Blog Posts Ecommerce Intensifies Warehouse Labor Needs


Overview

  • Ecommerce growth is having a dramatic impact on warehousing and fulfillment operations.
  • Finding, training, and retaining workers is a significant challenge.
  • To address labor challenges, many companies are turning to third-party providers.

U.S. ecommerce sales reached an estimated $794.50 billion in 2020, according to eMarketer. The surge in online shopping is having a marked impact on warehousing and fulfillment operations. Accommodating the need for labor can be particularly challenging.

While fulfillment automation can help, picking, packing and shipping orders is, by and large, a labor-intensive process. In fact, ecommerce fulfillment operations typically require two to three times more labor than traditional warehouse operations. It’s no coincidence that warehouse employment reached the highest level ever recorded in September with 1.25 million workers in the warehouse and storage sector.

Ecommerce giants like Amazon, Walmart and Target are scrambling to hire thousands of workers to fulfill online orders. Smaller merchants are also challenged to meet rising labor demands.

Finding and keeping qualified workers is one of the biggest challenges of warehouse management. It also can be one of the most costly. Labor costs can represent 50 to 70 percent of the average warehousing budget.

In addition, on-boarding and training can be a time-consuming process, and, since the current turnover rate for industry workers is 4.4 percent, you can expect to repeat these functions with some frequency. Of course, on-going labor planning, scheduling and management are also necessary.

Can a 3PL Solve Your Labor Challenges?

To ease pain points like these, you may opt to outsource warehousing and fulfillment functions. In fact, more companies are relying on third-party logistics providers (3PLs). A recent Auburn University study projects that 3PL usage will jump from 60 percent today to 70 percent by 2030, driven in large part by increased ecommerce.

How can a 3PL help to solve your labor challenges? Outsourcing offers a number of advantages:

Available capacity. 3PLs generally have an existing pool of workers and established relationships with temporary staffing agencies, so they’re ready to meet your needs. You’ll have labor available when you need it without the associated headaches of recruiting, training and management.

Flexible labor. If you often experience variations in order volume due to seasonality or promotional activity, the dramatic peaks and valleys can be difficult to accommodate. You may need 8 lines one week and 10 the next. Planning for this variability can be difficult.

A 3PL with a shared-space environment can scale quickly to meet your needs. They can balance the requirements of multiple clients – moving staff from one account to another as needed. (Since they are better able to ensure a steady workload, this can also help with workforce retention.)

Reduced overhead. When you handle your own fulfillment, you must be prepared for maximum volume – even when there is a lull in the action. Staffing at this level can be costly. With outsourcing, you pay for the labor you need instead of making a permanent, long-term investment. You’ll have the workers you need to handle peak volume, but they won’t be on your payroll if activity slows.

Increased efficiency – An experienced 3PL can actually help to reduce your labor needs. They can apply best practices and methodologies such as Lean and Six Sigma to improve processes and streamline operations. For additional efficiency, they may invest in automated fulfillment solutions that can help to speed cycle times and reduce the need for labor.

With no end in sight for ecommerce growth, it’s critical to take steps to address related labor challenges now. Exploring your options can help to ensure that your business is prepared for the “next normal.”

Related to: selling online, labor management

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