Operations & Fulfillment: Better Than Santa's Elves

For operations professionals in the cross-channel retail industry, the risks and rewards of the holiday shopping season are well known. Order peaks can be five times to 15 times higher than the average week. If you get behind processing orders, you may not recover until Christmas is over. For many companies, the entire year's profit results from fourth-quarter sales.

With this pressure comes the challenges of hiring seasonal associates, integrating them into your workforce, dealing with planned volume and the chaos that makes the disruptive exceptions to the rule, among other things.

Most retailers do their holiday post-mortem in January or February when Christmas past is still fresh in their mind. This gives them the time to consider how major improvements and budget requests for changes in warehouse systems, warehouse layout, material flow and process changes, and material handling equipment (MHE) and conveyance systems can be made to improve throughput and storage capacity as well as reduce cost per order.

While there may not be time to make these major changes before this year's holidays, here are 20 best practices you should consider and can implement before Christmas. These tips can make a big difference in your company's warehouse efficiency and customer service.

The highest benefit areas you can affect are managing labor better — it accounts for 50 percent of your cost per order — and, in particular, the pick and pack department, which represents more than 50 percent of your labor costs. Working with shipping carriers — probably your biggest overall cost — on your holiday plans pays off too. Here are 20 tips to improve your operations this holiday season:

1. Establish hot-pick zones. Put your best-selling items in the most accessible storage areas (e.g., ends of aisles) without creating traffic jams. This may only be 15 percent to 20 percent of your inventory. As much as 70 percent of a picker's time is spent walking the warehouse floor. Reduce walk distance and time and you increase productivity and reduce costs.

2. Implement a slotting system. What data can your merchants give you that provides additional sales velocity information that will help you with slotting product? Planned sales by item or purchase orders expected to have high sell-through during the period can greatly help. Again, reducing the walk time of pickers will improve productivity.

3. Improve packing productivity. Cushioned floor mats, tables with adjustable height to make them more ergonomic, large enough work surfaces, cubbyholes for inserts are all beneficial. Cartons and packing materials should be replenished to the pack stations so packers don't have to leave their station, maximizing productivity.

4. Manage your shipping expenses. For example, prioritize orders to ship as many by ground as possible. Move West Coast orders to the front of the queue and hold East Coast orders back to still meet promised receipt dates. Share your projections with your shipping carriers. Can you get extended pickup times for shipments and trailers to load during the day?

5. Alert your shipping carriers that you may need additional trailers for increased volumes. Rental trailers "spotted" on your lot can create additional seasonal storage space.

6. Name seasonal managers. Which full- and part-time workers can step up to be seasonal supervisors? Give them an incentive to do so for the holidays. At end of season they give up the responsibility.

7. Identify your best labor source. The most productive people are those who have worked for you in Christmases past. Stay in touch with them, nurture that resource and offer them an incentive to join again.

8. Try a "recruit a friend" program. Productive, effective employees often know good people who are looking for extra money. Offer them a small bonus if they reruit a friend or relative.

9. Offer a bonus to work the entire season. Along with returning seasonal workers and recruit a friend, offer an additional bonus to those employees who work the entire holiday season. Employees quitting early hurts your business.

10. Use temp agencies. Some of our clients have had great results sourcing seasonal labor from temp agencies. Doing so also gives you a preview of workers you might consider as full-time associates. Companies often don't want to pay the additional costs.

11. Implement a "buddy system." Assign each seasonal associate a "buddy" that's a year-round associate. Task the year-round associate to be available to answer all of their buddy's questions and help them be productive. Clearly identify responsibilities which are managerial in nature; they have to be referred to line managers.

12. Have a safety and security policy in place. Is your facility a safe place to work? Knowing how your facility changes with the increased order volume of the holidays, what changes are necessary to your policy? For example, allowing replenishment and put away during off-hours to reduce aisle congestion.

13. Have a disaster response plan in place. Be sure your "telephone tree" is up to date in case inclement winter weather throws you a curve. Are your seasonal workers on this list? Do they understand your emergency plans?

14. Head off back orders. The No. 1 source for creating customer service problems is back orders, not processing in the distribution center. Work with management to see if inventory control or your merchants can change their processes, and follow up on open purchase orders two weeks in advance of expedited receipt dates. The holidays are a busy time for everyone; give info about item availability to all customers.

15. Run second and third shifts. Put in place second and third shifts to keep up with the increased order volume. Schedule replenishment tasks for off-hours so the bulk of your staff isn't impeded by pallets and MHE in the aisles. This will improve facility safety, too.

16. Simplify your work processes. One of the hardest parts about using seasonal labor is they don't know your systems and processes. To improve temp associates' productivity, break down complex tasks. You still have time to consider where in your operation there are more complex tasks that can be broken down into simpler ones. Many retailers sell items which require special and complex packaging (e.g., posters and prints). Full-time packers know the process but seasonal workers do not. Consider prepackaging these items offline during the holidays to assure consistent and correct packaging.

17. Improve communication to increase productivity. Post standards, expectations and production metrics around your warehouse for employees to see. Adhere to having daily floor manager and shift-change meetings. Post on strategically placed whiteboards the main productivity rates as well as the challenges your warehouse faces.

18. Have a contingency plan. Have you worked out what your options are if the business is plus/minus 10 percent to 20 percent from your holiday forecast? Offer overtime? Hire more workers? Cut staff? Where could staff be used more effectively? Remember, more than 50 percent of your direct labor is in pick and pack.

19. Reduce peak season production systems disasters. Stick to a policy of not implementing new systems and noncritical modifications September through December.

20. Continually strive to improve. Keep a journal of problems encountered during the holidays as a starting point for planning next year. Invite a consultant in to observe your peaks this year to assist in making major process, flow and MHE changes for next year's holidays.

Consider these additional labor best practices during your company's off-season: seasonal differentials and incentive pay; aptitude and selection testing; screening and background checks; adopt a "flex hours" policy; overhaul your warehouse training program. These ideas can improve the quality of your hires and decrease attrition.

Making the best seasonal associate hires and managing your workforce effectively is at the heart of reducing costs and providing great customer service. Working with your shipping carriers to fine-tune outbound shipments brings big dividends, too.

Curt Barry is the founder and president of F. Curtis Barry & Co., a consultancy specializing in multichannel operations and fulfillment. Curt can be reached at cbarry@fcbco.com.