Outside the Box Warehousing: When Thinking of Inputs as Outputs Makes Sense

Abstract:As the supply chain revolution continues, small and medium-sized enterprises and smaller facilities of large companies experience an increased pressure from their adjacent supply chain partners and their own senior management to improve their performance. This places higher demands on the accuracy of their performance measurement, particularly labor productivity in warehouses. Smaller facilities cannot afford to implement engineered labor standards (ELS) and rely on traditional metrics of output, such as piece count, which do not provide the reliable level of accuracy demanded today. Changing the traditional view of the inputs-outputs paradigm, this study suggests a unique labor productivity metric for non-ELS facilities based on warehouse lift-truck utilization data. Empirical tests using a longitudinal data set from an automotive parts distribution center provide evidence that the new metric is more accurate than the traditional output metrics because it is not affected by the assignment contribution error due to workload smoothing. The new metric offers managers an opportunity to fine-tune labor productivity measurement in warehouses and other environments with extensive lift-truck utilization without investing in ELS projects.