Get a Grip on Your D.C.
Most fulfillment processes are largely manual in nature, as only the very largest companies can justify advanced automation. Looking at the total cost of back-end order fulfillment — including direct and indirect labor, occupancy, and shipping supplies — total labor generally makes up 60 percent to 65 percent. That excludes any shipping costs because they distort the comparisons.
Benchmarking ShareGroups, a proprietary program in which participants share benchmarking data, reveals that labor rates were typically around $7 an hour five years ago. Today, they’ve reached $12 to $13 an hour for many direct marketing businesses, plus a 20 percent benefit rate. But overall productivity in distribution centers has remained flat over a five- to 10-year period. If you factor in increasing labor rates, you can conclude that productivity has actually declined.
Consider employee turnover of 15 percent to 25 percent, or even more in many centers.
Turnover costs $3,000 to $10,000 in people time, training, testing and the ramp up to full production; that doesn’t include the expenses for agencies, ads or other details.
Given the current economic climate, businesses must do all they can to get more out of the resources they have.
With that in mind, here are 10 ways to improve productivity by managing distribution-center labor more effectively.
1. Improve Hiring Practices
How many times have you had new employees quit because they didn’t understand what the job entailed or didn’t like it once they tried it? No matter how good the people come across in interviews, you can’t tell how well you’ve hired until they start working. Consider these ideas.
• Give prospective employees some limited instruction, then let them try the work up front.
• Determine if there are tests you can give that assess whether people can do the work or have a good chance of fitting into
your company's culture.
• Use a “buddy system” with seasoned employees in the department to get the new employees off to the best start.
• Look at whether you have an effective training program by function. Will cross-training improve production and give you flexibility in the use of your staff?