The Effects of High Employee Turnover on Warehouse Operations

Tips to Quantify and Resolve the High Cost of Employee Turnover in Warehouse Operations

by Rick Williams

In an earlier LinkedIn post, I listed the Four Foundational Technologies needed for running a top small parcel/LTL distribution center (DC):

• Barcoding – implemented for both products and pick locations.
• A solid and effective WMS that exceeds your current requirements.
• Effective conveyor and WCS control systems to quickly move packages and shipments through your warehouse.
• A scalable multi-carrier shipping software system that can handle 25% more shipping capacity than last year’s peak shipping day.

While these four technologies lay the groundwork for high-performance order fulfillment operations, many more pieces must run in tandem to operate an effective warehouse operation. Managing a great distribution center, particularly in the eCommerce space, is like trying to win the Super Bowl. It requires the support of an entire organization − the players, the coaches, and the front office, to succeed.

I can think of more than a hundred ways to improve a warehouse’s productivity and reduce shipping costs. Still, every one of these can be thrown right out the window if your warehouse operations are not led by managers that provide effective employee training and honestly care about their team.

Identify the Reasons Your Employees are Leaving

To gauge the effectiveness and strength of your warehouse, begin by analyzing your employee turnover rate (ETR). When meeting with executives, both now and before COVID and the “Great Resignation,” one of the most common pain points I would hear is, “We have trouble retaining our warehouse staff.” To better understand if you have an employee turnover problem, dig into these four questions:

• What is my current ETR?
• Are senior warehouse staff members leaving?
• Are people with less than six months on the job leaving?
• Why are they leaving?
• Where are they going?

Your ETR should be calculated and distributed monthly amongst your senior management to put it front and center how many people worked here last month compared to this month, and of those no longer on the team, how many left or were fired. These numbers should then be combined and reviewed quarterly and annually to identify trends and potential causes for increases/decreases.

Calculate the Cost of Employee Turnover

The cost of turnover from lost/fired/replaced employees is generally accepted as a minimum of 6 months’ compensation. Using a $30,000 average warehouse worker salary ($15.00/hr.) as a minimum hourly wage, what is warehouse turnover costing you?

I’ve visited warehouse operations where a 50% to 100% turnover rate per year was deemed to be “normal.”  Even if you use an example company with just 20 warehouse employees, these levels of turnover cost these companies somewhere between $150,000 and $300,000 per year.
 
Hopefully, you and your team are doing much better than these examples. Few business entities or departments can be highly effective and consistently profitable with a 50% plus turnover rate.
 
Rick Williams, president and CEO of CLS, is a logistics expert with 40 years of experience in parcel shipping and supply chain operations and technology. CLS helps companies improve warehouse productivity by combining streamlined workflows with multi-carrier shipping software, integrated pack/ship stations, data collection, and more.