COVID + People + Mistakes = Lost $: The Right People Can Help

What did your workforce look like during the fourth quarter?

Taking a deep breath: Fourth quarter is over.

Or is it?

Your fourth-quarter woes could still be in peak mode due to excessive returns. In the article referenced below DC Velocity Survey: Retailer Mistakes Fuel Accelerated Returns,” you’ll see that 40 percent of consumers received an incorrect item through online purchasing. Four out of 10 customers! How is that acceptable? Amazon, Walmart, and Target are telling people to keep the wrong item instead of sending it back. Why? It’s cheaper!

But these mistakes have very real costs: the cost of the product, shipping (both ways), consumer opinion, and more. What can we do? In the fulfillment warehouse, voice over, pick-to-light, robots and other technologies are helping. But still, 40 percent!

In 2020, retailers started offering specials earlier to try to spread out demand from October through December instead of Thanksgiving to Christmas Eve. That helped but you still had these numbers of inefficiency and diminished client satisfaction. The article shows that this has a direct impact on that customer returning to that retailer in the future. What is that dollar value?

I believe the greatest percentage of this cost is directly attributable to poor labor. All the capital being spent on technology and then pennies saved on labor diminishes the expected and projected benefit of the technology.

I offer this statement for us to ponder: The technologies are only as good as the people operating them.

2020 saw the perfect storm of factors that led to an incredible decline in workforce numbers combined with explosive wage increases. One factor was a drastically reduced number of immigrants due to increased enforcement of immigration law and border control. COVID shutdowns and the news made people afraid to work. For some, the unemployment subsidy made it more lucrative to not work.

And, of course, all of this affected client demands – and we were forced to address those demands. We all got used to stagnant wages for the last 10-12 years. Convincing our clients to accept the wage increase was a battle, especially if the wage increases went to the same quality of individual and delivered the same poor results. But I believe we now have the opportunity to make a necessary adjustment for the good of all parties: the employee, the client, and the consumer.

A better way to tackle these issues may be shifting focus to labor cost per unit instead of the labor cost per hour. I know we all know that but it’s not the way we typically conduct analysis. When choosing a staffing supplier or our own seasonal hires the focus is on the cost per hour and most contracts are based on cost per unit. That does not sync with the projections of profitability.

If you take the time to put a dollar amount to the losses pointed out in the article you will identify the opportunity for savings and increased profitability. A simple calculation makes this clear:

$2 million seasonal help reduced by 3 percent either in markup or wage reductions = $60,000 theoretical.

Theoretical in that the total is only a projection and doesn’t reflect the final number for the season. It doesn’t include unscheduled overtime, rework cost, headcount creep, training, cost of turnover …

What is the cost of return and replacement shipping, sales delays until the returned item is available for resale, the cost of examining and evaluating the returned items? Compare that to the $60,000 theoretical savings. My 34 years’ experience shows me that the return costs are multiple times greater.

Changing the way we hire and who we hire can have a substantial impact on all parties. I believe the days of Black Friday are numbered. The need for hundreds of employees for five weeks is not only impractical on a supply basis, but totally inefficient in quality control and meeting consumer demands. COVID has created what I believe is a permanent revision of retail fulfillment. The winner will be who can get the right product to the right person on time. We can’t expect to pay the same person who is marginal at best $3 more per hour and expect better work. We need to diversify our workforce and rethink scheduling to meet these new demands and be the thought leaders.

So, I return to my original question: What did your workforce look like this past season? Was it the same as 2019? What were your schedules? Same as last year? What was the result?

People who need and want the work are more productive:

  • Early retirees bring tons of experience to the table. They do not need constant supervision. Many of them would cherish the opportunity to be a part of something again if only for two or three days a week.
  • Ex-offenders need and want the work. Working is the way they will stay out of the justice system and begin new lives for themselves and their families.
  • In some cases, special needs individuals are perfectly capable to handle some of our fulfillment positions and again would cherish the opportunity to prove their worth to society.

IWLA is in the final stages of a study with Butler University to determine the pluses and minuses of hiring justice-involved employees. We will have those results end of first quarter.

The new workforce is different, and employers need to think differently: Who said you have to work five eight-hour-days or four tens? Find the people who want to work. Have them work when they want to work. Try to make it happen. Every time our clients or I have tried this approach it has worked. Productivity is up and turnover is down. That means profit is up.

Diversity has so many more facets than race. Inclusion and diversity mean expanding our workforce to meet our clients’ expectations. Get involved and make a difference not only for us but our community. And this will help you turn the losing equation to a winning one for your employees, your company, and your clients.

By Tom Landry is president of Allegiance Staffing located in Spring, Texas, an IWLA partner member company. He is the chairman of the IWLA Inclusion & Diversity Council.

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