Blog Posts How Outsourcing Can Help You Master Labor Management
When it comes to managing a warehouse, finding and keeping qualified workers is one of the biggest challenges. What makes labor management so difficult? How can a third-party provider (3PL) help? Read on for answers to these questions and more.
Challenges of managing labor
With the U.S. unemployment rate at 3.5%, workers simply are in short supply. Warehouses find themselves competing to attract employees from other fields. The current labor shortage is particularly challenging for ecommerce fulfillment operations which require two to three times more labor than non-fulfillment driven operations.
The labor shortage is also driving up median wage rates. Labor costs can represent as much as 50 to 70 percent of the average company’s warehousing budget. High overhead costs make it more difficult to be competitive in today’s marketplace.
When you do find workers, you’ll need to invest time and resources in training them to ensure optimal performance (i.e., efficiency and productivity). On-going labor planning, scheduling and other management tasks can also be time consuming.
Retention is another major challenge. The average turnover rate for warehouse workers is 36 percent, according to the U.S. Bureau of Labor Statistics. As a result, you’ll be repeating the recruiting, hiring and training process more often than you’d like.
Furthermore, you must be prepared to accommodate fluctuating labor needs caused by changes in order volume due to seasonality or promotional activity. To avoid service failures and/or delivery delays, you’ll have to hire enough permanent staff to handle peak volume. That means you’ll be paying for maximum staffing even when business is slow.
How a third-party provider can help address labor needs
A 3PL may be able to meet your labor requirements more efficiently and cost effectively. Here are just a few reasons why:
No overhead investment. When you outsource to a third-party provider, you only pay for the labor you use. You don’t have to make a permanent investment in staffing – or space and equipment.
Flexibility. Typically, you’ll have the option to utilize a shared-space environment where the provider balances the needs of multiple customers. Through shared labor, they’re able to handle the peaks and valleys of your business and offer the scalability to expand or shrink operations to accommodate your changing business needs.
Expertise/best practices. With an experienced management team and an established pool of trained workers, a 3PL gives you access to industry expertise, proven processes, and knowledge of best practices to ensure optimal efficiency. They also are better able to anticipate issues and resolve them proactively.
Continuous improvement. A third-party provider will pay careful attention to solution design and utilize proven methodologies such as Six Sigma to improve processes and reduce waste on an on-going basis. And when processes are more efficient and streamlined, you’ll need less labor.
Want to take the labor out of your labor management? Outsourcing might be the answer.