Coping With Today's Warehousing Challenges

Political issues aside, all indications are that the world's fuel production is peaking while its fuel consumption is rising, especially as China and India create a growing middle class and a new universe of oil consumers. It's not just the U.S. making high demands for oil anymore.

Anytime demand outstrips supply, you can expect higher prices and those of us in the oil-driven, transportation-dependent supply chain industry are seeing that in spades. Now we have to face the fact that prices probably won't go back to the good old days.

Our challenge as supply chain professionals is to find ways to offset higher fuel prices with greater efficiencies in other areas.

Among other things, this involves smarter DC site selection. You can't afford to choose a remote warehouse location today, even if the community it's in offers you the sweetest tax incentives in history, because it will mean traveling higher distances and using more fuel.

It means eliminating or minimizing redundant transportation. For example, why send West Coast shipments to a Midwestern distribution center and then send them back to retail outlets on the West Coast later on when options like deconsolidation centers are available?

And it means making good use of more fuel-efficient practices like consolidating loads. If you don't have the kind of economy of scale to do this yourself, it will be important to consider using a 3PL that can help you do it by combining your goods with other shippers'.

You also can't put your head in the sand and assume things will stay the same and that it's just about prices. If fuel shortages come-and it's highly likely they will-mitigating actions such as lower speed limits and limited hours of permitted truck operation may be put in place as well.

And we as supply chain professionals must be ready to adapt. Investing in optimization tools and expertise will be vital, because they'll help companies find the best solutions under the circumstances.

Labor Management

Brockmann: Warehousing labor, whether union or non-union, permanent or temporary, temporary or standard, is always a challenge to manage effectively. As everyone focuses on continuously improving their supply chain and distribution center (DC) operations by implementing new facilities, equipment, systems and concepts, labor is the one constant that must be addressed daily, if not hourly.

At Tompkins, we have identified six key initiatives to strengthen and improve labor management. These initiatives are:

• Labor retention: What drives turnover and how are companies working to keep staff from leaving?
• Recruitment: What are the most effective recruiting methods?
• Labor standards: How are standards being set, updated and monitored?
• Incentives: How and where should standards be used as incentives?
• Standard operating procedures: Where should SOPs be implemented? How often should they be updated?
• Training: What level of training is being provided and is it focused on the right areas?

When these six initiatives were researched using the Supply Chain Consortium database, the members reported the following statistics:

• Labor retention: The three largest contributors for turnover are (1) termination due to performance at 14 percent, (2) promotion or reassignment at 13 percent and (3) resignation due to working conditions at nine percent.
• Recruitment: The two most important factors in recruitment were emphasizing company brand and personal growth opportunities with scores of 3.8 and 3.6 respectively, on a five-point scale.
• Labor standards: At 45 percent, labor standards are most often set on an individual basis. Fifteen percent use group standards and 39 percent use a hybrid.
• Incentives: Some 60 percent of warehouse employees qualify for some level of incentive compensation.
• Standard operating procedures: Implementation of SOPs resulted in a six percent to 14 percent increase in productivity, accuracy, turnover, customer service and quality.
• Training: Typically, a new hire receives an average of 70 hours of training, with over half of those hours dedicated to job process training.

It is clear that a vital part of DC operation improvement involves labor management. From a best practice perspective, a quality labor management effort must include: