How Can I Get An Immediate Increase in Productivity From My Labor Force?
Problems:
Fulfillment center labor rates have increased 10% to 15% in the past five years. Excluding outbound shipping costs, 50% or more of the cost per order is labor related. Yet overall productivity has remained flat, so the cost per unit worked has increased. How well you manage labor affects both your costs and your customer service. High turnover (15% to 25% in some centers) adds costs of $3,000 to $10,000 per employee lost, and can critically hurt the customer service you provide.
Solutions:
Our Best Practices for Managing Labor More Effectively – found below - range from assessing ability before hiring, to focusing on feedback and incentives. Ask yourself, “What more can I do as a manager?” Consider what motivates staff to excel beyond normal expected performance. Have you delegated and empowered your staff to achieve success? Are your team members the most capable and talented you can afford? Are any of the staff too weak to enable you to achieve the success you were hired to achieve? How effectively and objectively do you evaluate performance and develop staff?
Best Practices for Managing Labor More Effectively
- Hire right. Have you had employees quit because they didn’t understand what the job entailed? Give them limited instruction and let them try the job. Find tests to assess ability. Use a seasoned employee as a buddy to get off to a good start.
- Track turnover. Set up a system to track and report turnover. Develop turnover report of long term and new employees. Use exit interviews to determine reasons. Calculate cost of recruiting, training and losing an employee. Develop management report.
- Set standards. Set productivity goals by department and employee. Investigate external benchmarking with other similar companies. Develop internal productivity reporting year to year by season, month and week. Increase productivity bar over time.
- Develop labor budget by function. The budget is developed in hours by function based on transactional work (e.g. orders, receipts, returns, etc.) and workflow. Convert the transaction volumes to units of work. This will help you plan for improved customer service and keep overtime to a minimum.
- Give feedback to employees. Create feedback tools such as departmental white boards of volumes processed daily, weekly and year to date; post departmental and individual productivity on department bulletin boards and company LANs. Develop measures such as the cost of an error, cost of a lost customer, etc. to gain employee understanding.
- Provide incentives. More and more companies are using incentives to increase production. Must constantly monitor and update financial pay standards. If you don’t continually monitor you may end up paying for productivity that you have gained over time. Companies have had success with non-financial awards for high productivity or cost saving suggestions.
- Manage seasonal spikes. Customers are buying closer to seasonal peak or events compressing peaks. Stay in touch in off season with good seasonal workers. Consider bonuses for rehires, stay-the-season, refer-a-friend.
- Continued improvement. Streamlining functions is not a one-time activity. Bring about gradual steady change through constant review.
Benefits:
- Highly motivated and empowered people provide high customer service which differentiates one business from another.
- How well we manage people determines whether we deliver fulfillment and customer service that our companies can afford.
Call or email Jeff Barry at 804-264-8040 or jbarry@fcbco.com to schedule a call to discuss best practices to manage labor. F. Curtis Barry & Company is a national consulting firm that works with eCommerce, catalog, retail, manufacturing and wholesale distributors on projects focusing distribution centers, order management systems, warehouse management systems, inventory management and forecasting, and freight rate analysis.
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