4 ways to deal with the warehouse labor crunch (beyond salary)

Insufficient manpower is a problem for 73 percent of warehouse owners. Because of this, 60 percent had trouble keeping up with rising demand in the previous year.

In 2021, the US alone had a record 490,000 opportunities in the warehousing and transportation sector. The shortage in labor is anticipated to double over the next three to five years as hundreds of millions of square feet of storage are needed to keep up with the expansion of e-commerce. Furthermore, businesses find it difficult to keep up with the increase in consumer spending throughout the holiday season. According to ARC Advisory Group’s report, 35 percent of warehouses see a seasonal increase in the number of employees of over 20 percent. A rise of more than 100% occurs in 8% of warehouses.

The labor shortage is a global phenomenon and caused the sector’s salaries to grow at a rate that is more than twice as fast as it did before COVID-19. This imbalance is caused by a number of underlying variables. Some are expected to be short-lived since they are directly tied to the COVID-19 pandemic’s effects. However, there are signs that more profound structural changes may be at work, causing the shortage of labor to last for a while. On the supply side, there’s a trend of changing job choices and early retirement. On the demand side, there’s a shift from services to goods.

So how do you navigate this difficult market environment as a logistics company?

1. Think beyond salary

Companies who developed appealing value propositions for employees and addressed the issue of competitive pay have found it simpler to retain their workforces. Companies may use analytics to identify the causes of attrition and implement radical adjustments where it counts most, in addition to proactively altering pay to remain one step ahead of rivals (particularly in highly competitive sectors) or launching aggressive recruiting drives.

According to The Washington Post, businesses with warehouse vacancies are providing higher salaries and other financial incentives. Radial has reacted to labor shortages by giving away PlayStations and iPads, as well as organizing pizza parties and ordering on-site food trucks. 24/7 telehealth consultations and 50% off clothes are two of Gap’s advertising highlights. Aldi has increased the average starting wage in warehouses to $19 per hour. Supply chain workers who show up for all planned shifts will receive extra compensation at Walmart. Sleep Number offers a sign-on bonuses of up to $1,000 and gives away free mattresses to new hires.

2. Put retention first

No matter the level of automation, employees will always be needed. Your ability to recruit and keep top talent will depend on how you manage your workforce.

While attracting talent is already a high priority for many, keeping top talent is frequently disregarded since many people are unaware of the cost of losing a frontline worker. The smartest businesses often realize that losing a less-skilled individual may cost between $5,000 and $10,000, but in a highly skilled, high-velocity manufacturing or transportation sector, it can cost as much as $45,000.

Losing an employee can cost as much as $45,000

The worker retention problem is particularly challenging at the new hire stage. Within the first 90 days of employment, the average organization experiences up to 50% staff turnover. Because of this, businesses waste money educating employees who leave as soon as a better offer pops up. The high turnover rate also hurts the morale of the people who stay, which hurts overall productivity.

Like everyone else, warehouse employees want to do their jobs well and be respected. Additionally, they wish to enjoy their time at work and enjoy a job well done. When the warehouse across the street is providing a better offer, workers are more likely to stay when there is greater workforce satisfaction.

One of the core factors contributing to job satisfaction are flexible schedules and career development pathways. However, only 44% of warehouse employers are investing in this according to Instawork. Another core factor is an employer that encourages and listens to employee feedback. 89% of workers has indicated this to be a core factor to make him or her more likely to stay.

3. Measure and improve your processes

When labor supply varies between different warehouses and areas, businesses can take steps to redirect goods flow away from warehouses that are labor-stressed. Next to this, items could be produced in areas with more plentiful labor. Reformulating or redesigning items can also be helpful because it could reduce the need for labor-intensive parts and materials.

Secondly, warehouses could deploy sophisticated people analytics to spot areas of improvement. This can be complemented by cross-functional war rooms that meet every day to help the organization learn more about the people who are available to work and help plan and make any necessary changes.

4. Focus on automation

Through automation, businesses may eventually use less labor across the supply chain. Automation may also enable businesses to increase worker happiness and engagement. More than 40% of workers spend at least 25% of their time on manual and repetitive work. Automation can reduce the need for workers and give them more time to focus on more important, higher-value tasks.

Warehouse operators are growing increasingly accustomed to the use of cutting-edge technology. Even now, in a time when supply chains are constrained and demand is growing, a whopping 92 percent of warehouse operators believes that technology will make the warehouse environment more appealing to employees.

92% (!) of warehouse workers believe that technology makes their work environment more appealing

More than 80% of warehouses, however, do not utilize any automation at all. This does not imply that you should replace all of your staff with robots. However, it will help safeguard your warehouse against unforeseen human shortages.

When determining which tasks to automate, focus on analysing factors like how much it costs to process an order, how many people are needed per shift, how picking and packing works, how many open orders you have and what your error rate is.

Right now, decision-makers feel the most important automation initiative is to reduce unnecessary tasks so that operators can focus on more meaningful work that directly adds value to the customer. This can be reached through full automation, but also by optimization of workflows and augmentation of your current workforce. This is exactly what Powerhouse AI focuses on. We deliver computer vision solutions to eliminate errors and to save time at inbound and stocktake. With a simple picture, the software can automatically count and verify your inventory. Either when stored on a pallet, in the rack or on shelves. Reach out to us, if you want to know more!

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