Peak season is upon us, and warehouse managers everywhere are revving up their fulfillment operations for the crush of holiday orders. The effort to slot, sort, and ship all that merchandise calls for a classic "all hands on deck" approach, including the hiring of extra workers to get the job done.
But for businesses planning for the 2019 peak, there's one major problem—the U.S. economy is in the midst of a historic labor shortage that's making it difficult for many DCs to find enough workers to fill their shifts. The U.S. Labor Department reported last month that the nation's unemployment rate had sunk to 3.5% in September, a nearly 50-year low.
At the same time, the demand for labor has never been higher. Burgeoning e-commerce demand is changing the nature of fulfillment work. In addition to filling the traditional bulk store-replenishment orders, warehouses today are increasingly called on to pack and ship individual consumer orders—a more labor-intensive process. And consumers accustomed to next-day delivery service expect those orders to arrive at lightning speed.
Caught between those two trends, warehouse and DC managers are turning to a number of unconventional approaches. Some are offering part-time shifts in a bid to tap nontraditional labor pools, like college students or stay-at-home parents working at night. Others are experimenting with flexible schedules, like four-day workweeks with 10-hour shifts. Still others are experimenting with creative ways to apply an old tool—their labor management software (LMS).
MORE CARROT, LESS STICK
Since its introduction decades ago, labor management software has become a standard tool for managing human resources within a warehouse or DC, offering companies a neutral method of tracking the work output of their employees. While the methodology hasn't changed much over the years, companies today are using the data collected by the software in new and different ways.
For example, in the not-so-distant past, employers commonly used their LMS data to identify underperforming workers so they could essentially cull the herd. "It used to be that every month, businesses would get rid of their bottom 10% and replace them with new people," says Peter Schnorbach, senior director for product management at Manhattan Associates, a developer of LMS and other supply chain software. "That doesn't work anymore, because you can't replace them."
Nowadays, the focus has shifted from performance improvement to employee retention. Among other things, that means warehouse and DC leaders are more likely to be using their LMS data to identify the top performers than the laggards. It's all part of a push to boost "employee engagement"—and by extension, retention. Workers identified as top performers are often rewarded with perks like prime parking spots, lunch with a top manager, or extra compensation. One Manhattan Associates customer brings a large wheel into its DC once a month, calls its top performers up to the stage, and lets them take a roulette-style spin to win various prizes, like the TV show "Wheel of Fortune."
But identifying those top performers isn't always as cut-and-dried as it might sound. In many warehouse operations, no two tasks are exactly alike, making it tough to draw apples-to-apples comparisons. For instance, it would be unfair to compare two workers on the basis of orders picked per hour if Worker A collected them all from a single aisle, while Worker B was forced to travel throughout an 800,000-square-foot DC.
In a bid to correct such inequities, a number of companies have begun adding warehouse "telematics" data— data collected remotely from forklifts and other warehouse equipment—to the mix, analyzing it along with the standard worker productivity measures.
"Everything is creating data these days," says Derrick Miller, enterprise solutions manager at The Raymond Corp., a lift truck vendor that also provides fleet management and labor management software. "LMS has traditionally been only about tracking how many pallets Carl touched, or how many crates Susan lifted. But you can also generate data from lift trucks and conveyor systems, or even track when employees use shrink-wrap machines."
By analyzing telematics data, warehouses can generate a richer, more detailed profile of their workers' activities than they can with basic performance measures. And more to the point, perhaps, this approach allows for a more nuanced comparison of workers' performance by factoring in variables like how far they traveled, how much weight they hefted, or how many locations they visited.
"People think of an LMS as an accountability tool only, to find underperformers and to drive margins, but that was before the labor crisis," Miller says. "Now, it can be used for rewarding people, giving them incentives, and retaining them."
SHIFTING LABOR LANDSCAPE
The recent shift marks the latest stage in labor management systems' ongoing evolution to meet changing business challenges, says Michael Wohlwend, managing principal with Alpine Supply Chain Solutions, a Chicago-based consulting firm.
In the early '90s, many companies used their LMS platforms to track workers' performance against "engineered labor standards" in an effort to gain leverage against unions that were pushing for less-stringent metrics, he says. Then in the late '90s, managers started using LMS software more strategically, implementing "pay for performance" programs that offered workers incentives to meet specific performance goals.
Today, warehouses are using their LMS systems—often in conjunction with their warehouse management systems (WMS)—to respond to a new challenge: meeting strict order-shipping deadlines. Many e-retailers now promise same-day shipping for all orders placed by, say, 5 p.m. However, fulfilling those promises often results in a last-minute scramble to get orders out the door, forcing managers to shift worker assignments on the fly. During these crunches, performance data from an LMS can help managers quickly identify the workers best suited to the tasks at hand, Wohlwend says.
If economic trends hold, the U.S. labor crisis won't be resolved anytime soon. But even in an age of increasing automation, most warehouses still rely on human workers to handle the growing fulfillment workload. And to help keep these valuable assets on board, more and more DCs are leveraging the data-collection and analysis capabilities of their trusty LMS platforms.