Little room for labor error

A booming economy and the rise of e-commerce have delivered a welcome shot in the arm to distributors and shippers. However, these dynamics have also placed new pressures on their warehouse operations. Companies must move more product faster than ever before. To remain competitive, they must address lingering inefficiencies in their warehouses and find ways to attract and retain qualified workers in an extremely tight labor market.

While total employment in the U.S. economy has grown by 15% over the past decade, total employment in the warehousing industry has expanded by 84% over the same time period. But the industry still isn't at capacity. Overall in the U.S. economy, there are now approximately 1 million more job openings than unemployed workers. And there were approximately 345,000 job openings in the transportation, warehousing and utilities industries in March 2019.

In such a strong economy, attracting and retaining talent is a challenge for any company. This challenge is even bigger for distributors and shippers. Warehouse jobs are difficult, physical and sometimes dangerous. Further, warehouses are usually clustered together geographically, so it's easy for companies next door to lure workers away with incremental pay increases. And inconsistent spikes and lulls in demand make a warehouse workforce unstable. Many companies rely heavily on temporary workers to accommodate increases in demand.

For all these reasons, there's often high turnover in the warehouse workforce. It's not uncommon for a company to hire 50 employees only to lose 40 of them a month later. With high turnover, companies must train new workers often and in an abbreviated time frame, which can lead to higher costs and potentially more accidents in the warehouse.

Still, too many companies continue to rely on outdated recruitment and retention strategies – and have inefficient and highly manual operational processes – that hold them back. Distributors and shippers must develop a multi-pronged approach to address their labor challenges that incorporates creative hiring and retention strategies alongside improved technology-enabled warehouse processes.

Get creative with talent acquisition and retention
To combat the labor shortage, warehouses should employ outside-the-box strategies to attract talent. Many of the challenges warehouses face exist because companies settle for hiring who they can get, rather than working to attract the best talent possible. And when a company's strategy centers on simply hiring warm bodies, it is going to get warm body results—like high turnover and poor performance.

Posting a job description online or in the newspaper and hoping for the best is not a viable strategy in today's tight labor market. Instead, a company must make a case for why prospective employees should want to work in its warehouse.

Companies can attract and retain talent by prioritizing the well-being of their employees and taking active steps to improve the workplace experience. For example, one distributor relocated from a city center to a suburban location. To avoid losing much of its city-based workforce, it offered free transportation and meals to its employees. This effort helped the company retain many of its workers. These employee-friendly practices also foster word-of-mouth referrals from current employees to prospective workers.

Employers must also seek to expand their pool of prospective talent. For example, one company hired an interpreter to help non-English speakers fill out applications, read the worker's manual and communicate with supervisors. This effort opened up a new group of prospective employees to the company. Other companies have partnered with organizations to hire refugees from foreign countries or even prisoners. By deploying creative strategies such as these, companies can tap new streams of labor and maximize their chances of finding reliable and productive workers.

Improve warehouse processes
In addition to deploying creative recruitment and retention efforts, companies must implement technology to help them operate more efficiently and ease the pressure on their workers. Distributors and shippers should evaluate their processes and current performance — including travel and search time within the warehouse, shipment error rates, and more – and deploy technology strategically to advance their operations and reduce labor pressures.

At a minimum, companies need modern warehouse management systems to help them oversee and actively manage inventory, shipments, labor and more. If the company doesn't already have goods-to-person solutions in place now, it should implement them to reduce travel and search time and increase efficiency.

Companies must also begin to embrace automation. Robots – which are increasingly affordable – can take over formerly manual tasks performed by a human with ease and without physical restrictions. Distributors and shippers have no choice but to implement automation alongside human workers to ease labor pressures and improve productivity.

Avoid the road to ruin
Distributors and shippers have great growth opportunities today – if they can meet the challenge presented by the expanding economy and explosion of e-commerce. The stark reality is the industry faces a labor crisis. And the status quo is a road to ruin. Forward-thinking companies that make efforts to expand their pool of labor while also implementing technology in their warehouses that reduces labor needs and improves productivity will charge ahead of more complacent competitors.

Joy Duce is the partner-in-charge of human resources consulting services at professional services firm Sikich. Gregg Hague is the partner-in-charge of the supply chain practice at professional services firm Sikich.

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