Unlocking the Secret to Warehouse Labor Costs

By Jeff Boudreau, Ryder Supply Chain Solutions

With the holidays approaching, retailers are once again facing the challenge of securing the right staffing levels in their stores to meet the higher demand of the season. And just as obtaining the right manpower levels is critical for capturing sales, reaching the right labor mix in the warehouse is essential in keeping inventory flowing smoothly through the supply chain.

But as every workforce planning expert knows, one of the major challenges of labor planning is balancing the need for more manpower with the need to control costs – which is why finding ways to work smarter with the same or fewer resources can help save on costs.

Retailers face unique workforce challenges. Demand is often difficult to project, which makes managing costs, labor, and productivity a tricky task. For the holidays or any season, retailer warehouses often need to operate with extended hours and extra staff.  During off-peak times, or even downturns, retailers need to staff down.  

One potential solution in the warehouse for retailers is applying the “Lean” production philosophy that originated in manufacturing. The fundamental principle of Lean is to focus on enhancing the quality of processes through continuous improvement and incremental changes. Workforce management is by no means a new concept to retail, but incorporating lean principles to workforce management is very new. A lean approach helps achieve optimal staffing and productivity in a constantly changing environment. Supervisors can build rules around staffing up and down depending on different business needs. Onboarding and training can be flexible and customized based on an employee’s unique skills. And the workforce can be directly engaged in identifying opportunities for improvement that will ultimately reap them personal rewards and incentives.

A lean approach to labor management in the warehouse is implemented by creating a culture where employees are taught to identify waste and inefficiencies in the processes carried out in the warehouse and are trained and incented to improve their performance continuously. Part of this process includes standardizing tasks and training employees in these standard tasks, identifying performance goals that are used to encourage better performance, and creating a rewards and recognition program that promotes improvement on an ongoing basis.

In a lean warehouse, workers are taught to identify inefficiencies and find better ways of carrying out tasks with Lean tools such as Kaizen exercises, A3 sheets, problem-solving jackets, and fishbone diagrams. Managers coach employees on finding new ways to carry out processes more quickly and with fewer errors.

The warehouse itself is also laid out for greater efficiency and productivity. The preferred way of carrying out a task is identified and work is standardized, so that employees understand exactly how they are expected to work, how much time should be delegated to each task, and whether they are meeting those performance and time targets.  

By laying out the warehouse with clear labels and visual cues and standardizing work, managers are also able to understand how to plan labor to ensure they don’t have too many employees with not enough tasks, or not enough employees who end up being stretched too thin.

Additionally, standardized work makes it possible for warehouse managers to set performance goals and engage in the active training of the workforce for better performance. Managers can use tactics such as employee shadowing and instant feedback, or daily shift start meetings and monthly team meetings to coach employees on areas for improvement on an ongoing basis as well as continuously evaluate performance goals for more efficient operation. This focus on training should also include cross training, or encouraging workers to learn new tasks continuously within the warehouse so as to be able to create a flexible labor force that can adapt to changing needs.  

Once these basic building blocks are in place, warehouse managers can then engage in a key piece for achieving peak performance from employees – creating a recognition and rewards program. Formalizing an incentive program motivates employees by developing the opportunities for workers to be recognized and serves as an engine to spur improvements on an ongoing basis. The truth is that people drive results, and employees must be motivated to give 100%. With goals in place and the coaching and tools to meet those goals, a recognition and rewards program ensures that employees feel motivated continually.

A Lean Labor Management program in the warehouse helps to control costs by preventing errors, mistakes, and inefficiencies through standard work processes; providing a map for desired performance; and securing a flexible labor force that is cross-trained in multiple tasks. A labor force with a Lean foundation will continue to provide value as it looks for new ways on an ongoing basis to take costs out of the supply chain.

 Jeff Boudreau is VP, retail, Ryder Supply Chain Solutions

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