Mitigating Labor/Space and
Meeting ROI hurdles
A central challenge with the
return of sales is the optimal
use of the resources of space,
people and technology. This
pressure, cited by more than
60 percent of today’s supply
chain managers, is pushing
them to improve their warehouse operations by increasing flexibility, realigning assets
and improving labor efficiency.
—Bob Heaney, senior research analyst,
Supply Chain Management, at
etween October and November 2010, Aberdeen Group surveyed 158 companies, documenting their processes and capabilities regarding warehouse management excellence and
producing an ROI Investment Matrix to detail areas of focus and
payback expectations across a broad spectrum of options to improve warehouse operations, capacity and efficiency.
It’s clear that among the companies surveyed, there is a focus on improving
the efficiency and performance level of resources (on average, over 45 percent
of respondents cite the need to support increased sales without adding
labor/space resources) as the top pressure.
Today’s warehouse environment is clouded with an array of functional areas
to manage, imbalances of volumes and staffing mix, and capacity restrictions of
process and equipment—which all hamper the ability of the workforce to be
efficient and productive. To correctly explore the options for bolstering capac-
ity, resource allocation and efficiency companies should:
• Fully assess warehouse capacity. Improve the overall labor efficiencies under
constrained operating budgets, balancing part-time and full-time labor, and maxi-
mizing people/process/technology in both the peaks and valleys of the business.
• Review capacity, technological investment hurdles and ROI guidelines.
What are the various cost/benefit tradeoffs one must examine in their warehouse and fulfillment operations? Beyond the ROI guidelines for solution selection (across automation, software and outsourcing) an assessment is needed to
define the scope and scale of internal capacity with and without added investment. If internal capacity is constrained, look to the use of overflow and 3PL
facilities to handle capacity constraints in labor, inventory and space—and balance all options against each other.
• Consider material handling solutions like conveyors, unit sortation and so
on. While there is a steeper investment required to justify these solutions, they
can be very beneficial and can sustain considerable growth in throughput volume without the need to add to headcount.
In 2011, expect to see more investments in automation like auto ID and material handling solutions and a return to the basics of efficient labor management.
A key step in mitigating labor/space capacity and meeting ROI hurdles is in
maximizing labor allocation and productivity. About 70 percent of all companies are using labor management solutions and about half of the companies use
labor management solutions in more than one functional area. Expect even
more companies to focus on non-picking areas in 2011.