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Consumer Goods Logistics Blog


Warehouse Labor: The 'Real' Cost of Associate Turnover

Published by Veronica Donchez on May 21, 2014

$7,000 dollars to replace a warehouse worker.

Sound like a lot? Well, that could be the low end. 

Calculating the traceable costs, the cost of turnover for warehouse workers can reach 25% of salary. Using an average salary for warehouse workers of $28,000.00 (according to Salary.com), $7,000 is about where you end up. But some experts calculate the real costs, when you factor in lost productivity and other indirect impacts, at 150% of salary. Either way, turnover in the warehouse can be a major drain on profits. 

What are some of the costs that result from warehouse worker turnover? 

  • Departure costs such as exit interviews, severance pay and increased unemployment taxes.
  • Supplementary costs for overtime to replace lost time, overtime or temp staffing.
  • Additional advertising, recruitment fees, and screening costs.
  • Drug testing, background checks and possible relocation costs.
  • Orientation training, certifications, uniforms and informational literature.

Other costs that are tougher to track, but no less real, include:

  • Lost productivity, since some exiting associates may finish their last days with a reduced work ethic and motivation. 
  • Dealing with the open position while assigning necessary work to other associates.
  • Training that consumes the time of busy supervisors.
  • Reduced quality and efficiency during the early stages of a new associate's tenure.

Holding on to warehouse workers

Wall Street Journal's guide on how to reduce associate turnover offers the following tips, which certainly apply to logistics. 

Hire the right people from the start. Most experts agree this is the single best way to reduce turnover. Vet candidates carefully, not just to ensure they have the right skills but also that they fit well with the company culture, managers and co-workers. As we like to say at KANE – hire for attitude, train for skill.

Set the right compensation and benefits package. Work with Human Resources to get current data on industry pay packages. Warehouse workers will follow the money.

Set fair expectations and communicate frequently about progress. The right systems enable associates to track their own progress against productivity goals.

Recognize achievement. Awards, recognition and praise might just be the single most cost-effective way to maintain a happy, productive work force. Simple, one-to-one praise at the completion of a project and peer-recognition programs are all ways to inject some positive feedback.

Outline career paths. Associates want to know where they could be headed and how they can get there.

Outsourcing workforce management

Of course, in an outsourced environment, companies can leave the details of hiring, training, and benefits administration to an experienced third party logistics company for whom logistics workforce management is a core competency. These 3PLs can maintain or improve operational quality while reducing labor costs. 

Meanwhile, shippers can focus on their own core competencies and leave behind the burden of:

  • Onerous labor costs, including salaries, benefits, training, liability, payroll administration.
  • Administrative burden, including the significant time required to hire, train, and manage this large labor force.
  • Variability and dealing with hard-to-predict volume surges, which wreak havoc on labor planning.   
  • Systems investments, such as both warehouse management and warehouse labor management systems.

Remember, when it comes to managing a logistics labor force, it's a lot more expensive to lose them, than to invest the time and money to hire the right people and keep them happy.  

Filed under: CPG Logistics| Logistics Labor Management