Ease the Labor Crunch With LMS Coaching and Incentives

It’s labor crunch time in the distribution and fulfillment (D&F) sector. Although labor has always been among the largest expenditures for distribution center (DC) operators — up to 65% of total expenses — today’s labor scarcities and rising wages are driving these costs even higher. Finding and training workers to meet your performance expectations is only half the battle. Once they are integrated into your unique DC workflows and processes, keeping them engaged and motivated to stay is equally as important.

In a recent On The Move webinar, Overcome DC Workforce Attrition With Labor Management Software, we examined how labor management software (LMS) addresses these escalating labor challenges with robust coaching and incentivization capabilities.

Today, improving employee retention is a top priority for nearly all DC operators. If the results of our in-webinar polling data are any indication, increasing wages is the most common strategy for achieving this goal. It’s probably no surprise to learn that hourly wages for non-supervisory employees have broken the $20-per-hour barrier for the first time in our industry’s history.

Bottom-line impacts: Direct vs. indirect costs

With labor costs rising, it’s important to understand the bottom-line impacts. The average annual turnover rate in the D&F industry is approximately 43%. For some of our customers, we know that this estimate doesn’t come close to capturing the severity of their labor retention issues. When evaluating the true cost of employee turnover, DC operators should consider both the direct and indirect impacts.

The estimated cost of replacing a DC worker is approximately 25% of their average salary, or $8,500. In a 100-employee workforce at 43% annual attrition, this amounts to $365,500 in annual direct costs. But these direct costs are just the tip of the iceberg. When you factor in the indirect costs of lost productivity, poor customer service levels, recruitment fees, temporary staffing services and overtime rates, this figure may be significantly higher.

In addition, the competition for qualified labor has never been fiercer. To minimize the increased risk of attrition and associated costs, employers need new tools to help them maintain an engaged and satisfied workforce.

How can LMS help?

LMS provides the visibility to individual worker or team performance to help identify employees who are performing below established standards and may need additional training. An LMS coaching program automates this process for supervisors and managers by providing executive dashboards and reports that keep them informed by tracking:

• Individual coaching sessions and performance data
• Employee and team statistics by supervisor to help them evaluate program impacts on performance
• History of employee coaching sessions and corrective actions for Human Resources

Overall, a coaching program helps supervisors to focus their attention on employees who need it most while enabling visibility into the effectiveness of their mentoring initiatives. Research shows that DC managers can improve performance up to 88% and reduce attrition rates in the process.

Another way you can use LMS to improve retention is by managing incentive programs. With LMS, managers can create incentives — both monetary and non-monetary — and then track individual and team performance metrics toward achieving established goals and rewards. Our data shows that the longer these incentive programs are in place, the better the results. In fact, programs that are active for more than one year deliver up to 44% performance gains. To drive workplace engagement and foster an environment of healthy competition, many DCs post progress reports and celebrate the winners.

Used together, LMS-driven coaching and incentives are proven methods to deliver the following benefits to performance and retention:

• Creating a culture of continuous improvement
• Retaining top performers and modeling their winning behaviors
• Reducing overtime by up to 15%

If you’re ready to learn how to leverage LMS to reverse the workforce attrition trend and create a more engaged workplace, please view our On The Move webinar. To subscribe to our blog and receive exclusive communications and updates from Honeywell Intelligrated, click here.