Blog postsFebruary 22, 2016
Balancing Warehouse Labor for Inventory Peaks and Valleys
Warehouse labor can account for half of warehousing costs. And it can be difficult match those expenses against the inventory peaks and valleys that are common to many organizations’ logistics activities.
Warehouse labor can account for half of warehousing costs. And it can be difficult match those expenses against the inventory peaks and valleys that are common to many organizations’ logistics activities. A recent FLEXE study and white paper revealed two very telling statistics.
- More than 75% of supply chain professionals currently experience significant fluctuations in warehouse volume.
- About 70% don’t have a viable solution when these problems arise.
Early this month, our two-part article on “The New Logistics” pointed out a number of the reasons for inventory spikes, some expected, some unforeseen and some created by new and competitive circumstances. Of course, there are also those periods when your warehouse and logistics activities drop to lower-than-normal levels too. Clearly, with an increasing amount and degree of fluctuation, optimizing warehouse staff can be a challenge. That said, getting the balance right is still essential. In most cases, it doesn’t make financial sense to size a fulltime crew to support random peak volumes. And, while staffing for the valleys reduces costs, it can prevent your operation from effectively scaling when you enter normal or peak periods.
There are numerous efficiency factors that affect labor costs as well. Factors like training, ergonomics, best practices, automation, communications and teamwork can make a big difference in the productivity of your team. So, it makes sense to maintain a core experienced team, sized to comfortably, efficiently accommodate your average volume in order to realize the full productivity benefits of having employees that know the ins and outs of your warehouse and your business. At the same time, however, you need a strategy for optimizing labor when inventory and activity levels surge and plunge.
Here are a few options you may want to consider that can help you do both:
On-call labor helps you bolster warehouse labor during peak periods
Often, warehouse operators prepare a pool of temporary labor that they can call on during peak periods. For the operators, this approach can be a win because of the cost savings of having somebody on-call rather than on-site. The downside is that this approach often requires a significant time investment to interview, run background checks and train temporary staff before they’re needed and for only a short-term benefit. However, temporary workers often like these arrangements because they get a chance to gain experience and show off their abilities and work ethic to potentially score a full time position down the road. And, there’s an added benefit for warehouse managers. With the higher-than-average turnover rate in warehouse industry workers (The Bureau of Industry Statistics cites >35% turnover rate), it can be a real plus to have known, experienced people, queued up and ready to step in if/when full-time employees leave.
On-demand labor helps your expand your team during peak periods
Emerging on-demand labor solutions, like Forrge.com, may provide quick access to temporary, knowledgeable workers during peak periods. Forrge currently provides an online labor marketplace for retail works. However, this approach could easily be expanded by Forrge, or another organization, to warehouse workers. Taking this kind of approach can reduce some of the upfront investment, training and vetting involved in establishing reserve labor. And, it can open up the field of potential people to call on when the need arises.
Keep your warehouse full even when your company volumes are low
For years, warehouse operators have used short-term leases to help keep their warehouses full when their own inventories have dipped. This is a common solution and can work well in the right situations. The challenge is not only finding and matching periods of low volumes with the exact needs of the sub-leaser but also finding the labor to help manage goods in a physically separated area. Alternatively, new on-demand warehousing solutions provide a marketplace for excess warehouse space, enabling temporary dips in volume to be viewed as opportunities to make that extra space available to other companies who need it on a temporary basis. In either case, instead of reducing your trained staff or limiting their hours, your team can be partially allocated to shipping, receiving and managing that third-party inventory on the other company’s behalf. On-demand warehousing can fill your warehouse and keep your experienced team working while your inventory volumes are low.
Optimizing labor for today’s warehouse dynamics can be tricky business. But, today’s warehouse managers have more resources than ever. If you’re rethinking your labor requirements, these options may be worth considering.