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nGROUP Performance Blog

Finding Growth During a Warehouse Labor Shortage

Posted by David Hair on Sep 18, 2018 8:11:00 AM

The issue of warehouse labor shortage is not new. It has made headlines for the last few years. Back in 2014, the warehouse and distribution center industry suffered a record-low labor shortage – the tightest job market since the year before the recession. The shortage has yet to abate, with warehouses around the country still struggling to fill their staff roster


Finding (and keeping) qualified applicants to staff your warehouse can feel like an uphill battle. With the right strategy, however, your warehouse can still achieve growth despite historical employment lows. Here’s a look at what’s causing the current warehouse labor shortage, as well as potential solutions to your staffing problems to inform your future workforce endeavors.

Main Pain Points Contributing to the Warehouse Labor Shortage

As of June 2018, the number of unemployed adults in the U.S. was 6.6 million. The unemployment rate currently stands at 4%. These rates are 0.3% lower than the previous year when the number of unemployed persons was seven million. A lower unemployment rate has contributed to the warehouse labor shortage, with not as many people looking for work. Those who are often looking aren’t interested in warehouse jobs. Instead, they want jobs with more flexibility.

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Meanwhile, the working age of the general population is rising. Immigration constraints are contributing; immigrant children are receiving their educations in the U.S. and going on to get new jobs, rather than to replace those currently working. As the demand for warehouse labor continues to increase with rises in manufacturing and eCommerce, the gap between how many people warehouses need to hire and the staffs they have is growing. Here’s a brief overview of the many pain points contributing to the labor shortage:

 

  • Huge demand for labor. Thousands of warehouses around the U.S. are currently experiencing a labor shortage due to the growth of eCommerce. This shortage puts applicants in the power position. They can pick and choose where to apply and which job offers to take. This fact has led to an unparalleled turnover rate in the warehouse and distribution industry, as workers jump from job to job to increase their wages and find job fulfillment.

 

  • High training costs. Labor costs are the most substantial chunk of any warehouse’s operating expenses. It costs thousands of dollars to train warehouse workers to operate forklifts, handle equipment, and adhere to the engineered standards in the company. The high price of training new warehouse workers is adding to the difficulties companies face in keeping their distribution centers adequately staffed.

 

  • Wage increases. The need to pay warehouse workers more money to stay competitive has made it difficult or impossible for some warehouses to keep up. Increasing minimum wages to $15 in some places has meant a significant increase in salary. Warehouses must now offer more money to attract and retain workers – something not all warehouses can comfortably accommodate.

 

  • Increased costs. Operational costs in warehouses are on the rise, making it more difficult to focus on employee training and retention. Increased prices of labor, materials, equipment, and maintenance have put many warehouses in tight positions, leading to things like downsizing and firms closing.

 

  • Cultural changes. Another contributing factor is the changing attitude of the workforce. Younger workers are not as inclined to put their noses to the grindstone for others. They are demanding new employment norms, such as scheduling flexibility. Cultural changes and new employee demands make it difficult for warehouses to keep up, resulting in understaffing.

 

The warehouse labor shortage is compromising companies’ abilities to meet the rising eCommerce-fueled demand for production and distribution. Warehouse growth is encountering roadblocks, as companies don’t have enough laborers to complete jobs. Short-staffed warehouses can’t produce at the demanded volumes, as it costs more to produce per unit. Missing people can mean missing orders and costly delays in business. Act fast to come up with a solution – before your warehouse suffers lost business.

 

Labor Solutions for Your Warehouse

ngroup blog technologyContrary to what you may believe, it is possible to thrive and even grow despite today’s warehouse labor shortage. Smart warehouse management, labor solutions, and a partnership with performance experts like nGROUP can give your company everything it needs to succeed regardless of the state of the labor market. The following are some ideas to get you started on building your personalized solution:

  • Increase in wages. Employees aren’t just looking for minimum wage but a living wage. Calculate what the wage for a reasonable standard of living is in your area. Then, offer this to your employees, even if it’s more than minimum wage. Providing more than your competitors can keep your warehouse staff robust and loyal.

 

  • Offer more flexibility. Offer more workplace flexibility if you can, such as the option to work hours other than the typical eight or nine to five. Flexibility in hours, pay schemes, and other aspects of warehouse work can be just the thing to attract a younger workforce.

 

  • Create a more engaged company culture. Optimizing your company culture can improve overall productivity and efficiency of your warehouse. How do you do this? By offering meaningful work.

 

  • Reconsider hiring requirements. Consider welcoming non-violent offenders with criminal records if it will help fill your roster. Offer realistic wages and be flexible, while still meeting safety requirements.

 

  • Try a structured incentive pay program. You can get creative and still control the costs while improving wages and decreasing turnover. Remember, it costs more to hire a new employee than to offer incentive pay! Amazon is notorious for direct production incentives to get workers (“Earn up to X  amount per hour!”).

  • Consider alternative sources. Look into workforce solutions such as H-2A labor (overseas), Source America (veterans), Upshift (short-term work), or a traditional temp agency for more employee options.

Click To Get Your Free Productivity StudyWe saved the best recommendation for last: hire nGROUP. Our firm has a proven track record of successfully navigating the current warehouse labor shortage. We know exactly how to increase productivity and production using the latest technologies and strategies – all while reducing labor costs. nGROUP can make labor a fixed instead of variable cost, as well as help you improve the efficiency of training and other processes. We’ll help you produce more, spend less, and grow despite the warehouse labor shortage.

Topics: training, risk, Outsourcing, Lean Manufacturing, Labor Management, employees, labor shortage, warehouse efficiency, nGROUP, performance partners, Cost