Warehouse Productivity is Declining: Blame it on E-commerce

By Ryan Birtwell, Chief Operating Officer, Lucas Systems

 

Productivity dropped by 7.6 percent in the warehousing and storage industry last year, according to a news release issued May 23 by the Bureau of Labor Statistics. Digging deeper into the numbers shows that the government figures don’t paint an accurate picture of what is happening in the warehousing and distribution space. In fact, the apparent decline in productivity is a function of the increasing share of ecommerce orders flowing out of warehouses and DCs, rather than a true reflection of labor productivity rates. Here’s why.

Everyone involved in distribution understands that it takes more labor to pick and ship 25 pieces for individual consumers than it does to pick one case of 25 for a single store. So as ecommerce increases as a percent of total retail sales, each picking is increasing as a percent of DC activity. Therefore, the number of labor hours required to ship the same value of goods is increasing. And that’s exactly how BLS measures productivity: output per labor hour.

In contrast to the BLS measure of productivity, warehouse productivity measured in lines picked per hour is steadily rising as DCs adapt their processes and invest in new technologies to address the ecommerce transition. On the one hand, more and more DCs are adopting proven productivity tools like voice picking or slotting. For example, voice picking usage has increased to 25 percent over the last decade, according to last year’s WERC DC Measures Survey.

Beyond the tried and true technologies, warehouses and DCs are starting to benefit from a raft of new technologies including automated mobile robots (AMRs) and other digital automation solutions such as machine learning and math-based work optimization engines and planning tools. These new technology investments are dramatically increasing warehouse productivity in lines per hour. But they will not be enough to make up for the growing demand for workers to pick, pack and ship orders. (Lucas will be discussing how these robotic and digital tools address productivity challenges in an upcoming webinar).

By our estimates, the growth in ecommerce sales—from roughly 5.8% of total retail sales in 2013 to 10.2% today—is driving a 10% annual increase in demand for warehouse labor (this is consistent with the BLS figures). Through 2021, ecommerce is expected to account for 13.7% of retail sales, further driving demand for workers.

Even if AMRs reduce total labor requirements by 10 percent (as predicted by Gartner), the industry will still need 20 percent more workers in 2021 than it employs today. At most, automation (robotic and digital) is providing a brake on employment growth. Warehouse and DC operators will continue to add jobs at a steady clip for the foreseeable future, even as they adopt technology to make every worker (and manager) more productive.

NOTE: The BLS labor and productivity data is for companies whose primary activity is listed as warehousing and storage services, NAICS industry code 493 (and sub-categories), essentially third party logistics companies. Although the data do not cover the warehousing and distribution operations of companies whose primary business activity is retail, ecommerce, or wholesale distribution, the 3PL industry is a good representation for the wider warehousing and distribution space. The ecommerce affect outlined here is being experienced across virtually every industry that distributes goods, including retail, manufacturing and traditional B2B distribution.

 

New M&R Software Innovations Keep Fleet Managers In Check

By Matt Hendrix, senior director of fleet services, Fleet Advantage

 

Over the last twelve to twenty-four months, it seems as though topics such as autonomous driving and ELD mandates have flooded the news headlines for the fleet transportation industry. And deservedly so, these are no doubt topical, important issues. However, in running your fleet day-to-day, understanding the evolution of maintenance and repair (M&R) issues continues to be right up there in level of importance.

M&R is critical because it significantly impacts every type of operation and having improper management of M&R can drastically erode profits from the bottom line, and the older the truck, the costlier it gets.

According to a recent report on lifecycle strategy, M&R costs on a 2012 sleeper model-year total $23,100, compared with $2,070 on a new, 2019 model-year truck, providing a savings of $21,030. 

A shorter lifecycle produces long-term savings beyond the first-year. When fleets adopt a three-year lifecycle for their trucks, replacing with new technology in year four, they realize a savings of $42,830 in M&R calculated in years four through seven when compared to a fleet driving the same truck for the full seven years.

More Trucks Equals More M&R Challenges

More fleet managers are realizing these numbers, and they’re now placing a higher emphasis on M&R strategies. According to a recent survey, 40% of respondents listed M&R as their top motivating factor for acquiring new trucks. However, the survey shows that costs are not the only concern fleets have regarding maintenance; 26.7% also believe a safe, well-maintained truck is most beneficial in driver recruitment and retention – critical since the driver shortage remains a difficult issue for many fleet and transportation companies.

This issue will only grow in the coming years, as fleets look to either replace trucks or add to their mix to handle more demand for the economy. FTR reports North American Class-8 orders for October continued to surge, registering at 43,000 that month.  ACT Research’s numbers show 43,600 Class 8 trucks in October.

With the demand for shipping and transporting goods remaining healthy, and more trucks coming online in the coming months, how can innovative software and data analytics help fleets and transportation companies better manage M&R activities?

Innovative M&R Software Resources

Today’s leading M&R software now enables private fleets and for-hire carriers to leverage intuitive dashboards instead of complicated spreadsheets and allows users to create their own custom view with the information that interests them most: vehicle performance for fleet managers, M&R data for repair personnel, and even custom financial models for the C-level.

Innovations in M&R software now allow fleets to manage their entire operations, with views on everything from operational costs, M&R data, replacement vehicle savings, vehicle servicing and histories; and these software platforms are now mobile-responsive for on-the-go fleet management.

Today’s new M&R software can track expenses for a fleet in every aspect of the truck’s requirements, such as expenditures that include tires, tubes, liners and valves; preventative maintenance measures; brakes; expendable items; exhaust systems; fuel systems; and more.

Heavy-duty trucks must be well-maintained throughout the year and be prepared for all weather patterns. It’s important to take every precaution necessary, particularly with M&R to ensure the safety of drivers operating the trucks as well as other motorists on the roads. As such, it would be wise for fleets and for-hire carriers to pay particularly close attention to the latest software innovations that leverage fleet utilization data and analytics to track all M&R activity to help ensure each truck is operating at a premium level. This will not only ensure safety for all on the road, it will significantly help the bottom line as well.

 

Matt Hendrix, CTP is the Senior Director of Fleet Services at Fleet Advantage, which just recently unveiled its ATLAAS Unified fleet management software with key M&R performance metrics and tracking. Matt has over 20 years of mechanical, operational and fleet management experience and provides fleet monitoring, technical expertise and oversees compliance for Fleet Advantage clients. For more information visit www.FleetAdvantage.com.