The Best Tactics for Retaining Warehouse Workers

The seasonal surge is upon us.  Hiring and retaining workers is top of mind for many managers this time of year. And it should be, there are signs of a looming warehouse labor shortage.  ARC did survey-based research focused on what tactics can be used to improve warehouse performance.  We took a close look at what techniques are most effective in retaining warehouse workers.

Labor is the biggest operational cost in most warehouses, and the expenses associated with high turnover – like recruiting, hiring, and training new workers – add up quickly when turnover is high.

In ARC’s survey of warehouse performance – conducted  in conjunction with DC Velocity – we found that warehouse’s track record in controlling turnover lagged well behind their performance in other critical areas – like safety, service, and productivity.

Given the drag that high turnover can have on a warehouse operation, we took a close look at the problem of retaining warehouse workers.  What we found was dismal indeed. When respondents were asked about their operation’s turnover rate, the majority of the answers were in the double digits. Nearly one-third (29.5 percent) reported turnover of between 10 and 25 percent, and an almost equal proportion (29 percent) reported turnover of between 25 and 100 percent. At the bottom of the scale, 2.3 percent reported turnover of over 100 percent per year.

The picture was even gloomier when it came to turnover among temporary workers (temps are considered to have “turned over” if they decide to leave before the end of the full period they could have worked). When asked about their temporary labor “churn,” fewer than 30 percent of respondents reported turnover rates of under 10 percent. Some 30 percent reported turnover of between 10 and 50 percent, and 22.5 percent reported turnover of between 50 and 100 percent. And that wasn’t even the bottom of the scale: More than 10 percent of respondents reported that turnover among temporary workers exceeded 100 percent per year.

Our survey also offered some insight into the productivity loss associated with that turnover. When asked how long it took to bring a new employee up to speed, only 28.5 percent of respondents said they could do it in under a month. Another 43 percent said it took one to two months of training, while 20.9 percent said it took two to three months. The remainder said the process required more than three months.

It’s worth noting that the big distribution centers have a harder time retaining workers than their smaller counterparts do. Among companies with over 200 employees, only 28 percent of respondents reported employee turnover of less than 10 percent. Among companies with less than 25 employees, by contrast, nearly half of the respondents (46 percent) reported sub-10-percent turnover rates.

That raises the question of what these “stickier” warehouses are doing that leads to better retention. In an attempt to get some answers, the ARC team examined more than 20 factors that could logically be linked to retention. This proved to be a largely unrewarding exercise. Of all the attributes studied, just one turned out to have strong explanatory value to retention: providing a clean warehouse environment.

We had slightly better luck when we narrowed our focus to temp workers only, finding three factors that correlated with retention. They were: operating a small warehouse (fewer than 25 employees), having a high proportion of full-time employees (more than 90 percent of the total work force), and—counter-intuitively—avoiding employment agencies that specialize in warehousing.

But of course, retaining warehouse workers is counterproductive if it does not also improve customer service, support productivity, and ensure a safe warehouse environment.  Our study also looked at what contributes to warehouse performance across the board.

If you’d like a copy of this study, please contact Conrad Hanf at chanf@arcweb.com.