Aptean eBook: irms|360 WMS - How to Reduce Labor Costs ......support makes it harder for your lowest performers to improve and for your highest performers to continue to be motivated

How to Reduce Labor Costs and Increase Productivity in Your Warehouse

The Ultimate Guide to Warehouse Labor Management

Table of Contents

Best Practices in Warehouse Labor Management u

Reduce Costs by Paying Your Labor More u

Eliminate Overtime While Increasing Productivity by 20% u

Labor Issues are a Major Supply Chain Threat u

How to Reduce Labor Costs u

The Secret to Empowering Your Employees is Language u

Comprehensive Labor Management is a Necessity u

How Much Will I Save with Labor Management Tools u

Reduce Labor Costs by 25% with a Cloud Warehouse Management System u

“Labor costs comprise the largest part of a warehouse’s operating expenses. The ongoing challenge is managing those costs without jeopardizing customer service and reducing productivity.”- Inbound Logistics Magazine

Best Practices in Warehouse Labor Management

Managing labor costs is the most important factor when it comes to controlling overall warehouse operation expenses. As the largest variable cost in your warehouse, it’s the place where monitoring and change implementation can have the biggest tangible impact on your bottom line.

Identifying and capturing labor metrics in the warehouse is the key to improving performance. Publicly displaying performance metrics in real-time for your workers to see will help them gauge what they do and don’t do in a cost-effective manner. The goal is to set higher standards of performance and to continually raise them as your labor force becomes more efficient, more productive, and less error-prone. Reward your highest performers to drive their production higher and you’ll build a capable, cost-effective, and self-directed workforce.

On the flipside, you also need to hold underperformers accountable for their lack of performance on the job. Ignoring this crucial part of your management duties will lead to increased costs and lowered efficiency. In effect, you’re accepting lowered performance standards and this continued support makes it harder for your lowest performers to improve and for your highest performers to continue to be motivated to do their job well. If you’re lowest performing employees don’t improve, eliminate them for somebody that will be cost-effective. Controlling your labor expense is really that simple.

5Labor Management | powered by irms|360

“Improving the mechanisms used in tracking labor helps you implement a “carrot and stick approach” in your warehouse, rewarding your top performing talent and holding your lowest performers accountable for their lack of production.”- Joe Matthews, Chief Operating Officer, Independent Publishers Group

Reduce Costs by Paying Your Labor More You can dramatically reduce your long-term operating costs by simply paying your existing labor more based on their level of performance. Incentivizing higher performance in the form of hourly wage increases will motivate your warehouse staff to continually work at a higher level, eliminating the need to hire additional workers.

When you incentivize labor like this, your staff will strive to meet the incentive metric. This creates an atmosphere of peer pressure that encourages everyone on staff to hit that high metric. The incentivized level becomes the new norm, thereby raising the level of performance throughout your entire operation.


We’ll assume there are 15 existing workers in your warehouse and that each makes $15/hr for hitting their minimum of 20 picks in an hour. At their current productivity, your labor is making 300 picks an hour at a cost of $225 to you. Your business has grown though and you need them to be making 360 picks an hour.

If you hire 3 additional workers, you’ll get those extra 60 picks per hour, but it will cost $45. If you allow each employee to work overtime, it’ll be an extra 1.6 hours for each employee per day, resulting in a total added cost to you of $56.25 per hour. If you incentivize labor output so that each worker makes an extra dollar an hour by getting 24 picks, you’ll reach your 360 picks goal at an added cost of only $15. When you extend those cost savings out over your entire operations over the course of a year, you’ve just reduced operating costs by enough to be the first line in your company’s annual report.

It is important to understand your facilities matrix in setting the baseline. It’s not just as simple as providing an incentive for your worker, you need that incentive to be driven by actual performance data. You need to identify your KPIs and standards so you can define the program, and make sure you understand how to track and compare metrics. Picking cases versus picking bulk would be different metrics per hour so you can’t penalize someone for performing less if it’s a different type of metric that’s not comparable. It is vital to analyze normal average days over the course of days, weeks, months, and even years to observe normal and spike behavior. You have to find out the median production and determine where your incentive and minimums are located.

Important: All incentive rates must account for error. Quality must remain at the same high level regardless of production. Metrics should be displayed in real-time across the facility so everyone always knows exactly where they stand, and those that fail to meet minimum standards consistently should be dealt with. Without consequences for failure, your incentives are useless.

Reduce Costs by Paying Your Labor More (continued)

You have three options here:

1. Hire 3 workers and pay them $15 an hour PLUS benefits

2. Pay for overtime at 1.5 times the hourly rate

3. Motivate your current employees to increase their current output


Your Goal for Step 5

Eliminate Overtime While Increasing Productivity by 20% The ultimate goal of labor management within a warehouse is to reduce costs while continually raising the standard of performance. Closely tracking performance data and incentivizing your staff with a wage increase based on superior productivity will increase individual performance, reduce the need to hire additional labor, and create a positive competitive environment where staff challenges each other to continually do better.

Measuring productivity is difficult and often misleading. Our approach to labor management is all about controlling costs. The foundation of managing labor costs is tracking critical performance metrics for every worker (number of units picked, number of orders completed, time elapsed to pick an order, etc.), and comparing it to established standards. These real-time statistics can be displayed throughout your warehouse and emailed to managers so your staff always knows their current level of performance.

These labor analytics can provide visibility into your warehouse operations that will have a significant impact on costs, inventory, and availability and cycle times. With this direction, you’ll have statistical data to easily improve order promising and profitability decisions.


Labor Issues are a Major Supply Chain Threat As your company’s supply chain becomes larger and more complex, the number of threats it faces always seem to increase. Your ability to mitigate those threats and minimize the financial risks your businesses face plays a major role in your ability to thrive as a company. Supply chain disruptions can bring your business to a halt and lower customer satisfaction, with IndustryWeek finding that “major supply chain disruptions have been found to cut the share price of impacted companies by 7% on average.” You need to work hard at building resilience in your supply chain in order to overcome each of these threats to your profitability.

Labor is the largest variable cost within a warehouse. Changes in worker wage agreements or increases in the minimum wage level can send the cost of products skyrocketing. A strike or other significant work stoppage can happen at any time and bring your supply chain to an absolute halt.


How to Reduce Labor Costs 1.) Understand Your Costs The quickest and most effective way to become more profitable is reduce your costs, but first you need to understand your costs. With a sophisticated tool set to view and manage your supply chain, you can significantly reduce the costs your business incurs. Use metrics from your supply chain to discover where your costs are coming from.

With a clear view of all the vital analytics from your business operations, you can measure the direct impact your warehouse operations have on costs, and use that data to continuously improve your profitability. Monitoring and maximizing operations on your warehouse floor will go a long way to achieving your strategic goals.

1. What are your labor costs?

Advanced labor management tracking and techniques will help you better unlock the potential within each worker.

2. What are your bottlenecks?

Analytics, real time data, and reports will show you hidden inefficiencies or bottlenecks that can be cut from your supply chain.

3. Where is your revenue coming from?

A real-time view of what’s on your warehouse floor and where items are in your supply chain will mean that you are accurately billing each customer.


2.) Cutting Waste and Costs Simply put: you don’t know what you don’t know. You can guess all you want, but nothing beats having that cold, hard data in front of you to lend complete transparency to your supply chain. If you aren’t tracking your supply chain and producing actionable data, you can’t identify anomalies or inefficiencies that lay within it very easily. You don’t have the real-time and actionable data to pinpoint the exact bottlenecks where waste is occurring and come up with a solution as efficiently and effectively as possible. Big data also allows you to anticipate supply chain disruptions on the fly so you can correct your processes before they become an issue.

With more than 50% of warehouse labor costs associated with picking and shipping, it’s a great candidate to be the first place to utilize big data. Even small gains in efficiency can have a huge impact on your profitability. By analyzing data from your orders, inventory, warehouse layouts, picking times, and much more, you can put your labor in the best place to succeed. Big data can also help root out fraud and abuse. With a clear picture of every aspect of your supply chain, you can ensure that your partners are invoicing you correctly and every part of the contract is being upheld.

3.) Empowering Your Employees Through effective labor management, supply chain leaders are able to empower their top workers, making them more invested in the success of the company as a whole. By incentivizing performance (you can actually reduce costs by paying your labor more) and carefully tracking every position on your floor to determine bottlenecks, you can control the largest variable cost in your supply chain.

More than effectively managing people, the most successful organizations put their employees within the supply chain in the best place to succeed by supplying them with the best tools to get the job done. Either through embracing intuitive and easy to use devices like smartphones or by utilizing multilingual systems, the best organizations make sure all of their employees have everything they need to truly shine.

How to Reduce Labor Costs (continued)


The Secret to Empowering your Employees is Language Maximize the potential for greatness in all warehouse employees by investing in technology that supports every language.

Increasing revenue and growing your business means that you have to find ways to continually raise the performance level of each employee. One of the most challenging aspects to creating an atmosphere where each of your employees can succeed is often communication. Most warehouses today employ a diverse workforce where at any moment there could be 10 different languages spoken on the warehouse floor. While your management may be able to overcome language barriers, the tools and systems used to manage your warehouse are likely not able to communicate in a language that all of your employees easily understand.

Language does not have to be a barrier in your warehouseAdvanced cloud platforms that run warehouse managements systems, like the irms|360 Enterprise Cloud Platform, will automatically translate the words and characters in your system into the language most comfortable for each individual employee.

Every User Can Choose a Different LanguageIn a cloud-based WMS, language is controlled by login. Each employee logs into the system with their specific username, and the system will automatically display in the language of their choosing. Now, a four-person team in your warehouse consisting of native Spanish, Polish, German, and Chinese speakers, will now operate as one cohesive unit.


“Our order profiles are very complex, with a lot of line items, SKUs, and regulatory requirements. And all of our documents are printed in English,” Scott Hothem, President of PACAM, explains. “If an employee is not able to read cartons or work with our WMS, that opens us up to chargebacks and noncompliance claims.”

The Cost of Not Supporting Multiple LanguagesNot addressing the language barrier in your warehouse hampers productivity, decreases accuracy, and increases headaches for a warehouse manager. Technology is not strictly an expense for a warehouse, it is an investment in creating a bigger and brighter future for your company. Slow or incorrect picking, and limited opportunities for your best employees to advance based on language will have a direct impact on your bottom line.

We recently came across a quote about the impact a WMS that cannot adapt to its users has on job roles from an old DC Velocity article that caught our attention:

For that reason, the company assigns employees with limited English proficiency to positions where written communication is less important, such as unloading containers.

Most operations may be using technology that their workforce cannot effectively interact with. It forces those workers into menial positions, limiting their potential and your business’s potential.

The Secret to Empowering your Employees is Language (continued)


“If you’re having difficulty with the language, then your productivity and accuracy can decrease. But if you can go back to a language that you are comfortable in, you can be as productive as the guy next to you who’s speaking English,” he says. “This helps build employees’ confidence in the system and in their ability to work in that environment.”- Larry Sweeney, VP of Business Development, Vocollect

Empower Every Member of Your WorkforceA warehouse management system that understands the wide range of languages spoken in your warehouse takes away all barriers to productivity.

Using technology that can adapt to each user and allow them to pick the language they interact in, gives them the best chance to succeed. All your employees are operating at 100% effectiveness, allowing the most gifted workers to rise to the top regardless of the language they’re most comfortable speaking.

It’s entirely possible that your best employee is under performing because of a language issue. Don’t limit that potential for greatness by mistaking a lack of proficiency in English for general incompetence. Implement a smarter warehouse management system today, with multilingual support built right into it, to get the most out of every member of your workforce.

The Secret to Empowering your Employees is Language (continued)


Comprehensive Labor Management is a Necessity in Every Warehouse Tracking and managing labor better will yield higher production at lower costs. Labor management and reporting functions will help you incentivize your staff with wage increases based on high productivity, leading to increased individual performance, reduced need to hire additional labor, and the creation of a positive competitive environment where staff challenges each other to constantly improve. Labor costs often make up the largest percentage of a warehouse’s operating expenses, so it makes sense to track it with as sophisticated tools as possible.

Just a few years ago it could be argued that the “M” in WMS was a bit of a misnomer. Previously focused on tracking and execution, the labor management function within a WMS has grown significantly. Your WMS can now be a true intelligence center that will help you run your business more effectively.

For too long companies have been making reactionary adjustments to labor based on how tasks have already changed. Labor management features can look at upcoming tasks and provide actionable content on how to move forward ahead of time. This is a huge improvement for companies that have extremely seasonal businesses.


How Much Will I Save with Labor Management Tools? Not having the proper tools in place means you won’t be able to accurately determine whether or not your employees are being productive and earning their pay. Reducing your labor costs by up to 25% in your warehouse is not out of the question for most organizations with proper labor management tracking and reporting. Think about how labor would be affected by your new WMS purchase, and how much working labor management functionality into your budget can save your company over the long run and help you to consistently raise the level of your staff’s performance.


Reduce Labor Costs by 25% with a Cloud Warehouse Management System More than diagnosing your best and worst performing employees, labor tracking also helps to reduce overtime costs, decrease your dependence on temporary labor, quickly identify bottlenecks, eliminate unnecessary positions, and add positions where there’s opportunity to grow.

The irms|360® Enterprise Warehouse Management System tracks labor with a fresh and innovative approach. Out of the box, it utilizes advanced technology to provide the tools necessary to continually raise the standards of performance within a facility.

Performance tracking and visibility tools allow you to monitor progress against standards in real time throughout the workday, allowing you to reward your best workers and address your lowest performers.

When you buy a cloud-based warehouse management system, you are buying greater efficiency and a blue print to reducing costs throughout the supply chain – especially when it comes to warehouse labor.

Aptean provides very specific industries with very specific ERP, supply chain management, and customer experience solutions. In today’s fast-paced, highly competitive economy, organizations don’t have time to waste forcing homegrown software, spreadsheets, and one-size-fits-all solutions to do things they were never designed to do. Aptean is on a mission to end those workarounds – with industry-specific solutions instead of generic software, expert support instead of making you go it alone, and a steady influx of new ideas instead of the status quo. For more information, visit www.aptean.com.

See the Bold New Look of Warehouse ManagementSchedule a personal tour of our award-winning Cloud Warehouse Management System developed on an advanced cloud platform. You’ll get a first-hand view of core functionality, advanced features, and real-time dashboards.

Schedule Today

https://www.aptean.com/contact-us/

Documents

Aptean eBook: irms|360 WMS - How to Reduce Labor Costs ......support makes it harder for your lowest performers to improve and for your highest performers to continue to be motivated