How To Measure And Share Warehouse Productivity To Get Results

One of the most commonly asked operational questions asked by clients is “what can we do to drive down labor costs?”.  Labor usually makes up 50%, or more, of the total cost of operating a distribution center when you consider direct and indirect labor, occupancy costs, and packaging materials. 

Given this high cost, it is no wonder that it is one of the first issues raised during an operations assessment. Now more than ever, with rising wages and quality labor increasingly harder to come by, it is paramount to get the most from your current labor force.

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How Well Is Your Warehouse Treating Your Customers?

It never ceases to amaze me how companies will spend untold time and money to source product and find someone to buy it and then provide poor enough fulfillment services that the customer never comes back. If you consider the cost of acquiring a customer, it makes sense to me that you would do everything in your power to keep them.

One situation to consider is when an error is made in shipping an order to your customer. There is the obvious cost of correcting the error including the numerous phone calls, extra warehouse expense to repack the order, freight cost to reship it, the packaging materials required, etc. These costs can amount to $15 – $30 or higher depending on your internal costs. This cost of correcting an error is significant but the cost of losing a potential life long customer is huge.

Another problem area centers on not meeting customer’s expectations for timely delivery. If you guarantee same day delivery or delivery within 7 days, you had better meet those expectations. Customers today not only have a very quick fuse when it comes to forgiveness for mistreatment, unless you have a corner on a particular item, they can and will go elsewhere. Thanks to the Internet, you are exposed to unlimited competition in many cases.

If you consider the statistics indicating that only a fraction of those who buy from you for the first time will come back, it makes it even more important to take good care of them the first time. If you combine those who will statistically not buy again along with those who you upset because of making an error or missing a promised delivery date, you can quickly see the importance of making sure the fulfillment function delivers on your company’s promise of customer service.
 
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