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Other than inventory, your logistics workforce is the largest expense in your distribution centers, eating up 50–70% of the warehousing budget. It’s why managing and reducing labor-related expenses is a top priority for just about every logistics executive.
At Kane Logistics, we’re proud that our associate retention levels with our top 10 customers is 80.2%, compared to the industry average of 53.9% (U.S. Bureau of Labor Statistics). Here are 10 logistics workforce management strategies that work for us, and may work for you.
1. Invest extra time up front to hire the right people
Most experts agree that this is the single best way to reduce turnover and improve productivity. But many companies rush the hiring process to fill much-needed positions. Our advice: invest time to carefully vet new associates – at every level – and always, always hire for attitude over skill. You simply can’t teach attitude and ambition. On the other hand, it’s relatively easy to teach someone how to operate an RF gun or to pack an eCommerce order. Despite this, businesses routinely hire poorly motivated candidates who have 5 months of warehouse experience over motivated candidates who are also experienced – just not in a warehouse setting. Don’t do it. Use personality testing and multiple interviews to identify people with genuine passion and enthusiasm for doing a great job – at whatever they turn their hand to.
2. Pay extra attention to developing DC managers and supervisors
Kane Logistics worked with Colorado State University to survey hundreds of distribution center workers on factors that impact productivity and retention. One of the clearest conclusions from the research is that DC managers and supervisors have a disproportionately high impact on associate happiness and long-term retention. These mid-level managers set the tone and are the face of your company to your logistics workforce. It’s very important that they not only run an efficient operation, but that they cultivate positive interpersonal relationships with the people who do the picking, packing and loading. If warehouse associates don’t like and respect that people they work for and with, they are more likely to leave. The moral of that story: If you’ve got DC managers and supervisors with the rare combination of operational acumen and strong interpersonal skills, invest in their personal development and show them a clear career path. Provide incentives for them to stay, because if they stay, you’ll experience lower attrition across your entire workforce.
3. Prioritize workforce retention
Kane Logistics and Peerless Research teamed up to survey 252 logistics executives for a study on logistics workforce management. When asked to identify their toughest day-to-day challenge, the respondents’ top response was “finding and keeping qualified, dependable workers.” For sure, it’s hard to retain warehouse workers. But you’d be wise to invest in strategies that push your retention rates well above the industry average of 53.9%. That’s because, with recruitment, training and other costs, you’ll spend at least $7,000 to replace associates when they leave. The total cost actually goes much, much higher if you factor in lost productivity. Newer associates in the training phase can take a month or more to match the productivity levels of experienced associates. If you are operating at 50% productivity, you essentially double your labor costs for the same output. Strategies to improve retention include:
- Establish a competitive salary and benefits package for the market you are in. According to a Paychex study, dissatisfaction here is the top reason workers leave their jobs.
- Show associates a clear career path. Associates need to see your organization in their personal future.
- Recognize achievement with easy, inexpensive gestures like personal notes or a rewards program.
- Most workers who leave a job say the company could have done something to prevent them from leaving.
4. Hire from within
There is a talent gap in logistics. When a key spot needs to be filled, many companies instinctively look outside to fill the position. There is an assumption that bringing in an outsider can accelerate achievement of a business objective. A good metaphor might be the baseball team that pays millions for free agents to provide a quick fix for a losing record. But performance results have shown that sustained success is more likely when the team invests in its farm system and relies primarily on home-grown talent. More and more logistics companies, KANE among them, have special programs to nurture and grow their “high potential” managers. And this investment is paying off big time. Example: our director of operations for a major retail client actually began as a temporary warehouse worker. Today, he manages three large DCs that process hundreds of millions of dollars in inventory every day.
Companies without such programs are in danger of losing talented and ambitious managers if they don’t see opportunity where they are now. Those that do invest to develop internal talent and hire from within create a fortuitous cycle. Your logistics workforce appreciates being part of a culture of learning and advancement, therefore retention and morale improve, along with overall productivity.
5. Hire from your temporary workforce
It’s likely that occasional volume spikes require you or your 3PL to bring in temporary workers to fill the manpower gap. This is actually a fantastic way to get to know potential permanent associates. As we’ve mentioned, bad hires can cost you tens, even hundreds, of thousands of dollars to replace over time. Hiring temporary workers that you already know substantially reduces that risk because you’ve already confirmed, pre-offer, that they have the attitude and attention to detail required to do well in your organization. The traditional job interview process is hugely time-consuming and expensive for the hiring company. When you bring on temporary warehouse staff, you’re essentially conducting dozens of extended job interviews – and getting a far better read on the potential hires than you would from a 30-minute interview. And keep in mind it works both ways. Temporary workers appreciate the opportunity to decide if your organization is a place they could be happy and build a career.
6. Use a labor management system
To this point, we’ve talked about the hiring and training aspect of logistics workforce management, but there’s a technology play that can have a huge impact on your success. Specifically, you want tools that enable you to maximize productivity so you get the most output from the least number of people. Labor management systems (LMS) do exactly that by measuring individual and team performance against specific productivity goals. According to the KANE/Peerless Research study, while only about 20% of warehouses use an LMS, 96% of these companies say they are “extremely,” “very” or “somewhat” satisfied with the results. Only 4% claimed to be unsatisfied. Of those using other productivity measurement methods – time recording, time and attendance software, labor activity tracking – 75% admitted that such systems are only somewhat effective or ineffective. LMS systems offer the following advantages:
- Objective and automated measurement of associate performance
- Improved productivity
- Reduction in labor costs
- Ability to monitor ongoing progress against a daily production plan
With even a modest 10% improvement in labor productivity, labor management systems pay for themselves within 1–2 years. If you outsource warehouse management to a 3PL, look for a partner that has invested in an LMS system in order to improve productivity and keep labor costs to a minimum.
7. Measure productivity at an individual level
Following up on the importance of an LMS system, one thing such a system enables you to do very efficiently is measure individual worker productivity. From our KANE/Peerless Research study, we know that the top thing logistics executives want to change in the area of workforce management is gaining an ability to “identify and improve productivity gaps.” The key to doing that is establishing individual productivity goals for particular tasks and providing associates with real-time, objective data on their performance against these goals. When you do this as an employer, human nature becomes your best ally. People want to succeed. They want to hit the target, and they’ll work harder and smarter to get there – on their own. But obviously the performance data gives you a chance to identify problem areas where re-training may be required.
8. Build strategic relationships with temporary staffing agencies
The use of temporary labor for warehouse staffing is highly strategic. It allows you to economically manage fluctuating order volumes by keeping full-time staff to a minimum and bringing in temporary workers for short-term spikes. Unfortunately, companies too often view temp agencies as tactical partners. That approach can backfire when you really need a volume of quality logistics workers to handle an unexpected surge. In this sense, it’s much like carrier management. If freight capacity is tight, carriers will first support shippers that have provided steady freight and taken the time to build strategic relationships and do collaborative, long-term planning. At Kane Logistics, we have quarterly business reviews with key staffing agencies to discuss any issues and upcoming plans.
How would you describe your relationships with outside staffing agencies? If the communications are sporadic and the relationships more tactical than strategic, consider investing more time to nurture these relationships. It will pay off at times when you most need the support.
9. Train your logistics workforce better
Every warehouse operation has a training program. The real issue is how effective that training program is in getting new hires to maximum productivity in the shortest amount of time. Poor training hurts you in several ways:
- When poorly trained workers take weeks and months to achieve productivity goals, you will need to hire more people to achieve the same output.
- An increase in the error rate will double the time and cost required to process orders and, worse, will create disgruntled customers.
- Training that doesn’t “stick” will require re-training. This involves more training resources and also forces you to fill that empty slot on the warehouse floor.
Pressure to address an order backlog can sometimes lead companies to take shortcuts with training to get associates out on the floor as soon as possible. But accelerated training is rarely justified. It’s far better to train well and avoid the punishing financial downsides of the consequences noted above.
10. Outsource your warehouse management operations
According to Statista, 65 percent of shippers outsource logistics warehouse activities to 3PLs. Of all the benefits of using a 3PL, logistics executives see reduced labor costs as number one, according to the KANE/Peerless Research study. That includes salary and benefit costs, as well as recruitment, training, liability, payroll administration and other indirect costs. 3PLs can help here by:
- Reducing the number of associates required through the deployment of systems and best practices to improve process efficiency
- Economically managing demand spikes through strategic use of temporary labor and cross-trained associates.
- Leveraging labor management systems that provide real-time feedback to associates and can increase productivity (and decrease labor costs) by 10–20%.
Think about it. Who handles security at your office building? Who cleans the offices? Who runs the corporate cafeteria, if you have one? Most companies outsource these functions because they can’t do it as well or as efficiently as businesses that are solely focused on that discipline. When it comes to managing a logistics workforce, 3PLs are experts.
It comes down to people
In the logistics industry, the trade press headlines and VC investments favor technology and what the supply chain of the future will look like. But how many robots and autonomous vehicles do you currently have in your operation?
Today, success in product distribution is still largely defined by an ability to manage a highly efficient logistics workforce – a workforce comprised of well-trained, reliable people who care enough to do the right thing.
