F. Curtis Barry & Company Blog

Many ecommerce fulfillment centers are largely dependent on manual labor. Direct and indirect labor costs generally make up 50% or more of the total cost per order (excluding outbound shipping). In many businesses as hourly wages have increased, overall DC productivity has remained flat resulting in an increased cost per unit produced (orders shipped, units picked, returns processed).

In many markets, even before the COVID crisis, the quality and availability of warehouse workers had decreased. High employee turnover in many distribution centers adds costs and instability to operations. The operations mantra is do more with the resources they have and to reduce cost per order.

Picking errors have a very high cost to your business in both actual costs, and in lower customer satisfaction, Life-Time Value (LTV) and customer retention. These aspects will erode your business’ profitability and customer and Net Promoter Scores (NPS).

A mis-pick or a picking error can occur for a variety of reasons:

• Picking a wrong item, in addition to, or instead of the correct item.
• Wrong quantity.
• Failure to pick an item.
• Picking an item that is unacceptable because of damage, incorrect labeling, or packaging.

This article discusses identifying the cost to your business and customer service as well as six ways to minimize picking errors.

Absolute productivity has declined in many companies because productivity has not kept up with the rate of increased costs over time. As an example, since the 1990s, labor rates have increased from around $5.00 per direct labor hour to $15.00. Some larger companies are paying $18.00 to $20.00 per hour in some markets.

We had a recent conversation with the President of a $65 million multichannel company. They had decided to replace their systems several years ago, using a disciplined approach to the evaluation and selection for their new warehouse management (WMS) solution. The problem is, two years later and they were still implementing the new WMS system.  Feedback from the President was that the implementation was so poor, that they had to switch integrator's part way through.

Without a doubt, Amazon is king of multi-distribution center processing and shipping.  In May 2019 industry sources estimated that Amazon shipped to 72% of the US population in one day from its 75 centers with 125,000 employees.  In 2019, Amazon shipped 3.5 billion packages, compared to FedEx at 3.4 billion.  Morgan Stanley expects Amazon to surpass UPS in 2022.

Developing a warehouse move plan is critical to successfully transitioning to a new facility. Here are key aspects to plan for months before your intended move in date.

Labor is continual challenge for most every business.  Outside pressures from other businesses, as well as state  governments are continually driving up labor costs.  The latest example is from the retailing giant Target.  On June 17^th, Target announced that it will permanently raise its minimum wage for workers by $2, to $15 per hour starting next month.  These cost increases will have a direct impact on your fulfillment cost per order. 

There is no end to the process of reducing labor effort, shortening processing times, making better use of warehouse space, costs and error reduction. To be competitive, have flexibility in fulfillment operations, and survive - a process of continuous process improvement is critical in warehouse and distribution activities today. 

In today’s challenging and competitive world, your success can hinge on whether your warehouse operations are productive, and effective, enough to meet your expectations and those of your customers. One way to gauge how effectively your warehouse operations are meeting those expectations is to conduct a warehouse operations assessment: a systematic review of the warehouse functions looking for possible improvements in efficiency and service.

Inventory management is a strategic issue that affects profitability and customer service. Additionally, many fulfillment centers are overstocked with slow-selling merchandise tying up valuable inventory locations. While an item’s inventory cost is the majority of the expense, it is only part of the costs incurred when you consider credit borrowing. labor and facility expenses to maintain and store inventory, plus lost opportunity costs should be considered when thinking about where to use cash elsewhere in the business.