Industry Talk

Regular Industry Development Updates, Opinions and Talking Points relating to Manufacturing, the Supply Chain and Logistics.

It’s time to address fulfilment’s productivity problem once and for all

The post-COVID era has been a rocky period for eCommerce fulfilment. Indeed, the spectre of the pandemic still looms large over the industry, visible in the scores of empty warehouses flanking our motorways.

eCommerce itself has largely reverted to its pre-pandemic (and undeniably positive) growth trajectory. The problem is that the fulfilment industry over-expanded based on flawed expectations of future eCommerce volumes, built around the false narrative of the ‘new normal’. As the pandemic did not permanently change everyone’s behaviour, many fulfilment providers have been left paying for vast amounts of excess space.

More pertinently, however, the frenzy of the pandemic-induced expansion helped to gloss over the industry’s longstanding problem with poor productivity. In many cases, COVID protocols made productivity much worse, but it didn’t matter so long as volumes continued to increase.

Now, however, the productivity question is back under the microscope following the UK Government’s decision to raise the National Minimum Wage by almost 10%, the largest ever increase since minimum wages were first introduced.


Better productivity is the antidote to increased labour costs

Thanks to the Government’s intervention, thousands of fulfilment industry workers will see their pay packets increase this month.

This is a big problem for their employers. No additional Government support is being offered to help them offset the additional labour costs. And having already increased prices due to two years of increased operating costs, fulfilment providers will be reluctant to ask their clients to shoulder the burden.

Realistically, the only way they can feasibly stomach this type of mass wage increase over the long term is by enhancing the productivity of the existing workforce – helping team members work smarter and more efficiently to avoid the need for extra hours or indeed, extra hires.


Staff retention is now a priority

There are multiple avenues fulfilment providers can pursue in search of productivity gains – from introducing better technology, to offering staff more training and skills development opportunities.

Underpinning everything, however, is the need to improve how team members are treated, particularly those in all-important warehouse roles.

Not only is the cost of retaining staff far lower than the cost of constantly replacing them, but team members who stick around are invariably more productive than those who churn. It takes time for human workers to learn the ropes, acquaint themselves with new technology, receive training and put their training into practice.

Unfortunately, with an annual industry churn rate of 37%, these productivity benefits are effectively out of reach to most fulfilment providers. Yet amazingly, they appear not to have gotten the message that change is urgently needed.


Squeezing employees will be counterproductive

Amazon is perhaps the most notorious for its poor warehouse practices, but the truth is that most fulfilment providers have responded to rising operating costs over the past few years by squeezing more and more out of their staff to try and glean productivity gains.

It hasn’t worked, and it would be a grave mistake to repeat the trick in response to the minimum wage hike. The industry is already facing an acute staff shortage; driving already overworked and demotivated teams to work even harder isn’t the answer to the productivity problem. Likewise, providers that treat their people poorly will see the cost of labour continue to rise until there’s no choice but to change strategy.


Productivity gains require a strong, positive company culture

Instead, fulfilment providers need to focus on improving working conditions, empowering humans in their roles (rather than making them subservient to robots and crude automated processes) and building a strong and positive company culture.

For example, we’re using gamification in the warehouse to boost productivity, creating fun leagues for our best pickers to compete in and rewarding the winners. In the coming months, we’ll be rolling out a rewards app that recognises strong performance and will ultimately make it possible for us to give out bonuses in an agile and responsive way.

The strategy is delivering for us because our warehouses are already vibrant, enjoyable places to work. Without the right company culture in place, similar initiatives would almost certainly fall on deaf ears or perhaps even make people fear for their job security.

For fulfilment providers looking to unlock productivity gains, it’s vital that they start with the core elements of job satisfaction. That means giving human workers more meaningful work, more manageable tasklists (no more walking miles are vast warehouses every day), more flexible hours, more job security, more training, less surveillance and more empowerment, and so on.

It sounds like a long list, but that’s because too many fulfilment providers have fallen short on the basics for too long. The good news is that change is not impossible, even for supertanker-sized organisations with poor reputations.


Time for change

Undoubtedly, the eCommerce fulfilment industry could have done without a Government-mandated wage hike following two years of post-COVID difficulties and ever-increasing operating costs.

Irrespective, the new minimum wage is here to stay, and that means improving productivity is now the only viable long-term strategy open to fulfilment providers. This is going to require significant shift in attitudes and behaviour towards employees – and it can’t come a moment too soon.