The warehouse and distribution industry is facing challenges due to changes in the workforce. The labor shortage in America is reaching epidemic proportions, putting pressure on employers. Companies are struggling to keep their employees, while many employees are struggling to find competitive job opportunities. However, when it all comes together in just the right way, both the employer and the employee can be happy in the workplace. It is a delicate balance that takes training on both sides, but the increase in productivity is well worth the time and effort.
Labor Shortage and Demand
The warehouse and distribution industry has been facing a considerable labor crunch for the past several years. E-commerce is driving increased demand for warehouse jobs, as more and more people rely on online shopping. Also, the median age of the working population is rising, and a lot of these workers have no interest in these types of jobs.
A significant portion of warehouse workers are immigrants. The children of these immigrant workers are educated in the American public school system and growing up to get new jobs in other industries, instead of replacing their parents as they retire. The more educated they become, the farther they drift from these minimum wage jobs. Many may wonder if immigrant workers compete with American workers, but research shows that immigrant workers often have a different skill set than American workers. Therefore complement the workforce, rather than competing with it.
When it comes to hiring in this industry, the going has been rough lately. Small businesses report that finding qualified workers is one of their most significant problems with many having job openings that they struggle to fill. Many companies have had to raise compensation and other benefits, as well as invest more in training and other resources to be competitive in attracting to potential employees.
Because of this shortage, there is a huge demand for workers who are willing to work in the warehouse and distribution industry. Qualified applicants have their pick of jobs – and where they would like to work. Jobs that are more appealing, with flexible hours, a better pay rate and benefits are the most desirable and filled first. The number of warehouse workers quitting their positions has been on a steady rise over the last few years. Even worse, turnover can cost up to 25% of the worker’s salary. That’s a lot of lost money for companies to swallow.
The costs of hiring new employees to join the workforce are also rising. Mandatory training hours and programs cost the company money for each new employee. When that employee quickly moves on to another position, the company must eat the cost. At the same time increasing minimum wage amounts mean a higher cost per employee. Higher costs for the company means fewer employees hired by the team. Fewer employees mean longer hours and more work for those who are on the team, decreasing morale. Also contributing to the problem is the lack of truly qualified applicants. Up to 75 percent of applicants do not make it to the interview stage of the hiring process because of criminal records, drug problems, and other issues. These problems have been critical in the light industrial sector creating unique challenges for management teams.
There are a few different solutions for overcoming the labor shortage. The one that ensures the highest employee retention is making the workplace a win-win situation for everyone. A job with higher wages is more desirable to incoming employees, creating a company that stands out from the competition. Flexibility and paid sick leave helps to boost the morale among the workers. Adding meaning to work causes employees to have a connection to what they are doing, making them want to work harder to achieve goals. When workplace satisfaction is high, employee retention improves, as well as productivity.
Instead of searching for a new workforce, some companies are also installing robots and automated processes to complete tasks. In some cases, robots can do more work in a lesser amount of time, increasing production. The initial cost of purchasing the machines and the maintenance may be higher up front, but machines do not need yearly training programs, sick time, or higher wages and result in savings in the long term. However, machines are not compatible with every process. Many distribution processes will always rely on labor-intensive procedures that companies will be required to use and adapt to the changing workforce.
Labor Productivity and Inefficiencies
How efficient is the flow of labor in your warehouse? If there are specific areas that often cause a problem in the production process, it may be time to reevaluate these areas. The designing phase of an effective production system is one of the most important. It does not matter how skilled your workers are; if the process itself has flaws, it will slow down your production time. Even a couple of seconds can have tremendous costs in the long run. These inefficiencies result in low productivity and fewer profits, reflecting poorly on the company.
Poor management can easily result in a lack of productivity, but effective management drives the workforce to succeed. A good manager knows when to push when to back off, and how to boost morale. The way management handles a situation can make or break the entire process. Managers should undergo extra training to be sure they have the skills needed to help productivity and not hinder it. Lean practices and skills can be applied to workforce management to maximize efficiency.
Evaluate the culture in the warehouse. The overall conditions of the facilities, as well as the personal discipline of management and staff, are both excellent indicators of the workplace culture. It is important to note that employee engagement is not the same as productivity, but both are important to your organization. Productivity refers to the amount of work an employee can complete, while engagement means how focused they are on the work and the number of mistakes not made because of the connection to the work process. Each is only one piece of the puzzle, but both together are a powerhouse. When the warehouse staff feels confident in what they are doing, and the atmosphere is positive, productivity increases across the board.
Having a temporary workforce can benefit your company by providing a regular influx of fresh employees. Temporary positions don’t require as many benefits for workers, quick training options, and no career path incentives. Managing a temporary workforce is also a great entry point for employees looking to enter a higher-level position. Both parties show a lack of commitment, but in turn, the benefits for both sides are significant. Plus, the requirements for the number of workers may change based on the season.
Tracking performance, culture, and incentives can be a full-time job by itself. The right software will make all the difference and save a massive headache down the road. Performance feedback needs to be immediate to make an impression. When too much time elapses between the evaluation and the feedback, it gives less of a chance to correct behaviors and processes. Clear documentation of expectations reviewed on a regular basis will keep everyone on the same page. Good performance is rewarded with incentives while weaknesses should trigger more training to help get up to speed.
A true win-win situation gives the employees a chance to be active in their incentive program. Offering incentives as a reward for desirable behaviors in the workplace can lead to better employee satisfaction and productivity. By measuring productivity and sharing the results instantly, you’ll be training the workforce for positive results. Keep the plan simple and opt for the details laid out in a clear and concise manner. Don’t forget to encourage safe work habits!
The Long-Term Effect on Productivity
How do you know if your incentive program is working as it should? Ask yourself these 10 questions about your program to help you determine the right direction. If you answered yes to all 10 questions, your program is well on the way to being effective. Your employees should feel very happy with the program and their options. If you answered no to any of the questions, it might be time to take a more in-depth look and figure out what can be changed.
Rising per-unit costs measure the results. This means that the number of units produced per hour should be in line with the cost the company spends on wages per hour. The problems stemming from the labor shortage, process inefficiencies, and insufficient productivity can result in rising per unit costs. Improving on any of these three critical issues can relieve the rising costs and even reduce them with the proper management techniques.
nGROUP Performance Partners have found sustainable success navigating these obstacles in multiple industries. Our success is measured by each client’s success which leads to breakthrough results no matter what type of production processes a warehouse or distribution center faces. nGROUP works directly with management teams on how to improve these statistics. Taking the time to evaluate your program is essential for everyone involved, and we want to help you reach a balance that is helpful and productive for everyone involved.