I heard an interesting speech by the director of logistics at a consumer goods company at the S&OP Innovation Summit. Like many companies, this company has highly-seasonal demand. To meet this demand at the warehouse, the company relies extensively on temporary workers. This is a story of how this warehouse went from a highly ineffective process for sourcing temporary labor to a highly-productive process.
Before the company improved its hiring process, it had turnover of about 50 percent among temp workers. Workers who struggled to do what was expected of them were not happy with the work. It was also an environment where new employees worked for two weeks with trainers, and yet after four weeks on the job, the pickers were still only 95 percent effective.
After improving the hiring process, the turnover rate fell to just 6 percent. Further, in the improved process, the new hires spent only two days with trainers and yet got to 95 percent picking efficiency in less than two weeks.
What was the secret? This company established a good partnership with a temporary employment agency that specialized in logistics; it developed an effective test that potential hires needed to pass before being hired; and it worked to continuously refine the test. Because the company did not have to provide as much lead time to train workers and make them effective, and because of the much lower turnover rate, it could hire fewer workers closer to when they were actually needed. In short, there were substantial payroll savings associated with the improved process.
The director pointed out that this was a win/win for the temp agency as well. It cost the temp agency about $100 for a background test and $50 for a drug test. When turnover was 50 percent, that was a big investment for the temp agency. With a low turnover, the agency achieved greater profits.
The company moved to testing that was much more skills based. At the temp agency, prospective employees would actually be tested on their ability to do an RF region scan (to certify they were in the right zone), followed by bin location scan (to make sure they were selecting the right product), and a product scan (to ensure they selected the correct number of items). The handheld scanner was programmed to score them on whether the right scans were made and how long it took them to do the scans. If a prospective employee could use the RF scanner in multiple order picking scenarios, close orders correctly, and indicate to the WMS pick discrepancies (like a slot not having enough product), the company was confident that worker would be productive within a few days.
This director took inputs from his workers on what questions they felt were important to ask. He also emphasized the importance of communicating effectively with the temp agency on which pickers were working out. Finally, he stressed how important it was to take a data-driven analytic perspective to revising the test, over and over again, until it had high predictive value.