How Distribution Centers Can Manage Labor Costs and Engage Employees
by Casey Castellanos
April 8, 2021
Distribution center operators have unique challenges due to the nature of their business. They must operate efficiently, comply with labor laws, and cultivate and retain a highly productive workforce while dealing with unpredictable delivery schedules that cause fluctuating staffing needs. Yet, many distribution centers use manual processes and paper-based systems or spreadsheets to manage operations, making it difficult to meet their goals.
Managing Labor Costs
Managing labor costs and attracting and retaining the most productive workers continue to be key challenges. It’s common for distribution center managers to schedule 5-10% more workers than demand requires because of high absentee rates. Employees don’t have an easy way to swap shifts or cover their shifts.
And if distribution center managers don’t have enough employees, they have to use temp agencies to cover demand. They pay temp workers the same $22 to $25 hourly rate, but there’s also a 50% markup for the staffing agency. Temp workers typically aren’t as productive because they’re not familiar with the environment, and they aren’t incented to maximize their efficiency and productivity. Relying on temp workers can add a large financial burden to distribution centers – and because distribution centers are cost centers, managers focus on optimizing labor costs.
Engaging distribution center employees is critical. Attrition can be difficult to manage because many distribution centers are in remote locations with limited talent pools – making it hard to fill open positions. And retraining workers to fill open positions is expensive. It can cost thousands to train a worker to perform critical tasks and take weeks for new workers to reach the productivity standards.
Most distribution center employees don’t have access to online schedules. In some cases, the hourly workers must come into the distribution just to see if there is any work for them that day. That’s a waste of time and can lead to frustration and job dissatisfaction.
Legion’s AI-powered Workforce Management platform can help optimize labor efficiency and employee engagement simultaneously – at scale. Employees get modern tools and flexible work arrangements that align their preferences and skills with the company’s needs.
Learn how distribution centers can get accurate demand forecasts and ensure employees are productive and engaged by using Legion’s AI-powered WFM platform. Watch our on-demand webcast, “Transforming Distribution Center Operations with AI-Powered WFM,” and learn how you can reduce labor costs, gain 98% forecast accuracy, and optimize employee engagement and productivity.