One large contributor to distribution costs is labor. It doesn’t matter how efficiently you manage the DC, it is a difficult component to control. This time of year, labor is a hot topic with seasonal operations, volume increases due to holiday shopping and seasonal projects. Unless you have a fully automated facility, labor costs are typically the largest component of your total operating costs and become a balancing act for warehouse managers hoping to control labor costs without causing issues with service.
Labor costs consist of 2 factors: Direct and Indirect. Direct labor costs relate to the people doing the activities in the warehouse. The cost of the people that handle forklifts, order picking, and pack and ship is the largest component. Indirect labor costs are the people affected by the warehouse work. This includes finance, accounting, sales, marketing and customer service.
Managing the work force is a constant battle within the operation. 40% or more of labor is estimated to fall under order picking for operations. This puts an importance on layout of the operation to minimize labor costs. Inefficient design means you will need more workers to handle the volume, which equals more time and higher costs. A robust warehouse management system (WMS) can help control these costs and help automating certain manual tasks, whether they are indirect or direct labor costs.
Here are some things to remember that will keep you and your warehouse on track:
- Develop Labor Budgets
- Run analytics by season, month and week based on order forecasts and planned productivity. You can use these reports to determine a staffing plan for each period or operation.
- Track Labor Force
- Look at your regular and premium hours and labor dollars. Set these against your volumes. Include history by month, week and day to look at continuously improving picking and packing
- Hiring, Retention and Turnover
- Look at trends in these areas and focus on improving your retention and training practices.
- Staffing Agency
- They can help out at peak with good temporary labor to overstaffing and overtime.
- Take advantage of the off-shift time to help with replenishment, staggering start times, multiple shifts and handling all slot moves at night to avoid congestion in the warehouse. This will help with your efficiency and material handling equipment utilization.
These are just a few areas to look into to help manage your labor force more efficiently. Take a look at how these may improve your operation during the holiday season and begin collecting data to create benchmarks and plans for continuous improvement.