When jan/san distributors want their salespeople to work harder they offer incentives: cash bonuses, trips to exotic locales, recognition in front of their peers. Can this same strategy be used to motivate other members of the company?
Yes, with warehouse rewards, distributors can entice their pickers, fork-lift drivers and other warehouse staff to fill more orders during their shifts and also cut down on mistakes.
Based on a study conducted by ARC Advisory Group, 63 percent of respondents increased warehouse productivity between 10 and 30 percent during a two-year period by offering incentives. In addition, 13 percent of study respondents increased productivity by more than 30 percent during that same timeframe.
With more work getting done in a shift, distributors are able to significantly reduce overtime hours. Since workers are earning incentives on top of their base salary, they actually can earn the same amount of money as overtime, but not have to work the extra hours, says Jon Schreibfeder, president, Effective Inventory Management Inc., Coppell, Texas.
If distributors can get more productivity out of their workers, they may discover their warehouses are overstaffed. When less productive workers quit, distributors may not need to fill the vacancies. Distributors may also find that their warehouse workers won’t want the empty positions filled; instead they’ll take on the additional workload themselves for a chance to earn extra money, says Schreibfeder.
However, distributors should be cautious about taking the opposite approach. If there are too many bodies in the warehouse, find new jobs for them rather than let them go, says Steve Epner, founder of St. Louis-based Brown Smith Wallace Consulting Group and professor at St. Louis University.
“You celebrate the wins. You take the people who helped make this a success and spread that joy and enthusiasm to other parts of the company. Don’t cut them off,” he adds.
Getting rid of employees after improving productivity will breed distrust and discourage staff from working harder in the future. But rewarding them for their hard work will benefit everyone.
Incentives that encourage quick and accurate work will also result in reduced costs for distributors. For example, when the wrong order ships, distributors will have an upset customer that will most likely need to be credited; also a truck will have to be pulled out of service to pick up and deliver the new item, explains Epner.
“The cost of an error that gets out of the shipping dock can be anywhere from $200 to $1,000, just in the ramifications down the road for all the things that go wrong and all the things you have to do to make it up,” he says.
Errors in the warehouse lead to inaccurate quantities of products on shelves. Warehouses can never operate efficiently if stock is incorrect.
“If the inventory is not accurate you can’t run a good business. Period. End of story. Nothing else matters,” says Tom Schmid, vice president of operations for HP Products, Indianapolis. “Without inventory accuracy you don’t know what to buy, you don’t know what to stock, you don’t know what your customer needs.”
Incentives help cut down on the mistakes and encourage workers to strive for continuous improvement. HP Products has incentive-based goals that increase gradually from quarter to quarter to show real growth at the end of the year.
Incremental steps help keep goals realistic, adds Epner. If distributors ask for the highest goal immediately, workers won’t accept the program and metrics won’t change.
Incentive-based warehouses may be a change in company culture for distribution centers, but as long as goals are clear and feasible, warehouse workers should appreciate the opportunity to earn rewards for excelling at their jobs.
“Most people like to be rewarded,” says Epner. “Let’s face it, it makes them feel good.”
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