Happy Holidays! To most of the United States, those words bring thoughts of family and fun. However, for those of us in distribution, they can bring a sense of dread for the massive rush of product that must flow through the supply chain to meet insatiable demands. This rush is also commonly referred to as “Peak.” This year looks to be an especially challenging one, and I’d like to share some thoughts on how to best manage it. Anyone in retail distribution is likely smack in the middle of Peak and will be so until at least Thanksgiving, or early January if in e-commerce.
This year’s Peak looks to be especially challenging. The US economy continues to grow nicely, exceeding 4% last quarter, and is projected to continue this quarter. Consumers are feeling flush from tax cuts, and the strong economy is finally putting upward pressure on wages. Unemployment is at a 50-year low at 3.7%. This year retailers expect to hire 700,000 seasonal workers. In 2017, Amazon alone hired 120,000 seasonal employees, and I expect this year it will be even more. To handle Peak, Amazon has moved their minimum wage to $15 in order to attract the headcount they need. The ripple effect from this will impact all companies hiring seasonal labor.
To compete for this much-needed labor, you will need to get creative. Drawing from my experience managing the labor at several mega-retailer distribution centers, I’ve learned the following lessons:
1. Temporary Labor
Temporary workers have tons of options. If you are too frugal with wages, you will not get the labor you need. When you are at the lower end of the economic ladder, 50 cents more an hour can make a real difference, so temps will often take the highest wage they can find. Work with your staffing agency to make sure you are competitive with your wages.
Since work flow can be very dynamic, you may need 10 temps on Monday but 50 on Wednesday. You need to track your no-show rate and plan accordingly. During tight labor markets, no-shows can be 30% or more. You need to take this into consideration when planning your staffing. If you need 50 workers and your no show rate is 30%, you will actually need to order 72 workers.
In general, seasonal temps will have lower productivity levels than your core team, because they do not understand your work flow like your more experienced staff. A general rule of thumb is that they will perform at 50-60% of the level of your core team. You will need to take this lower level of productivity into account when calculating your staffing needs, otherwise you will be left short-handed and might miss ship times.
Money is important, but even more so is respect. Seasonal workers are invaluable to your business success, so treat them with the respect they deserve. A positive work environment will help attract good labor. Take the time to say hello, call the temps by name, and show them you appreciate the work that they are doing for you.
Good luck this season and Happy Holidays!