Discover How a 10% Productivity Increase Transforms Warehouse Operations

For more than 30 years, FHI has established a track record of being able to enter a distribution center and make a meaningful impact on productivity. This track record is now our Hard Work, Done Right Promise to new customers, a guarantee that we will increase productivity by 10% or more in the roles we fill. And while a guaranteed production increase sounds good, I started thinking about the real impact this increase can have on an operation.

In today’s fast-paced supply chain, distribution centers and warehouses are the critical hubs that ensure the smooth flow of goods. Achieving a mere 10% increase in productivity within these facilities can have a dramatic impact on overall operations, significantly boosting profitability and operational efficiency. This article explores the transformative effects of such productivity enhancements, particularly through the lens of managed warehouse labor solutions, compared to traditional in-house staffing or the use of temporary agencies.

The Ripple Effect of Enhanced Productivity

A 10% increase in warehouse productivity directly translates to more orders processed per day with the same amount of labor, or the same volume handled in fewer hours. This efficiency gain not only reduces labor costs relative to output but also enhances customer satisfaction through faster delivery times. For instance, according to a study by the Warehouse Education and Research Council, improving worker productivity by 10% can lead to an 8% decrease in operational costs, highlighting the significant leverage that productivity improvements can wield.

Comparing Labor Solutions: Managed Services vs. Traditional Hiring 

Managed Warehouse Labor Solutions

Managed labor solutions involve outsourcing warehouse operations to a specialist provider who manages all aspects of warehouse labor, from team productivity to safety, to reliability, to recruitment, training and payroll. This model offers several distinct advantages:

1. Expertise and Efficiency: Managed labor providers bring specialized knowledge, experience and accountability in optimizing workforce productivity. They implement best practices and innovative technologies that many in-house teams may not have access to.

2. Scalability: These providers can quickly scale labor up or down based on real-time demand, a flexibility that is crucial during peak seasons or unexpected surges in order volumes.

3. Cost Effectiveness: With a focus on cost control, managed services assume the labor-related overhead costs associated with HR functions like hiring, training, benefits administration and workers comp.

4. Risk Mitigation: Outsourcing labor management helps mitigate the risk of non-compliance with labor laws and regulations, as the responsibility shifts to the provider who is expected to be an expert in the field.

In-House Staffing

In-house staffing offers direct control over the workforce, which can be beneficial for companies with highly specialized needs. However, this model often incurs higher costs due to:

• Recruitment and training expenses.
• Fixed labor costs regardless of demand fluctuations.
• Potential inefficiencies if not managed by specialists in workforce optimization.

Temporary Agencies

While temporary agencies provide labor that can be scaled quickly, this option might come with challenges such as:

• Variability in worker skill level, work ethic and reliability.
• Frequent turnover, which can affect productivity through the revolving door of training.
• Additional margins paid to the agency, increasing overall labor costs.

Industry Statistics and Insights

Recent industry statistics detail the growing reliance on and success of managed labor solutions. A report by Markets and Markets notes that the warehouse outsourcing market is projected to grow at a category growth rate of 7.5% from 2020 to 2025, driven by the increasing pressures for managers to reduce operational costs and focus on core competencies. Furthermore, a survey by Logistics Management found that companies using third-party labor providers reported an average improvement in order fulfillment accuracy of up to 12%.

Conclusion

In conclusion, leveraging a 10% productivity increase in warehouse operations through managed labor solutions has a broad impact on operating costs, order accuracy, labor, service levels and overall building efficiency. FHI, with over 30 years of experience in the industry, exemplifies the success of such outsourcing strategies. Serving top-tier customers, we have refined our expertise in labor management, maximizing productivity and efficiency within distribution centers. For companies aiming to stay ahead, partnering with a seasoned provider like FHI offers a proven pathway to realizing these substantial gains.

For additional information about our Hard Work, Done Right Promise or our Managed Labor Solutions, visit us online at FHIWORKS.com.