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This is the second of a two-part blog is provided by Dave DuBose and Will O’Brien from True North Growth Partners, as a companion to their interview on Innovating Leadership, Co-creating Our Future. This interview Lasting Solutions for Distribution Center Labor Shortages aired on 9/10/19.

For manufacturing and warehouse operators the shortage of workers, particularly during peak periods, is a major struggle. In the first blog of this two-part series we discussed the historically low unemployment and the pressure this creates as the demand for DC labor continues to escalate. Ecommerce further amplifies this dynamic as this channel requires 4X the labor compared to retail and wholesale fulfillment.

Three strategies underpin a winning playbook to deal with labor shortages:

1. Reduce the Work Content
2. Be a “Sticky Employer” – Barriers to Employee Turnover
3. Get the Most Out of Your Workforce

Previously we addressed how to reduce the work content of a facility. In this blog we reveal what it means to be a “sticky employer” and how to get the most out of your workforce.

STRATEGY 2: BE A “STICKY EMPLOYER” – BARRIERS TO EMPLOYEE TURNOVER

How would you design an experience for your workforce that would make it insane for them to leave you? Offer retention bonuses? These have their place but are easily overcome by a healthy sign-on bonus. Offer benefits like healthcare, 401K, training and tuition reimbursement? A menu of these types of benefits can address some of the things that are important to your workforce. They are necessary but not sufficient in this battle for labor.

A more compelling way to be a Sticky Employer is to provide amenities that are highly valued AND not easily replicated. Under Armour, consistent with its brand and mission, provides state-of-the-art gyms in its facilities, including aerobic equipment, weight rooms and basketball courts. Other retailers, like Ascena Retail Group, whose brands include Justice, Lane Bryant and Ann Taylor, provides a very high-quality foodservice program. Patagonia makes childcare available to its workers. Those who use the childcare have a 25% lower turnover rate than workers who do not. Employers that offer a safe and convenient place to care for your children and some of the best meals (which may be subsidized) that you eat each week make it a difficult choice to leave for an additional 25 cents/hour. These are expensive benefits; they require commitment and physical space, but that is why they are difficult to overcome.

STRATEGY 3: GET THE MOST OUT OF THE WORKFORCE

Flexible Workforce: Innovative partners like Upshift enable operators to access a high-quality, flexible labor pool. This allows employers to meet flex labor needs without resorting to temp agencies or Craigslist postings which tend to yield inconsistent labor quality. Upshift connects workers and employers through a simple app. The commitment can be as short as just one shift or much longer. Like Uber, Upshift taps into a new labor pool which includes small business owners, students, homemakers and fully employed workers who simply want to earn extra money during their available time. The schedules of this cohort make it challenging to maintain a conventional part-time job, so working one shift at a time is good for them.

High-performance standards and prescreening ensure high-quality workers. The employer establishes a pay rate that attracts “Upshifters” and it can vary the pay rate at any time. The balancing of supply and demand is fully at play for both parties on this platform. When a worker does not fit the employer’s performance expectations, he or she can be screened out of future work opportunities.

Labor Standards: Labor Management Systems (LMS) and engineered labor standards have proven to be very effective – potentially reducing labor by roughly 10%. With an LMS, the specific drive distances and equipment that is used can be factored into the standard and the worker’s performance. Setting labor standards and implementing LMS systems can be costly and take several weeks. Pay-for-Performance involves providing workers with incentives for greater productivity. The benefits are shared between the employer and the worker, creating a win-win situation.

Cloud technology and innovation in labor analytics have driven advancements in this field. EasyMetrics’ labor analytics solution drives benefits in a fraction of the time that it takes to create a full set of labor standards. It uses big data technology to analyze information from several systems (WMS, time clocks, RF scanners, etc.) to provide insights on the performance of people, processes, equipment, etc., identifying the best opportunities to leverage with the workforce. Its use of a cloud platform eliminates the installation and support of yet another application. Benefits are captured within 2 weeks, providing a very fast ROI. Labor management systems, in general, provide one of the highest investment returns of any warehouse software.

Be a great place to work: Providing strong leadership and maintaining high expectations will always make the difference between great organizations and all the rest. It is important to show your workers that you value them and offer them opportunities for growth. In doing so, it is important to understand that the general manager of the facility is not the most important leader- far from it. The most important leader in this organization is the front-line supervisor who spends every day with his/her people. The care that these critical leaders demonstrate to each worker and their families is very powerful. The front-line leader is far better able to deliver key messages and consequences and is the most effective in driving daily performance and creating high levels of employee engagement. Engagement is driven by how each employee views his/her direct supervisor, his/her fellow workers and the actual work that he/she does. Great places to work bake these things into their culture, actions and decisions. High employee engagement delivers high productivity, improved customer service, low employee turnover and increased profitability.

Conclusion: We will always have labor availability challenges. Operators have options in these labor strategies and the best operators will consider each one carefully and execute intentionally and appropriately. For some, capital will limit their use of automation and robotics. For others, culture will dictate the viability of options. The key is to work from a portfolio of options that will create long-term stability and success.

If available labor is a challenge in your facility and you are tired of just throwing money at the problem, then we are glad to offer you a free consultation. The first step is to contact Will O’Brien or Dave DuBose. We can be reached at www.truenorthgrowthpartners.com.

To become a more innovative leader, you can begin by taking our free leadership assessments and then enrolling in our online leadership development program.

Check out the companion interview and past episodes of Innovating Leadership, Co-creating Our Future, via iTunes, Google Play, TuneIn, Stitcher, Spotify and iHeartRADIO. Stay up-to-date on new shows airing by following the Innovative Leadership Institute LinkedIn.

About the Authors

Dave DuBose is a senior supply chain professional with strong cross-industry experience including retail, consumer products, resources and high-tech in the North American and global theaters. Dave has held executive positions in logistics and supply chain in industry as well as consulting and has more than 30 years of professional experience. DuBose delivers innovative results and can translate business strategy into operating strategy and tactics. He has deep expertise in end-to-end business operations and in deploying business solutions from strategy through implementation. Dave is currently serving as the Columbus Roundtable board president the Council of Supply Chain Management Professionals. He is active in speaking and writing about contemporary supply chain issues.

Will O’Brien is a partner at True North Growth Partners where he works with organizations on the supply chain and operations sides of their business. He helps his clients overcome the things that hold back their growth and profitability. He has over 30 years of experience in supply chain and operations. He has held executive positions in both industry and consulting. As an executive at Lowe’s Home Improvement he helped to lead the development of the supply chain for that big box retailer during a period of rapid growth, from $35 billion to $50 billion in revenue. He also helped pioneer Lowe’s omni-channel fulfillment when its online sales were growing significantly. He successfully grew a mid-sized family owned supply chain consulting firm by over 50%, expanded its markets, improved its pricing, reengineered its sales and business development organization and created career paths and professional growth for its associates.

Photo by ELEVATE.

This blog is provided by Dave DuBose and Will O’Brien from True North Growth Partners, as a companion to their interview on Innovating Leadership, Co-creating Our Future. This interview Lasting Solutions for Distribution Center Labor Shortages aired on 9/10/19.

Of course, that title is a takeoff from Coleridge’s “The Rime of the Ancient Mariner”. The author referred to a thirsty sailor surrounded by saltwater that he cannot drink. This is what many distribution center (DC) operators face when they can’t attract and retain the workforce that they need to support their operations. With historically low unemployment, the demand for DC labor is escalating- a trend that will continue. This drives higher wages while the quality of the available workforce drops.

Other factors make this situation more complex. Job candidates may be unable to meet an organization’s hiring requirements for drug testing and work history. Lowering standards creates workforce reliability issues. Ecommerce is a big driver. Amazon (the biggest example) has over 100 fulfillment & sortation centers. The e-comm channel requires 4X the labor compared to retail and wholesale fulfillment. This creates a salary war, undercutting any loyalty that workers might have had. This is magnified at peak season.

How does a leader deal with all of this? Three strategies underpin a winning playbook:

1. Reduce the Work Content
2. Be a “Sticky Employer”
3. Get the Most Out of Your Workforce

Strategy #1, “Reduce the Work Content,” is the focus of this blog

REDUCE THE WORK CONTENT OF THE FACILITY

Reducing work content is a challenge that belongs in the playbook. Analytical rigor is required to appropriately consider each option for achieving this goal and careful planning and execution is a must-have: these are not “quick fix” alternatives, but they can be very effective.

• DC Bypass is the method of flowing goods to the customer or store while bypassing the DC or fulfillment center. It is necessary to analyze volume and order history so that an effective program can be designed that will provide the relief to the facility and have minimal-to-no impact on supplier charges or the customer experience.
• Store-Based Fulfillment is growing rapidly. The most common version of this is BOPIS (Buy Online – Pickup In-Store). Walmart will ship an e-comm item to a store at no charge. Many grocers offer the increasingly popular curbside pick-up service. Others enable their stores to ship e-comm orders to customers’ homes. One retailer performs this function early in the morning, before the store opens for walk-in traffic. DSW stated that its stores are within 20 minutes of 70% of their customers, so they can’t afford to NOT take advantage of that proximity for improved speed and delivery cost. Target, Dick’s, Best Buy and others use store-based fulfillment as an economical way to compete against Amazon’s hyper-fast delivery model. Details related to how a retailer handles allocation, store operations, order management and small package carrier relationships are critically important. Creating and communicating a detailed plan ensures that leaders understand the assumptions about inventory, handling and transportation costs, as well as reductions in markdowns – and are committed to execution.
• Pop-Up Fulfillment Centers are used during peak seasons to provide relief from surges in demand. Advancements in robotics enable operators to slot more items in pop-ups than ever before, with reduced training needs and improved speed and customer service. Robots, in this case, Automated Mobile Robots (AMRs) from companies like Locus, Fetch Robotics and 6 Rivers can be deployed very quickly, typically in less than a day. The software that operates AMRs is cloud based, which eases the IT requirements. AMRs are safe around people and other mobile equipment. The interface between the worker and the AMR is very simple, so training for the associate takes only minutes. Worker productivity dramatically increases because the robot eliminates the need for the worker to walk the entire facility. Most AMR providers offer their products on a “Robot-As-A-Service” basis, avoiding the large capital outlay that is needed for traditional material handling equipment. There is great flexibility with AMRs as the number of machines can flex over time with volume.

AMRs in work environment

The two most significant advantages of pop-ups are reductions in labor and the cost of the last mile. By locating pop-up facilities in markets with dense demand, the operator shifts its labor burden from hiring  hundreds of associates in a labor-constrained single market to hiring dozens of associates in each of a handful of locations across the country- a much more achievable task. The cost of the last mile is    significant and is reduced by having pop-ups in dense markets. Given the success of pop-up DCs, operators are beginning to consider keeping them open year-round to augment distribution networks that need e-comm friendly solutions for speed, cost effectiveness and customer service. Careful product flow analysis and cost modeling ensures that the solution will deliver the intended benefits.

• Automated Material Handling Equipment (MHE) solutions offer different options for reducing labor requirements in large, capital-intensive DCs. Continued innovation in automated-storage-and-retrieval and goods-to-person systems, as well as in conveyors, sorters and put-walls, enable operators to realize significant labor savings. 60% of a DC worker’s time can be spent walking in the facility, sometimes as much as 15 miles per day. Innovative developments continue in pack station and auto-bagger technologies. Automated MHE solutions fit well in high-volume operations and these solutions require significant effort to properly design and select the appropriate equipment for each situation.
• Leverage a 3PL Partner: Finally, sophisticated 3PLs provide a wide range of services, from end-to-end fulfillment, including last mile delivery, to executing only the pieces of an operation that are most challenging to the business. A 3PL is a viable option for many scenarios. It is very important to perform due diligence in partner selection and in the integration of all processes and technologies to guarantee a flawless conversion and smooth operation.

If you are facing distribution or fulfillment challenges in your business, there are many options available to you. If you would like to discuss your situation with Will O’Brien or Dave DuBose, they can be reached at www.truenorthgrowthpartners.com.

To become a more innovative leader, you can begin by taking our free leadership assessments and then enrolling in our online leadership development program.

About the Authors

Dave DuBose is a senior supply chain professional with strong cross-industry experience including retail, consumer products, resources and high-tech in the North American and global theaters. Dave has held executive positions in logistics and supply chain in industry as well as consulting and has more than 30 years of professional experience. DuBose delivers innovative results and can translate business strategy into operating strategy and tactics. He has deep expertise in end-to-end business operations and in deploying business solutions from strategy through implementation. Dave is currently serving as the Columbus Roundtable board president the Council of Supply Chain Management Professionals. He is active in speaking and writing about contemporary supply chain issues.

Will O’Brien is a partner at True North Growth Partners where he works with organizations on the supply chain and operations sides of their business. He helps his clients overcome the things that hold back their growth and profitability. He has over 30 years of experience in supply chain and operations. He has held executive positions in both industry and consulting. As an executive at Lowe’s Home Improvement he helped to lead the development of the supply chain for that big box retailer during a period of rapid growth, from $35 billion to $50 billion in revenue. He also helped pioneer Lowe’s omni-channel fulfillment when its online sales were growing significantly. He successfully grew a mid-sized family owned supply chain consulting firm by over 50%, expanded its markets, improved its pricing, reengineered its sales and business development organization and created career paths and professional growth for its associates.