The question is, how will today’s organizations that order pick, pack, ship, and assemble products be impacted by a new minimum wage increase? Seattle, Washington has recently passed the record-setting increase of its minimum wage rates. It’s a trend that’s repeating across the country. Comments range from ridicule to praise.
So why do I say this is no problem? If we are able to identify the failed processes and systems in our order picking, packing, shipping and assembly systems and successfully fix them, then we will generate more profitability and as a result be able to provide such an increase! Let us not forget, history proves this!
Too often, I’ve seen warehouse and distribution centers utilize minimum wage employees as “instant fixes”. This does not solve the problem. Comments such as, “Is there a problem getting orders out? Get more sneakers on it. Inventory totally out of whack? Let’s get a sea of counters out there. Error rates too high? Let’s bring in the clowns… I mean the checkers to check the checkers”… you get the idea. Too often, we see warehouse and distribution centers utilize minimum wage employees to fix broken processes.
Minimum wage and low wage labor (temps and part timers) are thrown into situations to fix broken processes and poor system designs. Flooding zones with people to fix pick rates, errors and cycle counting is like putting a band aid on a cut artery … it just doesn’t work!
Why doesn’t it work? Using this tsunami of labor creates even more costs and chaos. Look at the time and costs for recruiting, interviewing, hiring, salary, training, re-training and calling out sick/missing work. You often get what you pay for when it comes to work ethic and reliability. If you are having problems with your full time staff, odds are the problems are systemic and your minimum wage employees (no matter how many you have) can’t possibly overcome such bad processes and systems.
History says the increase will be a good thing.
Now let’s take a look at history. Henry Ford in 1913, just over 100 years ago, was successful at doubling his employee’s wages at his new automated factory. When the country’s average wage was under $2.25 a day, Henry Ford paid $5.00 per day. People from all over the country flocked to Detroit, MI hoping to work at the Ford factory.
Only the best of the best were hired. The pressure to perform was great, but the rewards were equally high for everyone.
The success of this strategy is legendary, and a major part of the growth was that of the middle class. Henry Ford’s workers could afford the fruits of their labor. In fact, the sticker price of the brand new Model T went from $825 per car to under $450 per car just a few years later because efficiencies and volumes increased and costs plummeted. Production increased from 19,000 cars in 1910, to 34,500 in 1911, to a staggering 78,440 cars in 1912.
Ford created his own market. Both the supply and demand were part of his ingenious plan. Wages doubled and sales quadrupled.
Are we suggesting every manufacturer and distribution center double their payroll? No, but when you take a real look at minimum wage costs and at your lower paid employees, you should be assessing their real value with good, streamlined processes and equipment.
Investing In Your People
Order picking operators – good order picking operators can make or break your profitability. I’ve seen organizations use a variety of strategies. Regardless of your business model and industry, day in and day out organizations that “invest in their people” are the most successful.
By analyzing your operational model costs: labor, inventory, space, errors, customer acquisition, customer retention, damage, mis-ships, etc., and thereby cross referencing it with human variables such as labor seasonality, training, shrinkage, injuries, productivity, etc., the case is often made that having a smaller, better, more highly motivated order picking workforce is by far the most cost effective.
Example: Take the metrics from the top 10% of your order pickers’ performance and project those numbers to all of your order pickers. Odds are you are looking and drooling over numbers that you could only see in your dreams. So now that we understand the goal, the question is how do we achieve such a goal?
Review the differences in performance. Sometimes it’s due to processes and that can be fixed. Many times, however, it’s just individual desire and attitude. I was recently in a facility and in minutes saw four out of the approximately twenty pickers who were the rock stars. These employees clearly stood out. These guys hustled and loved what they did.
You can attempt to hire such an elite group, but you can’t see what your employees can do until after you’ve hired them. Upgrade your processes and equipment to allow your average performers to increase their productivity. Look to improve your techniques for finding gaps and inefficiencies. Once accomplished, you can determine which processes need to be automated.
Using Improved Warehouse Processes & Simple Automation
Find the most efficient way of turning every person into a rock star and provide a fast return on investment. For example, simple automation such as horizontal carousel systems have historically reduced up to 2/3 the labor required in manual picking systems while hitting up to 450 lines per hour/per operator.
Another example is utilizing a robotic automated storage and retrieval system (ASRS) which is totally scalable and can handle up to 10,000 SKUs, 5,000 orders per day, 600 lines/operator/hour and require as few as 5-6 employees (order picking, packing and shipping processes) in under 825 square feet of warehouse space. This is efficiency personified!
This is efficiency personified!…again??
So the answer is yes, these types of warehouse processes and performance numbers help make this $20 minimum wage an issue that is acceptable and profitable … especially if, like Henry Ford, your product is one that your employees consume.
Integrated Systems Design – ISD is a leading consultant, designer, manufacturer and integrator for order picking, order packaging, order shipping and manufacturing assembly operations for warehousing, manufacturing, distributing and retailing organizations in North America.
Are your processes, systems and operations able to handle a $20 minimum wage? We offer a free consultation to help you determine which improvements will enable you to. For more information please contact ISD at 248-668-8250 or email sales@isddd.com