For businesses that rely on warehousing, managing labor costs is critical to maintaining profitability. To reduce labor costs, there is often a need to balance the need for efficient operations and skilled labor. Labor costs account for a significant portion of warehouse, distribution center, and order fulfillment operating expenses. To address this challenge, it is essential to implement strategies to reduce labor costs without compromising productivity or quality. By implementing the following methods, your warehouse can gain a competitive advantage and achieve long-term success. Warehouse
1. Leverage technology and automation.
By leveraging automation for routine tasks, businesses can reduce the need for additional labor and allow existing employees to focus on value-added activities. This approach can help businesses stay competitive by reducing costs and increasing productivity. Additionally, replacing labor is an expensive and time-consuming process that requires finding, training, and retaining new employees. By reducing the need for labor, businesses can avoid these additional costs, and adopting a combination of technologies can optimize your warehouse operations and yield numerous benefits to automate your business and increase efficiency with technologies such as:
1. Goods-to-Person (G2P): Optimizing the picking process by reducing the distance traveled by employees to fill orders provides a more efficient and cost-effective solution than relying on manual labor.
2. Automated Storage and Retrieval (ASRS): Provides buffer storage between different stages of the workflow and holds orders for shipping to efficiently automate the movement of products within the warehouse.
3. Autonomous Mobile Robots (AMRs): By using advanced sensors and cameras to optimize routes in real-time, understand and move around the warehouse without manual action, with the ability of these technologies to perform a variety of tasks, automation can help your business reduce its reliance on manpower, transport inventory, or products, assist with the sorting and return process, increase throughput, and provide flexible sorting solutions.
2. Optimize the current process and workflow.
Another way to reduce labor costs is to optimize current processes and workflows, and by analyzing warehouse operations data, you can identify bottlenecks and inefficiencies to help implement changes to streamline processes. This could include reorganizing warehouse layouts, improving inventory management practices, and optimizing pick and pack processes. These improvements can significantly reduce labor costs while improving overall warehouse performance.
3. Implement effective training programs.
Effective staff training is a key component in reducing warehouse labor costs, for example, implementing advanced picking can increase efficiency by 30% and save up to 60% of time. In addition, 54% of organizations are adding **chain and technical training to retain the workforce and create career paths for valuable employees. When employees are well-trained, they are more productive and efficient, resulting in faster, more accurate work, and less turnover. This can reduce the need for additional labor, saving your business time and money.
Fourth, update the warehouse location procedures.
A warehouse location is a method of efficiently scheduling inventory within a warehouse or distribution center. Good location practices ensure that inventory is stored according to order speed, versatility of "other parts", and ergonomics. By leveraging storage and an efficient picking process, warehouse locations can increase storage capacity and reduce handling expenses. An efficient location approach not only saves space within the facility, but also allows fewer workers to pick more orders, which can lead to lower labor costs.
5. Ensure that the warehouse execution software is effective.
Upgrading your software system, such as implementing Warehouse Execution System (WES) software, can significantly improve your ability to manage labor resources and equipment performance on a day-to-day basis. By implementing more complex software systems, you can effectively coordinate and streamline your workforce needs to ensure productivity.
6. Keep the flow rate low.
Warehouse operators are struggling to find and retain skilled workers, and high turnover can be costly for businesses as it requires investment in the training of new employees, which can also disrupt the facility's workflow. As a result, reducing employee turnover has become a top priority.
7. Track key KPI indicators.
Labor costs typically account for a significant portion of the total expenses associated with warehouse fulfillment, typically around 60% to 65% of total costs. Finding ways to optimize labor productivity and efficiency can lead to significant cost savings. One way to achieve this is to track key performance indicator (KPI) metrics such as:
Total error rate: Identify areas where errors occur, such as order picking or packing.
Fulfillment time: Helps optimize labor resources as it provides insight into the speed and efficiency of warehouse operations.
Inventory Accuracy: Reduces errors and effectively reduces the need for additional man-hours.
By tracking these and other key performance indicators, as well as analyzing the data, you can gain valuable insights into your warehouse operations and identify areas for improvement to optimize workforce efficiency and reduce costs.
8. Identify common operational inefficiencies.
Identifying inefficiencies in warehouse operations is critical to optimizing warehouse performance and cutting labor costs, a common cause of warehouse inefficiencies is that old equipment is only operating at the level designed to operate at the time, and systems and processes that once worked may now be outdated and inefficient due to fluctuations in consumer demand.
9. Make use of real-time inventory management.
As the chain begins to normalize again after the pandemic, just-in-time (JIT), an inventory management method that involves close collaboration between a company and its merchants, works to reduce the amount of inventory that a company must maintain. This approach aims to reduce waste, optimize efficiency, and improve responsiveness to customer needs. Labor costs can also be reduced as the man-hours required to store inventory and fulfill orders are reduced. With JIT, inventory levels can be kept within a horizontal range, and production can be closely aligned with demand. This results in a more streamlined and efficient production process that reduces the need for additional man-hours.
10. Eliminate unnecessary steps.
By eliminating unnecessary steps and streamlining workflows, your warehouse can reduce the time and effort required to complete tasks. One way to achieve this is to streamline existing processes and workflows, eliminating any unnecessary steps, tasks, or inefficiencies. This can be achieved by analyzing each step in the process and identifying areas where improvements can be made. In addition, feedback from employees involved in the process can be valuable in identifying areas for improvement. By involving employees in the process and listening to their suggestions, businesses can identify and address issues that may not be immediately apparent.