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Is a Tightened Labor Market Driving Up Your Operational Costs? Consider Exploring Warehouse Incentive Programs to Increase Retention

By Contributing Author | 07/18/2018 | 6:02 AM

By Tom Stretar, Vice President and Labor Management Practice Leader, enVista


The speed of today’s supply chains, coupled with macro behaviors, are causing organizations to seriously consider incentive compensation as part of their overall associate compensation strategies. The Bureau of Labor Statistics recently reported that warehousing jobs experienced year-over-year uptick in the number of quits, making it one of the top industries having to cope and plan for unemployment. Just last year, there were 25,000 more quits in the industry itself [1], and some companies are even having to retrain 50 plus percent of their workforce to lessen the amount of quits.

We are seeing three key contributing issues to this trend.

Companies in large metropolitan cities are appearing in the lower percentiles of wage rates.

Bigger metropolitan areas and some of the tightest labor markets, such as Seattle, San Francisco and Minneapolis, are currently building in mandatory minimum wage increases to payroll, with amounts being adjusted based on employee headcount. These much-anticipated improvements in incomes are expected to take effect by 2022 and 2024.

By raising wages, cities are hoping to attract employees, because let’s face it, with an unemployment level that is the lowest it’s been in many years, it’s hard to motivate people to look for work other than presenting a decent number attached to the dollar sign.

The Amazon effect is causing a need for flexible workforces, including temporary and seasonal associates.

The Amazon effect is comprised of two parts. Yes, it offers employment opportunities, but at what cost? Amazon has long been known for its ability to attract employees from some of today’s largest and longest-standing retail operations.

As one of the few retailers that can afford to cut overhead costs, offer savings to customers, operate same day shipping all while decreasing profit margins, it’s a recipe for traditional retail disruption.  

Traditional retailers can’t afford to keep up with Amazon’s operations and what it’s able to pay and promise its employees in wages and growth potential. This is exactly what contributes to the key stakeholder’s decision to either cut hours and reduce payroll or even completely close the doors on brick-and-mortar and other online retail operations all together, giving into the “Amazon effect.”

Increase in omnichannel operations

Increased omni-channel capabilities mean increased complexity and activity. The window of order orchestration is getting shorter and shorter to meet customer expectations and provide the positive buying experiences customers expect. Combined with holiday shipping and continued e-commerce growth, the increase in need for labor programs will continue to be a strategic issue that logistics and human capital professionals will need to address as part of the recruitment, retention, and compensation programs of the future to compete.

In conclusion, whether you’re finding or retaining warehouse workers, the costs add up from departure costs, to additional advertising and recruiting and new training once onboard. Make it easier on your entire workforce and consider a warehouse incentive program. The programs have been proven to be a popular option for improving productivity and retention by as much at 15 to 30 percent, with labor expense ranging from 20 to 70 percent of a company’s operational costs [2], every company should avoid absorbing those costs by any means necessary.


Tom Stretar_headshotTom Stretar is Vice President and Labor Management Practice Leader at enVista, bringing more than 20 years of supply chain consulting experience in marketing, sales and implementation of complex supply chain improvement programs. Tom joined the enVista team in June 2009, following more than 16 years of service at JDA (formerly RedPrairie Corporation). During Tom’s career, he has personally developed or managed the delivery of more than 250 labor performance management programs across North America and Australia and is Green Belt certified in Lean Six Sigma. 





[1] Economic News Release: Job Openings and Labor Turnover, Bureau of Labor Statistics, DECEMBER 2017 https://www.bls.gov/news.release/jolts.nr0.htm

[2] Economic News Release: Employer Costs for Employee Compensation, Bureau of Labor Statistics, September 2017 https://www.bls.gov/news.release/ecec.nr0.htm



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