Want to Reduce Warehouse Costs? Think Warehouse Labor Management

For a typical warehouse, the largest operating expense is labor, which can eat up anywhere from 50 to 70 percent of the company’s warehousing budget.  Therefore, finding the right people and maintaining high productivity levels are essential to keeping labor management costs in check. 

A recent KANE-sponsored research report – Labor Management Strategies in the Warehouse – surveyed 252 top logistics and supply chain managers on this important topic.  Read the full report. Below are just a couple of the questions posed in the survey research. 

What are the toughest challenges you face relating to warehouse labor strategies?

1. Finding and keeping qualified/skilled/dependable workers (62 percent)
2. Increasing workforce productivity (57 percent)
3. Controlling labor costs (45 percent)

These are the top three responses.  Distribution professionals are clearly worried about a potential shortage of available warehouse labor. The turnover rate for warehouse workers, according to the Bureau of Labor Statistics, is 36 percent. The Material Handling Industry reports that the logistics industry will be looking to fill about 1.4 million jobs, or roughly 270,000 per year, by 2018.

What benefits can be gained from usage of a formal warehouse labor management system (LMS)? 

1. Ability to objectively measure associate performance (72 percent)
2. Reduction in labor costs (57 percent)
3. Visibility over performance throughout the day (50 percent)
4. The capacity to monitor progress against a production plan (50 percent)

Of those firms that have implemented LMS, nearly all have seen significant warehouse productivity improvements as a result.

These kinds of productivity gains suggest there would be a solid ROI from investment in a LMS system. For example, in an environment with 50 warehouse workers, a 10 percent productivity hike would save around $190,000 annually, equating to a 1 to 2 year payback period. Outsourcing to a 3PL with a strong  warehouse labor management system is a way to realize these benefits with no capital investment. 

To reduce warehouse costs and improve warehouse services performance, focus on labor management. Download the complete survey research report – Labor Management Strategies in the Warehouse...just click below.