Defining Today’s Biggest Labor Challenges

Today’s warehouse operations face unprecedented labor shortages, high turnover, increased overtime, and low associate performance. These challenges lead to high labor costs and lower-than-desired customer service levels. With labor representing 65% or more of warehouse operating costs and labor issues consuming up to 80% of managers’ time, the need for a highly engaged and productive labor force is more urgent than ever.

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. For instance, an LMP can help in setting clear performance expectations, while an LMS can provide real-time tracking of individual and team performance. Focused improvements in your Labor Management Program hold immense potential to enhance your organization’s overall performance and competitive position significantly. This leads to lower operating costs and improved customer satisfaction.

The following defines these challenges in more detail.

 

Labor Shortage

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 exist 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 most significant supply chain challenge. Not just hourly associates but operations management as well are in high demand, which adds even more complexity.

Finding and retaining skilled labor has been a persistent challenge, and it’s unlikely to improve soon. Most hiring managers are happy to find capable and willing individuals eager to learn. Your company must effectively compete for available talent to meet your hiring needs. Here are the common obstacles to hiring:

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 increases, as defined by a formal “salary path.”
• The availability of a “signing” and or “stay bonus.”
• The option to participate in a performance-based incentive program

Lack of Culture

Culture is easy to talk about, hard to define, and even harder to achieve. Below are a few things that immediately show warehouse candidates that your culture stands out. First impressions mean everything. Design an ideal standard operating procedure for your candidates’ experience, from their first interview to their first day on the job.

Areas of consideration include:

• Building and grounds maintenance.
• Selecting your best ‘people person’ to greet the candidate and guide them through the hiring process (like your best salesperson).
• Providing a candidate gift.
• Offering a company overview and explaining core values.
• Conducting warehouse tours for qualified individuals.
• Ensuring bright and clean operations.
• Walking through and explaining the specific role for which you are hiring.
• Introducing the candidate to their direct manager.
• Discussing your relationship with the work staff, focusing on engagement, onboarding, coaching, schedule flexibility, rewards, and recognition.

 

The key to successful hiring lies in a well-defined process, where your most personable staff guides and sells the candidate on your company, not just your operation. Speed is of the essence in this competitive hiring landscape. If you feel that the candidate is a good fit, make the offer on the same day as the interview, pending whatever background checks your company requires, and agree to a start date. Candidates who walk away without an offer continue the interview process with your competitors, underscoring the importance of an efficient and structured hiring process.

High Turnover

According to the Bureau of Labor Statistics (BLS), the annual turnover rate for warehouse and storage workers was a staggering 49% in 2022.

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 onboarding: It is critically important to have a formal onboarding program, not only in the first few weeks of a new employee’s tenure but also 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 onboarding process.

Unclear expectations:  It is critically important to have a formal onboarding program, not only in the first few weeks of a new employee’s tenure but also 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 onboarding process.

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 not doing their part and management is doing nothing to change that.

Lack of or inconsistent coaching:  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 who are not doing their part, and nothing is being done to change that by management.

Lack of engagement:  Employees want to have a relationship with their manager and 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.

Excessive Overtime

Not all employees want to work overtime. For some, 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. Your daily labor plan must be accurate, making sure that the correct number of people are in the right area of the operation to accomplish this. These efforts ensure a high level of labor utilization, which means getting the most out of your workforce without overworking them and keeping your labor costs under control.

It is a misconception to think you cannot have high performance and low turnover. You can!! People want to work in a high-performance 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.

Underperforming Areas

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 increase performance levels effectively, and operational analytics. These analytics can provide insights into areas where performance can be improved, such as identifying bottlenecks in the operation or areas where additional training may be beneficial 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 standard 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.

The Crucial Role of a Comprehensive Labor Management System Program

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 that provide the most fair and equitable performance expectations.
•  labor management system (LMS) provides real-time reporting and management tools to ensure that the operation is operating at peak efficiency.
• A fully customized labor strategy managed by the LMS, addressing 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 is needed to ensure SOPs and performance standards are in alignment and support the program equitably.

How an LMS Addresses These Common Operational Challenges

Labor Shortages: Though a Labor Management System cannot solve the availability of candidates, it can significantly increase your hiring success and retention of your current staff.

Employee Turnover: 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: Though a Labor Management System cannot solve the availability of candidates, it can significantly increase your hiring success and retention of your current staff.

Poor Onboarding: The LMS can formalize the onboarding process by configuring both performance-based coaching plans and non-performance-based engagement. This approach ensures employees receive the necessary training time to learn their jobs while fostering a supportive relationship with their supervisor. The LMS will automatically alert supervisors when an engagement is due and track the completion of these 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 LMS seamlessly manages the entire performance achievement and accountability process. The accountability steps configured in an LMS are replicas of each organization’s accountability steps as specified in its handbook. This seamless process takes the “guesswork” out of performance management and accountability, 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, and highlighting birthdays, anniversaries, or other operational achievements, can provide consistent messaging to your floor team.

Excessive Overtime: An LMS provides labor planning functionality using actual performance levels by activity, assuring the best number of full-time and temporary workers in the building. The system can also assign individuals to specific activities within an operation, ensuring the right people are 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.

Underperforming Areas: 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 facility’s labor utilization. Tracking delays and indirect time also allows for continuous improvement opportunities through the LMS’s business intelligence reporting module.

 

Conclusion

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 plan labor, manage performance, and engage with their employees, resulting in performance improvements of 8 to 20%.

To learn more about the role of a best-in-class LMS in an effective Labor Management Program, please visit www.tza.com or schedule a call with one of our associates at https://www.tza.com/contact-us/.