How can retailers and logistics providers get the best out of warehouse staff? Simon Jack looks at how the latest systems can improve employee efficiency at distribution centres.
Tough trading conditions are forcing retailers and logistics providers to search hard in their operations for ways to cut costs. One area that still offers potential savings is staff productivity in the warehouse.
Improved management techniques and specialist software are among the tools available to motivate staff and employ their skills more efficiently. This should also help to improve staff retention, a growing issue in the key distribution locations.
One system has been created by Kurt Salmon Associates (KSA) and is used in 400 sites across the world, many of them in the fashion sector. It uses software developed in conjunction with US IT company Red Prairie to measure how well staff are deployed in the distribution centre, whether working methods are the most efficient, and how fast people are working.
KSA principal Tony Lee says: "Gaining improvements is often a question of working smarter rather than harder. It could be that you are working at 100% in terms of effort but you are only achieving 50% of what you could in terms of utilisation of the staff or that your methods and processes are not as efficient as you thought," he says.
The KSA system can be used to measure the performance of individuals, teams or the overall warehouse and any improvements can be encouraged through financial incentives or coaching and training. Lee says that, if the operation is fairly basic, it is not unusual to see a 25% leap in productivity after using the system. In one case, a 40% increase was recorded.
Another company offering systems aimed at improving productivity is Manhattan Associates, as part of a range of programmes for controlling the entire supply chain. Steve Smith, vice-president in charge of Europe, the Middle East and Africa at Manhattan Associates, says that combination of labour management software which analyses how well staff carry out key tasks, and "slotting" software, which looks at the warehouse layout, is needed.
"There is a massive opportunity for retailers to shift product far more quickly through the depot than they could otherwise," Smith says.
Information from the system can be used to let staff know in real time how they are performing as they go through their shift or on a cumulative basis. Smith says that retailers can achieve productivity increases of 30%-50% by using such techniques. In some cases, productivity can even be doubled.
Alastair Charatan, a retail specialist at PA Consulting, says that even retailers with relatively efficient warehouses can profit from improving productivity.
"In a well-run warehouse you might achieve 10% gains. Most distribution centres still have significant benefits to go for," Charatan says.
However, retailers have to think carefully about whether to reward a team or an individual if they decide to use financial incentives.
"If you're a hard worker and get rewarded individually you would pull all the stops out to gain the extra incentive but if you're someone who is not bothered about the extra money individual incentives are not going to motivate you. In that case, team incentives would work better because peer pressure would force you to pull your finger out," Charatan says.
Many believe that financial incentives are not the best way to motivate staff, however. Logistics firm Wincanton, which works for a number of clothing retailers, including Matalan and Littlewoods, usually avoids them. Instead, it favours a team-based approach that gives regular recognition for good performance, rather than extra payments.
Phil Houghton, Wincanton's business development manager, explains: "At the start of the shift there are team briefings, which include congratulating warehouse staff if they are meeting targets. That is very important in making people feel valuable."
John Lewis Partnership also avoids incentives aimed specifically at rewarding productivity. However, it has a group-wide bonus scheme which is intended to motivate all staff and makes one-off payments to recognise an individual's overall contribution to the business.
Adrian Went, operations manager in John Lewis' garment warehouse in Park Royal, north-west London, explains: "If someone has come up with an efficiency measure that benefits the operation, we would give them a bonus to recognise that."
One way to improve staff productivity is through multi-skilling and moving people around the warehouse to where they are needed most. Again, this approach is used by John Lewis at Park Royal. The facility acts both as a national storage point for garments and as a local distribution point for John Lewis' London outlets and it is necessary to swap staff between the two operations.
TNT Fashion Group also believes in using multi-skilling on behalf of its clients but development director Philip Bracken says it must not be overused: "You don't want people chopping and changing what they are doing all through the day because that in itself is unproductive. You want someone to do a particular job quickly and well. However, it is important to be flexible, for the sake of the staff themselves as much as anything else," he says.
Wincanton's Phil Houghton agrees that it is important to strike a balance. "It is difficult because you can lose productivity during the time when people are changing over but you don't want people doing monotonous jobs for too long," he says.
As well as helping control the overall workings of the warehouse, new technology is improving productivity in other ways. "Voice-picking", where staff are guided to the right place in the warehouse via a headset and confirm to the system verbally when they have picked an item, is predicted by many to be an aid that will grow fast.
PA Consulting's Alastair Charatan says:
"Voice-picking is a very powerful technology because it totally frees up both hands. As well as adding to productivity, it is incredibly accurate. Implementation can be rapid, producing benefits with three months and payback within a year to 18 months."
Charatan believes that radio frequency identification (RFID), where cases or individual garments are identified through electronic tags rather than barcodes, will make an impact on warehouse productivity but not for five to 10 years. It will only become effective when most suppliers and retailers use it, Charatan says.
Wincanton's Houghton says that warehouse productivity can also be improved by creating a positive environment. This can include providing meals when staff want them - 2am is popular during night shifts - and facilities such as creches and gyms, and encouraging social events. "The best incentive anyone has to work well is to be happy at work," Houghton believes.
The benefits of such policies are hard to measure but can improve overall performance and lessen the squeeze on margins being felt by many retailers.
At the Peacocks Warehouse
Creating a logical flow of products through the warehouse is one of the most important keys to improving productivity, believes Neil Burns, group operations director of Peacocks. In this case goods come in one set of doors, go to storage areas until they are needed, back to a central sorting area and out through a separate set of doors.
"You need a good geography to the building, so that products do not cross-over as they are moved about," Burns says.
Peacocks uses multi-skilling and keeps a record of how many tasks employees have been trained to carry out, with the figures analysed at weekly operational meetings. This is necessary because the company only decides in the morning how many staff to allocate to each function that day.
"Because we replenish products that have been sold we don't know exactly what we've got to get out until then," Burns explains.
It is also intended to motivate employees. So staff spend only a few hours of a shift operating an automated sorting machine putting flat-packed items on to a chute.
"We make sure that people carrying out that task change during the shift. By doing so, we are trying to make the job more interesting," Burns says.
Peacocks does not use financial incentives to reward individuals but offers recognition though a "Colleague of the Month" scheme and counselling or extra training to those not achieving the expected level of performance.
