Warehouse operators are spending more to attract people and investing billions in automation. Both trends point to the same underlying challenge: creating reliable, productive capacity.
A new 1.2 million-square-foot distribution center in Connecticut is preparing to open its doors, and the effort required to staff it offers an interesting snapshot of today’s warehouse labor environment.
At almost the same time, another warehouse trend is accelerating.
North American companies ordered nearly 18,000 robots worth approximately $1.2 billion during the first half of 2026 as distribution operations continued investing in automation.
At first glance, these may seem like opposite strategies.
One involves spending more to attract people.
The other involves investing in technology that can reduce dependence on people.
But both are attempts to solve the same fundamental operational problem:
How do you create reliable warehouse capacity when labor availability, labor cost and workload can all change?
For warehouse and supply chain leaders, that may be the more important question.
The Cost of Labor Is More Than the Hourly Wage
When executives evaluate warehouse labor costs, hourly wages are usually the most visible number.
They are not necessarily the most important one.
An internally managed warehouse workforce requires an organization to recruit, screen, hire, onboard, train, schedule, supervise and retain enough employees to meet operational requirements.
When people leave, they have to be replaced.
When volume spikes, additional capacity has to be found.
When employees call out, supervisors still have to get the work done.
When productivity falls short, the operation absorbs the consequences.
And when a warehouse carries additional employees to protect itself against future peaks, it may also carry labor expense during periods when that capacity isn’t required.
The actual equation therefore looks more like:
Labor Cost = Wages + Recruiting + Training + Supervision + Turnover + Overtime + Productivity Variability + Capacity Risk
That doesn’t mean companies shouldn’t employ their own warehouse teams.
For many operations, an internal workforce is absolutely the right model.
But it does mean the decision should be evaluated as an operating model, not simply as a comparison of hourly rates.
Automation Is Solving the Same Problem From the Other Direction
The surge in warehouse automation makes sense when viewed through the same lens.
Robotics, automated material handling systems and other technologies can reduce the amount of human labor required for certain repetitive processes while improving consistency and throughput.
That can create significant value in the right operation.
But automation brings its own set of considerations.
It requires capital.
It requires implementation.
It requires integration with existing processes and systems.
It may require technical support, maintenance and changes to facility layouts.
And it works best when the process being automated has enough consistency and volume to justify the investment.
For some warehouse functions, that equation is compelling.
For others—particularly operations affected by changing freight profiles, unpredictable inbound schedules, seasonal volume, variable product characteristics or rapidly changing customer requirements—human labor remains exceptionally flexible.
That leads to a question that often gets lost in the automation discussion.
What if the choice isn’t simply between hiring more people and buying more robots?
There Is a Third Warehouse Labor Model
Supply chain leaders generally have three ways to create operational capacity.
1. Build and manage an internal workforce.
The company hires employees and retains responsibility for recruiting, training, supervision, scheduling, productivity and workforce availability.
2. Automate appropriate processes.
The company invests capital in technology that replaces or augments labor in functions where automation provides the appropriate operational and financial return.
3. Use a managed labor model.
A qualified operating partner assumes responsibility for defined warehouse functions and the workforce required to perform them.
The third option is fundamentally different from simply obtaining temporary employees.
Traditional staffing typically provides people.
Managed labor is intended to provide operational capacity and accountability.
That distinction matters.
Buying Headcount Versus Buying an Outcome
Imagine that a distribution center needs 30 additional people to support an operation.
A traditional staffing question might be:
“What does it cost to provide 30 workers?”
A managed-labor question is different:
“What work needs to be completed, what resources are required to complete it efficiently, and who is accountable for the result?”
That change in perspective moves the conversation away from headcount and toward productivity.
Instead of the warehouse operator managing attendance, staffing levels, training, supervision and day-to-day labor deployment, responsibility for the defined operation can shift to the managed-labor provider.
The customer still establishes service requirements and expected outcomes.
But it does not necessarily need to build all of the workforce infrastructure required to produce them.
For operations experiencing frequent volume fluctuations, difficult recruiting environments or recurring productivity challenges, that can materially change the labor equation.
The Best Strategy May Include All Three
The future warehouse is unlikely to be entirely human or entirely automated.
In many facilities, the better answer will be a combination.
Automation can handle processes where machines provide superior consistency or economics.
Internal employees can support functions where institutional knowledge and direct organizational control create value.
Managed labor can support functions where flexibility, productivity management and workforce scalability are particularly important.
Consider inbound unloading.
Freight doesn’t always arrive evenly.
Trailer configurations vary.
Product mix changes.
Arrival schedules move.
Daily workload can fluctuate dramatically.
Maintaining enough permanent internal headcount to cover the highest possible workload may leave excess capacity during slower periods.
Maintaining only average headcount can create bottlenecks when volume surges.
And fully automating an extremely variable process may not always provide the desired return.
This is precisely the type of environment where an alternative labor model deserves consideration.
The same analysis can apply to order selection, material handling, production support and other labor-intensive distribution functions.
Ask a Different Question About Warehouse Labor
The headlines about rising wages, hiring incentives and warehouse robotics are important.
But they can also encourage executives to focus on the wrong question.
The question isn’t simply:
“How much are we paying per hour?”
And it isn’t:
“How many people can we replace with automation?”
A more useful question is:
“What is the most efficient way to create the productive capacity this operation requires?”
Sometimes the answer will be internal hiring.
Sometimes it will be automation.
Sometimes it will be managed labor.
And increasingly, sophisticated distribution operations will use different models for different parts of the same facility.
What matters is understanding what the business is actually purchasing.
A warehouse doesn’t ultimately need labor hours.
It needs freight unloaded.
Orders picked.
Products moved.
Trailers turned.
Service levels achieved.
And customers served.
Headcount is an input. Productive capacity is the outcome.
That distinction may be one of the most important warehouse labor conversations supply chain leaders have in 2026.
How FHI Approaches Managed Warehouse Labor
For more than three decades, FHI has helped supply chain operations manage labor-intensive warehouse functions throughout the United States.
Rather than simply supplying temporary workers, FHI’s managed labor model is designed around operational execution, workforce management and productivity.
From inbound unloading and material handling to broader warehouse and distribution operations, FHI works with customers to determine the labor model that best aligns workforce capacity with operational requirements.
If your distribution operation is evaluating labor costs, warehouse productivity or how to scale capacity without simply adding permanent headcount, the right place to start may not be asking how many people you need.
Start by asking what outcome you need the operation to produce.
We’re here to help. There’s no pitch – just a conversation.