Today’s modern fulfillment and distribution centers are an orchestrated convergence of hardware, software, processes and people. While your technology systems, hardware and equipment may be in it for the long haul, the other reality is that your best workers likely won’t be.
Stop what you’re doing and take a quick look at the warehouse floor. You may not realize it yet, but three of those 20 order-fulfillment specialists are on the verge of quitting. And those four new employees you are in the process of training? You can get ready to say goodbye to two of them sometime within the next three months. If you’re responsible for a warehouse or distribution center, you don’t need to be reminded that the supply-chain industry is facing a very real and very costly workforce crisis.
Causes of Employee Turnover
On any given day, distribution managers hold their collective breaths wondering which of their warehouse associates is or isn’t going to show up. Study after study continues to indicate that warehouses and distribution centers experience turnover at an alarmingly high proportions – up to 15 percent by some accounts (seasonal and other part-time laborers excluded). Additionally, it’s reported that nearly half of all new hourly employees leave the job within the first three months. Constantly onboarding new warehouse staff not only negatively impacts productivity, but is also very expensive. By some reports, direct costs to replace an employee can reach as high as 25 percent of that individual’s annual salary. But when you factor in lost productivity and other indirect impacts, it becomes a much higher number, up to 150 percent of salary. Needless to say, companies are scrambling for answers.
Most supply-chain managers would agree that an ideal candidate profile for your distribution workforce is someone who can be dependable, embrace technology, and has the potential to advance to new levels of responsibility. The answer seems simple enough, but most will attest that it’s easier said than found.
So what’s the best way to identify quality talent that would actually be inclined to make a career out of distribution – or at the very least stick around for more than three months? If you’re like most hiring managers, the frustrating answer is simply, “We don’t know.” Considering all the time, resources, and science poured into attracting new talent, there simply isn’t a consistent profile or formula for predicting the success or long-term tenure of an hourly distribution-center employee.
Since we can’t predict the likelihood of a candidate's success, it’s only natural to try and identify the reasons for warehouse employee turnover or retention failures instead.
To what can these disproportionately high attrition rates be attributed? More questions than answers often come to mind.
It’s hard to pinpoint one specific reason. Regardless of why, this ongoing migration presents some very real problems for supply-chain management to overcome.
Identifying an Ideal Warehouse Candidate
What does it take for a person to make a career in order processing?
Let’s face it: not everyone is cut out for the grinding day-to-day life of a distribution center supply-chain laborer. Shifts can be long; the job requirements can be physically demanding, with more than a little walking, lifting, bending, standing, and uncomfortable conditions (especially during the hot summer months); and the tedious, repetitive aspect of daily order fulfillment can make it mentally challenging for some. On the other hand, those who are naturally self-driven, task-oriented, and can work well both with others and also on their own seem to be a natural fit for this type of work.
Is there a special breed of person best suited for this job, which can be painfully boring to some, and exceedingly stressful to others? Myers-Briggs, a leading job-matching personality indicator, suggests that those with an ISTJ (Introverted, Sensing, Thinking, Judging) personality mix are best suited for the demands of logistics employment. In the warehouse, those with such traits are said to be practical, steady, reliable, honest and responsible – sensible individuals who follow methods and procedures to the letter, reducing costly errors.
Making up about 13 percent of the population, ISTJ personality types have been dubbed “the logistician” because they work well independently, take a great deal of pride in their work, and tend to see the correlation between short-term job functions and long-term career goals. They often have little tolerance for co-workers who are late, create distractions, and miss deadlines, which makes team management and personal accountability key. When measured on their individual merits, these people will naturally excel, but when tied to a collective under-performing team, the door is quickly opened for disenchantment or frustration. Before you blindly hire the next ISTJ who walks in the door, there are a few other things to consider.
Back to Basics: Re-Examine Order Fulfillment Processes
Aside from the obvious productivity gains, an efficiently configured warehouse can make life easier for those spending their day navigating the floor.
It may sound trivial, but those extra pieces can really add up. Fortunately, there are things that you can do quickly to boost productivity, while making life a little easier for your warehouse staff. Examples include widening aisles, doing zone or label picking; or something as involved as installing or upgrading material-handling systems or implementing dynamic slotting. Seemingly small changes can have a measurable and lasting impact on productivity and worker morale.
Changing Corporate Perceptions
With the massive talent shortage we’re facing, it’s easy to assume the problem begins with the talent pool rather than within our corporate structure. We need to stop assuming that the problem lies with the workers, and start by taking an hard, honest look in the mirror and asking: What is your company’s culture as it relates to warehouse workers?
A positive corporate culture is all about setting and communicating expectations and rewarding those who excel. Just as importantly, warehousing staff should be held accountable just as you would any other department, and sometimes an addition-by-subtraction scenario is the best alternative. When creating an effective distribution environment, it’s just as important to weed out those not suited for the job as it is to identify those you want to hang on to. Continual mistakes, absence or tardiness cost companies customers and contribute to a tense working environment.
More often than not, warehouses are physically separated from executive management and front offices – sometimes miles apart. The shop floor can seem distant and isolated physically, but can also be perceived mentally as well. Some on the corporate end may even see warehouse associates as a tolerated necessity – simply a cost of doing business. It’s no wonder that warehouse staff can feel like the forgotten stepchild or mere afterthought. While sales, marketing, and finance might be high-fiving that big new order, those tasked with actually executing on and delivering the order are often oblivious to the impact of the new contract to the organization’s bottom line. Rather they may only see such business wins as increasing their workload – especially if they are not properly incentivized, or sharing in the company’s profits.
“Customers are the lifeblood of any company, and the truth is that warehouse staff is the final and often critical link between the organization and its customers. Incorrect or late orders reflect directly on the organization as a whole,” explains Gorilla Glue’s vice president of operations, Mark Kramer. “When employees feel disenfranchised, there’s a problem, and it all comes back to leadership.” Gorilla Glue recognizes the distribution workforce as a valuable asset, and is diligent to ensure that staff is properly compensated, recognized, and embraced. As a result, it has officially been named one of Greater Cincinnati’s Top Workplaces for the last eight years running.
Businesses are getting creative with incentives to combat the problem. In addition to higher wages and better benefits, some are upgrading facilities to include locker rooms, recreational and workout facilities, break rooms, and even a few extra perks such as catered meals, on-site child care and more. While it might not be enough to retain all dissatisfied workers, it does address a few concerns and is a clear step in the right direction.
Attracting the Next Wave of Supply Chain Workers
As Baby Boomers punch their retirement tickets out of the workforce, they are largely being replaced by millennials and Generation Xers. This new breed brings with them a unique skillset, technical aptitude, and confident mindset. They are generally hard-working but need constant reassurance and encouragement, and want to have the proper tools with which to work. Maybe it’s time we turned those millennials loose! Remember, this generation was raised on technology – they understand it, apply it daily and, most importantly, need to employ it in their jobs. Performing tasks manually that could or should be automated is a recipe for confusion, frustration, and restlessness.
“We’re seeing more and more young first-timers enter the workforce,” says Tim Herbert, warehouse manager for Bryan Equipment, a leading distributor of Stihl power tools. “This generation has grown up with technology and expects it in their daily routine.” With a myriad of material handling systems, voice picking, scanners, and finger fulfillment options, Bryan Equipment offers its warehouse workers the level of technology with which it feels the most comfortable.
Unfortunately, far too many businesses continue to rely on manual or paper-based fulfillment processes that are more reminiscent of the last industrial revolution than the 21st Century. Many have failed to fully embrace this digital revolution by only implementing automation on a limited basis, and aren’t leveraging the functionality to its full potential. The hard truth, according to the Warehouse Education & Research Council’s (WERC) latest 2018 DC Measures study, 35 percent of warehouses still do not use a WMS to automate their order-fulfillment tasks. That’s one out of every three warehouses! This presents problems both in perception and reality for today’s young workers, who are more likely to shy away from what they might perceive as a low-tech job in a low-tech industry.
Getting Digital in the Warehouse: Next-Gen Supply Chains
Automation can help you to attract employees. It’s all about productivity and efficiency, and when technology is leveraged, the returns can be significant. So, while you’re looking inward at your company’s culture, take a second look at the technology (or level thereof) that you employ. Does your company employ a warehouse-management system, material-handling systems and order-fulfillment tools, and are your processes conducive to an organized and efficient workflow? Automating (or better managing) many of the manual or remedial tasks in your facility can deliver some measurable and sustained improvements.
As robotics continues to evolve, it will play an increasingly larger role in transforming warehouse operations. And increasingly for some, phasing out at least part of the warehouse workforce in favor of robotics will be more than tempting. After all, robots show up, don’t take breaks, get along, gladly work overtime, tolerate even the worst working conditions, and can outshine even your best workers in terms of efficiency.
However, forward-thinking companies are recognizing the advantages of leveraging robots alongside people and not in place of them. Assigning robots with simple, repetitive (often boring) tasks allows workers to focus on tasks requiring creative thinking, complex decision-making, and strategizing. The result is a positive impact on warehouse employee attraction and retention. There are a number of emerging terms for this type of collaboration, including cobots and autonomous mobile robots (AMRs).
Cobots are robots designed to cooperate with and assist humans (rather than competing for jobs) by allowing each type of worker, human or machine, to focus on what they do best. What’s more, cobots are surprisingly affordable. Research by Barclay finds that cobot pricing is dropping by as much as 5 percent year-over-year. If the trend continues, it’s anticipated that one could purchase a cobot in 2025 for about $17,500.
AMR is another term making the rounds these days. Intelligent, self-directed AMRs are taking their place alongside workers handling goods-to-person duties, pallet moving, and basic order processing. In a North Carolina distribution center, workers who once spent their time moving pallets are being reassigned to more meaningful jobs. Workers were added or reassigned to work calling for mobile dexterity, problem solving or other value-added positions.
Data-Driven Labor Management
Labor management applications come in a variety of flavors, but the bottom line is access to more complete information and the ability to use that data for workforce optimization. Collecting labor information – who did what, what was the number of orders processed, how much time it took for the worker or team to complete the task, and so on – can be leveraged to develop internal performance standards. This information in turn can be measured against industry standards available through organizations such as the Warehouse Education Research Council (WERC), which offers members a Warehousing & Fulfillment Process Benchmarking & Best Practices Guide.
As Fascor vice president Andy Klare explains, there are several ways a WMS solution with a hybrid labor management component can have a positive impact on employee retention. “A warehouse management system adds an element of predictability by setting the tone and expectations for the day,” says Klare. “Now warehouse workers know at the start of their shift what’s expected and how long it should take. A WMS provides workers with the tools, structure, and consistency often lacking. For some, just knowing there’s a light at the end of the tunnel makes all the difference.”
WMS technologies can use this data to calculate how long it should take to fill an order, and clearly communicate what’s on the daily docket for the staff. This information can then be communicated to each worker, so that they are aware at any point during the day where they stand individually and collectively regarding completing tasks within projected time parameters. It all comes down to allowing employees to understand exactly what’s expected, where they stand, how they are being judged, and the payback or consequences.
Klare goes on to explain: “Without a WMS, it’s hard to hold people accountable in a way that’s fair and accurate. A paper-based warehouse environment, for example, can be chaotic and lacks visibility, allowing people to hide from work. Many warehouse workers don’t ask for much, just consistent work days and limited surprises. If I do what I’m supposed to do, will I be home on time for dinner with the family? It’s only fair to have clear daily objectives, and know that you will be consistently out the door on time if those objectives are met.”
More than a mechanism to manage and monitor operations, a WMS can have several other indirect effects. With a WMS solution, management can make better data-driven decisions faster. Does the workload warrant additional workers? Should we add a second or third shift? How much productivity is gained versus cost? Answering these questions accurately can go a long way toward ensure that realistic expectations are set.
“With data-driven insights provided by a capable WMS, companies may often come to realize that their people or labor pool isn’t the problem, but rather it’s the tools or processes that are creating the real bottleneck,” concludes Klare. “In short, a WMS allows companies to fully maximize their most valuable resources – their people.”
Produce distributor Crosset, a division of Castellini Companies, assembles and distributes prepackaged organic produce to some of the nation’s largest grocery chains. The company actively leverages a WMS to combat these labor and predictability challenges. “Before each shift we look at the number of picks for the day, project a schedule and review the shift’s objectives with the staff,” says Rob Norris, Crosset’s chief operating officer. “Knowing that the workday won’t go on indefinitely allows workers to more accurately anticipate what time they will be home.”
Using the WMS dashboard, Norris and his team now have instant access to the information needed to track picks and let the group, as well as each individual, know how the day is progressing. “Predictability is a key WMS advantage,” Norris says.
Leveraging a WMS for Employee Retention
Many companies in a variety of industries have seen the benefits of a WMS in regard to improving employee retention.
For several years, Bryan Equipment has been tracking worker productivity with the help of a WMS. Five years ago, its turnover rate was 5.5 percent, well below the industry average. What’s more, for the past two years the voluntary turnover rate among warehouse workers was zero percent.
In addition, Bryan Equipment is leveraging its WMS to help identify and reward top performers. This is critical, as orders received by 12:00 p.m. are guaranteed to go out that same day.
“We rely on our WMS to track the performance of our entire fulfillment staff,” says Herbert. “This allows us to continually improve our processes in order to meet growing demands.
“My job isn’t to come down on workers for mistakes,” he continues. “We use our WMS as a teaching tool. When errors are made, we use the data to help the worker understand why.” Raises, bonuses, and promotions are performance-based at Bryan Equipment, which uses its WMS to track performance and reward workers who excel. Concludes Herbert: “Ours is a totally integrated operation.”
From big-box stores to the smallest grocery store and corner gas station, Gorilla Glue serves a wide variety of customers. Its distribution operation utilizes 15 processes specific to differing customer and carrier requirements.
Prior to implementing a WMS, the turnover rate at the Gorilla Glue distribution center exceeded 15 percent, well above the national average. “Our previous paper-based process created a lot of strain and anxiety,” says Kramer. “Even though we’ve always done a good job in valuing our employees and making sure they were well compensated, there was still a fair amount of frustration associated with the job.”
With the help of its WMS, Gorilla Glue has standardized these various customer demands across all work types, channels, and across all transportation modes. For growing companies, this consistency simplifies order fulfillment and shipping procedures, removing the burden from the worker.
“Because our WMS automates many of the tasks and number and item associations, it helps to remove the pressure (and sometimes frustration) to get the order right,” explains Kramer. “At the same time, it has also cut the time needed to prepare large orders from days to several hours. It all adds up to more predictable days for the warehouse staff.”
Kim Messer, vice president of supply chain and logistics for Galco, a distributor of 2.3 million industrial electronic parts, echoes such sentiments. “Without a WMS, you’re just guessing. A WMS removes subjectivity from the equation, allowing you to quantify performance.”
When workers are able to grasp the big picture, or see a method to the madness, they are better able to offer useful grassroots insight for improving processes or leveraging new technologies. “Our warehouse staff is on the front lines,” says Messer. “They are the vital link between the company and the customer. We look for problem solvers and those who can take the initiative – not to simply put in their time and clock out.” Those who grasp the full functionality of a WMS are best able to solve problems by implementing lesser-used features or making recommendations to warehouse management.
The Bottom Line
As a seasoned supply-chain professional your view of the industry might be radically different than that of the up-and-coming workforce. To those who don’t yet appreciate today’s sophisticated supply chains, the mere thought of order-fulfillment jobs can conjure ho-hum images of a 1940s assembly line. Drawn to what they perceive as more glamorous and technology-driven industries, young workers surveying the job market often see warehouse positions as temporary or a last resort.
In today’s digital world, it might seem hard to believe that one in three warehouses continues to rely on manual order processing and paper-based recordkeeping. As spreadsheets are plagued with inefficiencies and errors, why any business would willingly choose to forego WMS functionality is head-scratching, putting unneeded extra pressure on fulfillment staff.
Regardless of the steps you take, it’s inevitable that some of your best employees will be lost along the way. Such is the nature of the business. In summary, here are some steps that you can take to improve the odds of attracting and retaining your best performing employees.
Don’t let the technical aspect of a WMS scare you off. Many systems are easy-to-use and readily affordable. Today’s systems conform to your requirements without an overhaul of hardware, systems or processes on your end. The key lies in the scalability of such systems, allowing the customer to select only needed functionality. Furthermore, such systems are easily integrated with enterprise resource planning and other business applications.
Jaime Reints is vice president of marketing and business development at Fascor.
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