of their resources in terms of space, dock doors and labor hours. A workplace might have to be augmented with temporary labor on short notice.

Understanding the precise trade-off between cost and resources "is a combination of art and science," Heaney says. "The numbers are just a starting point." Warehouse management must know which items it can move into the next day's picking cycle, taking care not to jeopardize service to the end customer. "The key is being able to know where your labor and volumes are at, as you get through the day." One way to ensure a more flexible and responsive workforce is to promote cross-training, he says.

Companies surveyed by Aberdeen cited labor management as a key area of concern in the warehouse. Many are beginning to explore the use of engineered labor standards, which establish detailed performance targets based on workers' individual tasks and abilities. Software that offers this capability delivers a quick payback in the form of increased productivity, according to Heaney. A third of respondents to Aberdeen's survey said they saw their biggest return on investment in the first year of deploying labor-management software.

The biggest hurdle to adopting such technology is the difficultly in assessing the appropriate level of standards. Not every warehouse has the data to drive an engineered standards program, which must assess such elements as travel within the facility. "On the other hand," says Heaney, "if you just measure what an employee is doing, you can get a great advantage over time."

To view video in its entirety, click here