How to Improve Warehouse Efficiency in a Tough Labor Market

Three Simple, Yet Powerful Strategies You Can Implement Right Now

To most people, a warehouse is just a warehouse.

You know better.

You know your warehouse efficiency standards can (and do) set the pace of productivity and overall costs in your company’s operation. After all, the more efficient your warehouse, the lower your cost-per-unit and the higher your production, resulting in more money out the door.

Yet maintaining (much less improving) warehouse efficiency can feel impossible when you’re struggling to get the workers you need to get the job done.

At nGROUP, we’ve seen firsthand the disruption that shortages of floor-level talent have on operations across industries – especially warehouses.

But what if we told you that you could make warehouse efficiency gains despite your labor crunch pains?

Even in today’s very tough labor market, simple strategies are producing tangible improvements in warehouse efficiency and long-term optimization.

Here are three of the most powerful we have seen:   

Strategy #1: Cross-Train Your Workers

Higher employee turnover rates erode the already thin margin of error in warehouse efficiency.  Even more so in the case of highly-specialized workers. These days you’re less likely to have an employee who is able to step into a specialized role at a moment’s notice. That’s why just one resignation, sick day, or time-off request can introduce a cascade of headaches unheard of just months ago.

Training your workforce to perform multiple tasks eliminates these issues. When more than one person can perform a task, your efficiency targets are more resilient to employee absences and your warehouse is more productive.

Yet that’s only one benefit of this strategy. Because cross-training helps your people, too. It teaches them new skills, diversifies their resumes and increases their value to the company.

It also helps reduce turnover by making your warehouse roles more interesting and feel more connected to your overall operations. All of which increases employee engagement with and trust in the organization.

And once cross-training is established, you can monitor and measure its effectiveness with a skills matrix. This excellent tool enables the management team to easily see what’s working and where improvements are needed.

Strategy #2: Consider an Incentive Pay Program

When there are fewer hands on deck, doing more with less is sometimes the only option. The key is getting the people you have to boost their productivity. For workers who perform manual tasks (think of areas like shipping and warehouse receiving) an incentive pay program can be a powerful motivator.

Take note: when productivity depends on machines or automated processes, or where work is not continuous, incentive pay is not an effective strategy. Incentive pay programs will work for your warehouse only if workers control productivity.

Provided they do, the first step of establishing an incentive pay program is to analyze your current performance.

At nGROUP, we assess how efficiently a warehouse operates through a process we call PUMP.  (The acronym makes it easier to remember what to look for.)

  1. Pace: First, rate how fast your warehouse team works.
  2. Utilization: Next, look at the percentage of the time a worker is on task. (In an eight-hour day filled with distractions ––lunch, fatigue, breaks, bathroom––60-70% is world class.)
  3. Method: Then examine how workers go about processes. (nGROUP implements nVISION, our video-based analysis tool, to see how the process might be changed.)
  4. Performance: Finally, measure the overall performance of your warehouse. Small changes in pace, utilization, and method can result in significant gains.

Once you’ve identified inefficiencies, you’ll need to establish new standards to address them. Incentive pay can then be offered to workers who meet and/or exceed the new standards.

When implemented correctly, incentive pay (along with other tools) can increase productivity 20-30%. And in our experience, the most effective incentive pay programs can answer “yes” to the following questions:

  • Will this increase measurable productivity?
  • Are the labor standards attainable?
  • Does it include metrics such as attitude and attendance?
  • Can you continue to monitor the program and offer feedback?

Strategy #3: Incorporate a Labor Management System

Labor crunch or no, it’s always a good idea to evaluate your warehouse efficiency on a regular basis. Just like any system, issues will inevitably creep in, and it’s important to find and fix them before they can cause real trouble.

Today’s high turnover rates only make the need for regular evaluation and monitoring more urgent. Each change in personnel or shift in responsibilities opens even more doors for new problems to come in and take root.

That’s why we recommend incorporating a labor management system (LMS). The right LMS will not only help you spot and correct inefficiencies now, it will continue to do so for years to come.

Fortunately, advancements in technology have made LMS more effective and easier to maintain.

For example, at nGROUP we utilize video diagnostic tools to analyze each task in a warehouse individually. Using video allows you to see where productivity is being lost, as well as opportunities to improve operations.

Video diagnostics can also uncover whether things like body movement, risk factors, and potential errors are slowing your warehouse down.

Improving the efficiency of one task by even a few seconds could amount to hours of saved time per week and month, and better productivity in the long run.

Yes, you can improve warehouse efficiency in a tough labor market

For some, losses in efficiency may seem inevitable in an age of high turnover. But they don’t have to be. Even in today’s tough labor market, warehouses across industries are maintaining and even improving their efficiency rates with simple strategies like the above.

Of course, a strategy is only as good as its execution. Unfortunately, that’s why too many operations leaders fail to fix inefficiency issues before they cause even bigger problems. They lack the time, expertise, resources or all three to implement the right strategy in the right way.

That’s where bringing in an outside partner like nGROUP can be so valuable.

We are experts in maximizing warehouse efficiency from the ground up. In fact, we’re so confident a partnership will produce tangible results, our fee is based on the % improvement!

Book a call with us today to see what your operation and nGROUP can accomplish together. Just like in today’s labor market, a simple strategy like booking a call can lead to huge warehouse efficiency gains for years to come.

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