In most P&Ls, labor is the largest controllable cost in a distribution center.
Because of that, it’s often viewed as a lever to pull back when margins tighten.
But there’s a blind spot:
It’s not labor that wrecks budgets — it’s labor instability.
Turnover, overtime spikes, inconsistent productivity, staffing gaps, and constant retraining quietly erode EBITDA far more than a well-planned, stable workforce ever will.
This article breaks down the financial ROI of labor stability in plain CFO language — and shows why partnering with a managed labor provider can convert a volatile cost center into a more predictable, performance-driven asset.
Labor stability doesn’t mean never losing people.
It means building a workforce model where:
In financial terms, labor stability is about reducing variance:
Stable labor = forecastable cost and predictable performance.
Labor instability doesn’t show up as a single line item — it leaks into multiple places across the P&L.
Replacing one warehouse associate typically costs 30–50% of their annual wages once you include hiring, onboarding, lost productivity, and supervisor time.
Instability drives:
Even modest reductions in turnover can generate six-figure annual savings for a mid-to-large DC.
Understaffing and turnover lead to:
On paper, OT is a line item. In practice, runaway OT is a symptom of labor instability.
When OT usage regularly exceeds 12–15% of total hours, it is almost always cheaper to invest in a more stable labor model than to keep buying premium hours.
A DC may have a target CPC (cost-per-case), but labor instability creates swings:
CFOs feel it as:
The more stable the workforce, the more consistent the CPC trend line — which is the language finance cares about.
Instability correlates with:
Serious recordable injuries can cost tens of thousands of dollars each in direct and indirect costs (medical, claims, investigations, downtime, and replacement labor).
Stable labor, trained consistently, reduces:
That’s not just safety — that’s capital preservation.
Let’s simplify the CFO lens into three buckets:
Fewer people leaving = fewer new people to onboard.
Lower recruiting and onboarding costs
Reduced training time for new hires
Less supervisor time spent on ramping and remediation
Stable teams:
That translates into:
Stability means:
Which leads to:
CFOs don’t just want lower cost — they want predictable cost and predictable performance.
Internal hiring alone often struggles to deliver stability because:
A managed labor provider like FHI addresses this by:
Instead of buying hours, the customer is effectively buying output and stability.
In practice, that means:
“We didn’t just lower labor cost — we made labor cost more predictable, which improves confidence in all downstream financial decisions.”
Here’s a simplified modeled scenario for a single DC:
Before Labor Stability
Turnover: 45%
OT: 20% of labor hours
CPC: $1.10
Injury rate: 6 recordables/year
After Managed Labor + Stability Focus
Turnover: 20–25%
OT: 10–12%
CPC: $0.94
Injury rate: 3 recordables/year
For a high-volume operation, that CPC improvement alone could translate into hundreds of thousands to millions in annual savings — before accounting for reduced claims, recruiting, and overtime.
That’s the ROI of stability, not just “cutting labor.”
When speaking with a CFO, skip the operational jargon and connect directly to outcomes:
Instead of:
“We want to fix turnover and productivity.”
Say:
“We want to reduce turnover by X%, cut overtime by Y%, and bring CPC down by Z¢ — while making those numbers more predictable. Partnering with a managed labor provider helps us achieve that stability faster and with less risk.”
That’s a financial story, not just an HR or operations ask.
Labor will always be one of the largest line items in a distribution business. But the companies that win aren’t the ones who squeeze labor the hardest — they’re the ones who stabilize it.
Labor stability:
For CFOs, the question isn’t
“Can we make labor cheaper this quarter?”
It’s:
“Can we make labor more stable, so performance and margin become reliably repeatable?”
That’s where managed labor becomes a strategic financial tool, not just an operating expense.
Q1: What is labor stability in financial terms?
Labor stability means lower and more predictable turnover, consistent productivity, and controlled overtime — resulting in a more stable and forecastable cost-per-case.
Q2: How does turnover hurt the P&L?
Turnover increases recruiting, onboarding, and training costs, reduces productivity during ramp-up, and forces dependence on overtime or temp labor.
Q3: Why does overtime grow when labor is unstable?
Staffing gaps and call-outs force operations to pay premium rates to maintain service levels, which inflates labor cost and fatigue-related risk.
Q4: How does a managed labor provider improve labor stability?
By supplying trained teams, on-site leadership, standardized processes, and performance accountability — all of which reduce variance and increase predictability.
Q5: What’s the quickest metric to prove ROI to a CFO?
Cost-per-case, tracked over time alongside turnover and overtime percentage. If CPC declines while stability improves, the financial ROI is clear.
👇📅 We're here to help. There's no pitch - just a conversation. 📅👇
If you need dependable support to reinforce your team and get you back on track, FHI NOW can help.
In any market, your supply chain can make or break your ability to compete well. Don't leave that to chance. We can help you create a stronger operation, so you never fall behind the competition.
Stop worrying about labor challenges and start enjoying a safe, lean, and rock-solid supply chain.
(800) 849-3132 | © FHI. All rights reserved.