Use Your WMS to Measure and Reward

If the Culture in Your Warehouse is Outstanding, Employee Performance Will Reflect It

How important is organizational culture in a warehouse setting? Experts say that if the culture is outstanding, employee performance will reflect it. The culture establishes a framework for equal treatment for all – and nothing helps reinforce fairness better than pure analytics derived from concrete data.

By now, you may already be familiar with the data that can be gleaned from a warehouse management system (WMS) and how it can be used to help streamline operations and staffing. The core metrics derived from a WMS are designed to show the efficiency of an organization’s receiving, slotting, picking, shipping and other logistics and order-related activities. But, in the last few years, warehouse managers have been discovering how to use WMS metrics to evaluate employee performance. Things like establishing fair standards, identifying additional training opportunities, and initiating pay-for-performance bonuses are just a few examples.

Jensen Distribution Services: A WMS-driven Bonus Plan

Landon Horton, vice president of operations for Jensen Distribution Services, Spokane, WA, is one of the pioneers in determining how to extract and use employee-specific metrics from the company’s WMS. When he first rolled out the software in 2009, it produced rudimentary worker data, such as number of hours worked. But he collaborated closely with his provider over the years to enhance and tweak the software to deliver the sophisticated level of data he uses today.

Jensen currently expects 160 hourly employees to handle 23,000 lines (or 15,000 cartons) per day. Zone standards vary, but the average throughput is between 52-71 lines/cartons per hour, with some zones managing to hit 160. The company offers a monthly bonus for high performers. “The data we collect now in our WMS helps manage our warehouse incentive program,” Horton explained. “Every four-week period, employees receive a bonus if they exceed 100 percent of their goals. On average, as few as 50 percent and as many as 88 percent of them get incentive pay – which is pretty high.”

He continued by saying, “The incentive program pays for itself. And with the metrics we extract from the WMS, there’s no question as to how the bonuses are distributed.” What happens to the employees who don’t receive bonuses? Horton says that the company goal is for everyone to be eligible for monthly incentive pay. If an employee regularly misses out, he or she goes on a “watch” list where supervisors look for wasted motion, distracted picking and other obvious reasons for poor performance. In some cases, the next step is for that employee to shadow a high performer in the hopes that he or she will begin to mirror better, more productive work habits.

Horton added that the incentive program is based on more than just pick accuracy and output. “We also measure housekeeping issues. If one employee opens a case, it needs to be presented in an easy way for the next person who might need one of these items. If a pallet is put away, it needs the shrink-wrap removed so that the next person can easily retrieve this product.” Horton believes that the data it now collects through its WMS has allowed Jensen to move from using customer complaints as the only way of tracking errors to its current 99.99% accuracy rate. He attributes the minor remaining error percentage to human error, as even voice picking isn’t flawless.

EPS Gauges: WMS Feeds Merit Pay KPIs

For ESP Gauges, Kennesaw, GA, data is king. Everything the company does in its warehouse is driven by metrics. That makes Tony Moore, the company’s warehouse manager, its data guru of sorts – someone who looks to disrupt old thinking by finding new ways to use data and facts. He might even be considered a New-Age type of manager, since he spends considerable time thinking about employee welfare and how to boost the morale of not just individuals, but the team.

The company offers pressure gauges, primarily to the oil and gas industries, and operates its warehouse with 26 people. It deployed a new WMS a few years ago and, since then, Moore has rigorously applied performance metrics derived from it to every aspect of its operations. “We definitely had some areas that needed work,” Moore conceded. “For example, our time to ship went from seven days to .9 days, thanks to our ability to identify trouble spots through tracking data in the WMS.”

Moore wasn’t satisfied with using the WMS just for the usual improvements that come in order accuracy, slotting and shipping; he was curious to see how individual employee performance could be measured and rewarded using data from the WMS. He started out creating employee report cards, but quickly wanted to evolve his program into something with a tangible benefit: money. ESP Gauges already had an employee merit pay program in place through standard salary increases, but with data from the WMS, he wondered if he could create a new way to reward top performers.

The answer was yes. “We were able to use WMS metrics to add value to productivity,” Moore explained. “We first had to identify what our KPIs were and put a value on them, ranging from transactions per hour to accuracy. In the end, we were able to create a standard for evaluating performance and a general bonus pool that all employees could share if they met their goals. The beauty of it is that it’s transparent to everyone.”

ESP Gauges implemented the bonus program toward the end of 2017 and, under the new additional pay-for-performance plan, some employees began earning up to 30 percent over their base salary. Turnover declined, and the pick/ship accuracy rate has been pushed to 99.96 percent. Three quarters of the employees receive some amount of incentive pay per paycheck; others miss out due to errors or not meeting the minimum activity threshold.

“Unspoken expectations are the biggest reason for performance problems,” Moore said. “With our new bonus pool system using data from the WMS, every aspect of how to earn performance pay is transparent to employees. In fact, we’ve turned it into a game, with a large TV screen displaying WMS daily metrics. For some employees, it’s a point of pride to be at the top of the leader board.”

Optimizing Warehouse Performance and Culture

Ensuring that your company culture emphasizes employee satisfaction can be a full-time job.  Perhaps it’s time to more closely examine the versatility of a WMS and its ability to generate useful data. Jensen Distribution and ESP Gauges have proven that WMS statistics can not only increase customer satisfaction and lower error rates but can also be used to create better programs to lower turnover, improve workplace culture and encourage high performance through pay incentives.