Cost-Cutting Done Right
Problem: Seta Corp., a jewelry syndicator and the parent company of Palm Beach Jewelry catalog, continually looks to reduce labor fulfillment costs.
Solution: Instituted employee incentive programs, improved automation, realigned scheduling and staffing, and streamlined distribution center operations.
Result: Between 1999 and 2004, the cataloger reduced its labor fulfillment costs by 45 percent; at the same time, it increased employees’ average hourly wages.
* The following functions are included in Seta’s labor fulfillment costs: receiving; quality control; stock putaway; picking/packing; shipping; engraving; returns processing and putaway; production maintenance; and all hourly and salaried payroll costs, including payroll taxes.
If you’re of the mindset that says you can’t significantly reduce labor costs without also decreasing workers’ wages, Tim Holody, chief operating officer at Seta Corp., has a message for you: Think again.
By carefully implementing a strategic plan, Seta Corp., a Boca Raton, Fla.-based jewelry merchant, reduced its labor fulfillment costs by 45 percent and reduced its cost per package* from $1.64 in 1999 to $0.90 by 2004. Meanwhile, fulfillment employees’ average wages during that time period actually rose 25 percent.
Moreover, Holody and his team achieved these results despite a substantial sales reduction during the five-year period as a result of Spiegel’s bankruptcy. Seta Corp. sells jewelry through syndicated partnerships with other catalogers (e.g., J.C. Penney, Redcats USA titles), in addition to selling merchandise direct to consumers via its Palm Beach Jewelry catalog.
The following program enabled Seta to tighten its product fulfillment operations while also keeping its workforce motivated.
Instituted Individual Incentives
Holody instituted an ambitious and aggressive incentive program for all of the company’s distribution center (DC) employees and managers. For each employee, the company tracks how many hours worked and the number of transactions processed, and it measures the worker against a set standard of productivity. It then rewards the employee $3 for each hour he or she saved. (See chart “Individual Incentives,” for further explanation of this system.)