Defining Today’s biggest Labor Challenges
Today’s warehouse operations face the challenge of unprecedented labor shortages, high turnover, increasing overtime, and/or low associate performance. All these lead to high labor costs and lower than desired customer service levels. Labor represents 65% or more of warehouse operating costs and labor issues are where managers spend up to 80% of their time making it critically important to develop a highly engaged and productive labor force.
Optimizing your workforce’s overall performance using a comprehensive Labor Management Program (LMP) enabled by a modern-day Labor Management System (LMS) is the best investment and quickest payback in the supply chain market today. Focused improvements in your Labor Management Program hold immense potential to significantly enhance your organization’s overall performance and competitive position. This leads to lower operating costs and improved customer satisfaction.
The following defines these challenges in more detail.
A CNBC survey of logistics managers found that 75% of respondents face problems with hiring, while 65% are troubled with employee burnout.
While labor-shortages can be found across nearly every industry, they are especially prevalent within the supply chain.
Fifty seven percent of supply chain executives surveyed by MHI and Deloitte report that hiring and retaining qualified workers was their biggest supply chain challenge. It is not just hourly associates that are in high demand, but operations management as well, which adds even more complexity.
Finding and retaining skilled labor is a challenge we have all been experiencing for some time now and it is not likely to get better any time soon. The majority of hiring managers are simply happy to find willing and capable individuals who can be trained. Your company must effectively compete for the labor that is available to satisfy your hiring requirements. Here are the commonly discussed obstacles to hiring:
1. Low wages: Today’s workers do not necessarily find working in a warehouse very desirable so the need to be competitive is critical. Areas of consideration for many applicants are:
- Starting wage and how quickly it is increasing defined by a formal “salary path.”
- The availability of a “signing” and or “stay bonus.”
- Participation in a performance-based incentive program.
2. Lack of Culture: Culture is easy to say but hard to define and even harder to achieve. Below are a few things that immediately tell a warehouse candidate that your culture stands above the rest. First impressions mean everything. Create the ideal standard operating procedure for your candidates’ experience from the moment they drive onto your property to the moment they are hired.
Areas of consideration include:
- Building and grounds maintenance.
- Picking your best “people person” to greet the candidate and guide them through the hiring process. (i.e., your best salesperson)
- Candidate gift.
- Company overview and core values.
- Warehouse tours for qualified individuals.
- Bright and clean operations.
- Walking through and explaining the specific role for which you are hiring.
- Meeting the candidate’s direct manager.
- Discussing your relationship with the work staff emphasizing engagement, on-boarding, coaching, schedule flexibility, rewards, and recognition.
The key is to have a very defined hiring process with your most personable staff guiding, and selling the candidate on your company, not just your operation. A key component of the process is also to hire quickly. There are not a lot of candidates available so if you are convinced the candidate is a good fit, make the offer the same day as the interview, pending whatever background checks your company requires, and agree to a start date. Candidates that walk away without an offer, continue the interview process with your competitors.
Finding and hiring the right candidate is difficult so when you hire correctly, it is imperative that you retain that employee. Commonly, most turnover occurs in the first six months of a new employee’s tenure. Therefore, the first six months are critical. Here are the major contributors to turnover:
- Low wages: Your average pay is not competitive with your immediate area’s pay rates.
- Poor on-boarding: It is critically important to have a formal onboarding program, not only in the first few weeks of a new employee’s tenure but for the first six months. A new employee’s “impression” of the company and how much you care is often determined by their experience during the on-boarding process.
- Unclear expectations: Employees want to know what is expected of them from a performance standpoint. Fair performance metrics and real-time reporting are critical to your success.
- Inconsistent accountability: Employees want to work where they feel everyone is putting in a fair day’s work. It is frustrating for any employee to see other employees that are not doing their part, and nothing is being done to change that by management.
- Lack of or inconsistent coaching: Not only does the right kind of coaching help the employee do the job more effectively but aids in the required engagement between employee and manager.
- Lack of engagement: Employees want to have a relationship with their manager. They want to be seen as valued. Your engagement program should be formalized to include consistent recognition, periodic rewards, performance coaching, and non-performance-based discussions.
- High overtime: If your overtime is out of control, this can be a major contributor to high turnover. See below for how to get control of your overtime.
Not all employees want to work overtime. For some employees, their free time is more valuable than the extra pay they earn working overtime. With that in mind, it is critical to keep overtime to a minimum when possible. To do that, it is critical that your daily labor plan is accurate, making sure that the right number of people are in the right area of the operation. This ensures you will have a high level of labor utilization keeping your labor costs in control.
It is a misconception to think you cannot have high performance and low turnover. You can!! People want to work in a high performing operation, in fact they are proud of it. It is really all the other things listed above that are forcing your employees to look elsewhere.
Monitoring and optimizing the productivity and utilization of warehouse workers is crucial to maximizing operational efficiency. Challenges include having a fair and equitable performance metric for each direct activity in the building, seamless and real-time tracking of individual and team performance, floor managers having the observation and coaching tools to effectively increase performance levels and having operational analytics to tell you where the hidden opportunities lie.
Low utilization is a result of poor labor planning, inappropriate staffing, and the inability to make appropriate and timely staffing adjustments throughout the day using real-time performance and work completion data. It is becoming a common best practice to utilize a dedicated Performance Manager who is responsible for daily labor planning, balancing labor throughout the day and working with supervisors who are struggling to achieve the appropriate performance levels in their department resulting in focused labor cost control.
HOW A COMPREHENSIVE LABOR MANAGEMENT SYSTEM PROGRAM, INCLUDING A LABOR MANAGEMENT SYSTEM, IS THE KEY TO SOLVING THESE CHALLENGES
A comprehensive Labor Management Program includes the following components.
- “Leaned out” operations to reduce waste.
- Defined Standard Operating Procedures (SOPs) for each activity in the building.
- Multi-determinant Engineered Standards providing the most fair and equitable performance expectations.
- A Labor Management System providing real-time reporting and management tools to assure the operation is operating at peak efficiency.
- A fully customized labor strategy, seamlessly managed by the LMS, to address items such as performance expectation periods, accountability, learning curves, incentive pay, recognition and reward programs, and coaching.
- Defined roles and responsibilities associated with managing the organization’s labor program.
- A maintenance program to assure SOPs and performance standards are in alignment and support the program equitably.
HERE’S HOW AN LMS ADDRESSES THE COMMON OPERATIONAL CHALLENGES MENTIONED ABOVE:
Though a Labor Management System cannot solve the availability of candidates, it can significantly increase your hiring success and retention of your current staff.
Finding the root cause(s) of turnover is critical to solving the issue. Here is how a Labor Management System helps to address the root cause of high turnover.
- Low wages: An LMS can fully support a self-funding incentive plan to supplement your current pay rates. In fact, a successful incentive pay program can make you the highest paid employer in your area. Additionally, an LMS is designed to increase employee performance so any cost savings can be used to fund any increase in base pay.
- Poor on-boarding: The LMS can formalize the on-boarding process through configuration of both performance-based coaching plans and non-performance-based engagement. This not only assures the employee is being given the proper training time needed to learn the job but that a supporting relationship is being developed between the supervisor and the employee. The LMS will automatically alert the supervisor that an engagement is due and track the completion of those engagements.
- Unclear expectations: The LMS can calculate highly accurate performance standards using multi-determinant variables and sophisticated travel-based calculations. These standards not only support the need to establish fair expectations but are the basis for any successful incentive pay program. Additionally, an LMS can provide performance expectations and feedback to the employee in near real-time throughout the day.
- Inconsistent accountability: A modern day LMS seamlessly manages the entire performance achievement and accountability process. The accountability steps configured in an LMS are a replica of each organization’s accountability steps as specified in its handbook. This seamless process takes the “guess work” out of the performance management and accountability process supporting both the operations team and the firm’s Human Resource requirements.
- Lack of or inconsistent coaching: The LMS will automatically alert the appropriate supervisor if an employee’s performance has fallen below a specifically configured performance threshold by assigning an observation/coaching process to that supervisor.
- Lack of engagement: An LMS has a multitude of ways it helps a floor manager to engage with their staff. First, every coaching session is an opportunity to connect with the employee. Additionally, non-performance-based engagements can be scheduled in the LMS to further develop the supervisor and employee relationship. Lastly, utilizing the LMS’s production board capability including recognizing high-performing-departments or employees, highlighting birthdays, anniversaries, or other operational achievements can provide consistent messaging to your floor team.
An LMS provides labor planning functionality using actual performance levels by activity assuring you have the right number of full-time and temporary workers in the building. The system also can assign specific individuals to activities in the operation assuring you have the right people in the right place. Finally, the LMS can provide progress reports of work completed allowing the operations team to make real-time staff adjustments throughout the day.
At the heart of an LMS is the ability to calculate accurate performance expectations for each activity in the building using multiple determinants, travel calculations and progressive personal, fatigue and delay allowances. Utilizing a “heal to toe” time tracking approach, the LMS will eliminate WMS “gap time” making performance management seamless. Additionally, an LMS will track all operational delays and indirect time by type and individual resulting in the ability to track and manage the facilities labor utilization. The tracking of delay and indirect time also allows for continuous improvement opportunities through the LMS’s business intelligence reporting module.
A Labor Management System is the foundation of a comprehensive Labor Management Program. The LMS will help solve warehouse labor challenges by providing managers with the tools they need to effectively labor plan, manage performance, and engage with their employees resulting in performance improvement of 8 to 20%.
To learn more about the role of a best-in-class LMS as part of an effective Labor Management Program please visit www.tza.com or schedule a visit with one of our associates at https://www.tza.com/contact-us/