Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.
Distribution center managers often feel like they're caught between two inexorable forces: rising demand for fast, accurate order fulfillment and a shrinking labor pool that makes it hard to find employees to do the work.
While there's no shortage of vendors who claim to have the perfect solution to the problem—whether it's smartphone apps, mobile robots, or the Internet of Things—those fixes are still a ways off. In the meantime, DCs must rely on human employees to provide the lightning-fast fulfillment services that e-tailers like Amazon.com have conditioned consumers to expect.
As any DC manager can attest, finding, keeping, and getting the most from those workers can be a serious challenge. So to uncover the best practices in warehouse labor management, DC Velocity teamed up with the Dedham, Mass.-based consultancy ARC Advisory Group to conduct a survey that tracks which labor management strategies are the most popular with DC managers and how they're being applied in day-to-day operations.
The study, which is part of an ongoing series of research projects by DCV and ARC, follows a similar survey we conducted last year [see
in our July 2017 issue]. That survey revealed that most DC managers struggled to keep worker turnover below 10 percent. And the results showed that while there is no silver bullet for labor retention, there were certain management practices that were common to the top-performing warehouse operations. So in 2018, we returned to this topic and dug deep into best practices in warehouse management to identify strategies that could help you cut turnover and boost DC performance. (See "About the study" sidebar for details and demographic information on the survey respondents.)
A GOOD EMPLOYEE IS HARD TO FIND
Our survey results showed that it's not your imagination—it really is harder to find employees than it was five years ago. When respondents were asked how many applicants they got per open job, the most common response was two to five people. That represented a significant drop from 2013, when respondents said they typically had six to 10 applicants for every job. (See Exhibit 1.)
In response to that dearth of applicants, employers are lowering their standards for the warehouse workers they hire. For example, many warehouse managers have eased back on their requirement for previous warehouse experience. Nearly half (49.5 percent) of respondents said they are more likely to hire a worker with no prior experience today than they were five years ago, while just 17.2 percent said they are less likely to do so. (See Exhibit 2.) As for the level of experience of workers currently on the DC floor, 61.2 percent of respondents said less than half their new hires had warehouse experience. (See Exhibit 3.)
Another measure of how hiring standards in the DC are changing is the rising proportion of warehouses that are willing to hire workers with a criminal record. While only 37.7 percent of respondents said they hire workers with a record, it's clear that attitudes are starting to change. Fully half of respondents said they were more likely to hire an employee with a record today than they were five years ago, while just 3.8 percent said they were less likely to do so.
FOUR TECHNIQUES USED IN LOW-TURNOVER DCs
Keeping a warehouse running smoothly in a tight labor market is a challenging task, so employers are looking for the best way to retain their top workers. Our previous research has shown that there is no "secret sauce" for labor retention, but that warehouses with low turnover rates often share some common business management practices.
"What we found last year is that management matters, whether it's for safety, labor retention, being productive, or doing accurate work," said survey author Steve Banker, vice president of supply chain services at ARC, in an interview."People who are good at those things tended to also do things like conduct 360-degree reviews and run continuous improvement programs. Those efforts to manage and engage people were what made them successful."
For this year's survey, the researchers returned to that central point, digging deeper to identify how closely those common management practices are followed and to highlight differences in how they are applied. Specifically, they examined four management strategies and asked respondents whether they deployed those techniques. (While the survey did not tie specific management practices to improvements in labor retention, it did find a statistical correlation between organizations that follow the practices and those that reported lower turnover.) Those practices are as follows:
1. The 360-degree review. Unlike a traditional performance review, which relies almost exclusively on feedback from the worker's supervisor, the 360-degree review includes input not just from the worker's boss but from his or her colleagues and their assistants as well.
More than 51 percent of respondents to our survey said they practice 360-degree reviews, soliciting feedback from a variety of sources on an employee's performance in areas like communication (92.5 percent), teamwork (90.6 percent), leadership (83 percent), collaboration (81.1 percent), and decision-making (67.9 percent).
One of the keys to conducting a successful 360-degree review is promising anonymity to floor-level employees when asking them to evaluate their superiors. "Without keeping it anonymous, you're probably not going to get as much out of it as if you did," Banker said. And indeed, 92.3 percent of respondents who conducted such reviews said they kept the responses confidential.
2. Training managers on effective coaching techniques.
While there may be no one right way to coach employees, there are plenty of wrong ways—failing to provide timely feedback, yelling, and offering vague (or unhelpful) criticism, to name a few. To help keep coaching sessions from going off track, nearly three-quarters (73.5 percent) of respondents said they provide training to managers on how to give effective performance feedback. In fact, they consider this training so important that most companies provide it repeatedly, offering instruction to managers when they are hired or promoted (44.6 percent), through a refresher course every year (42.2 percent), and after a performance review if necessary (30.1 percent).
As for what's typically covered in the training, topics range from the timing of the feedback to the clarity of the content to the method of presentation. In many cases, the sessions also included a rundown on the facility's standard operating procedures (SOPs). (See Exhibit 4.)
3. Developing objective performance measures. While it's common practice in DCs to measure employees' performance, the researchers found there is no clear agreement on the best way to do it.
For instance, when it came to the basis for the feedback, the survey found a wide variety of industry practices. Nearly 51 percent of respondents said they based their feedback on whether employees were following "fully documented" SOPs. But plenty of others were forced to rely on murkier standards: The remaining 49 percent said their assessments were based on SOPs they described as "mostly" or "poorly" documented.
Likewise, while 46.8 percent of respondents based employment feedback on labor standards set through engineered standards, 41.5 percent said they set labor standards "we think are fair," and 11.7 percent had no labor standards whatsoever. Companies also varied in their ability to document the feedback they gave employees, with 51.1 percent saying the feedback is not consistently recorded.
4. Continuous improvement.
Sometimes known as Lean or Kaizen initiatives, continuous improvement programs are ongoing efforts to streamline workflows and eliminate inefficiencies. They typically follow a four-step process, where teams identify opportunities, plan improvements, execute changes, and review their impact—then start over again.
While the practice is common in corporate America, our survey found that it is applied sporadically in warehouse logistics. When we asked respondents how many of their floor-level employees engaged in continuous improvement projects, the answers were all over the map. At the high end of the range were the 27 percent who said more than 20 percent of their employees participated in this type of program. At the other end of the spectrum, 25.3 percent reported that less than 5 percent of their workers were involved in continuous improvement efforts, and 13.5 percent said they didn't practice continuous improvement at all. (See Exhibit 5.)
The results of the 2018 ARC and DCV labor management survey provide a yardstick on how the industry is applying common management practices in the face of growing labor recruitment and retention challenges.
The study documented specific management practices and provided a measure of where logistics industry leaders are applying them well and where they could use improvement. The results revealed that some practices—such as the 360-degree review and training managers on proper coaching techniques—are widely followed, while other techniques—including developing objective performance standards and continuous improvement—are deployed only occasionally. Further study will be required to track the impact of these trends on companies' success in reducing turnover.
About the study
The "Best Practices in Warehouse Labor Management" survey was conducted by ARC Advisory Group in conjunction with DC Velocity. Steve Banker, vice president of supply chain services at ARC, oversaw the research and compiled the results. The study was conducted via an online poll in January and February of 2018, with a total of 134 industry executives completing the 21-question survey.
Of those respondents, 54 percent had a title of director, vice president, or higher. The majority were from North America. The warehouses profiled in the study were operated by businesses in a variety of industries, with more than half coming from the retail, third-party logistics, or distribution sectors. (See Exhibit 7.)
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."