By Jennifer Smith | Photographs by Andrew Cullen for The Wall Street Journal
Retailers and logistics companies have been opening warehouses
at a record pace to ensure online orders reach customers as quickly
as possible. Now they're struggling to find workers to staff
them.
Amazon.com Inc., Wal-Mart Stores Inc. and other e-commerce
giants rely on armies of "pickers" to grab items off warehouse
shelves and prep them for shipment. For years they've drawn from a
seemingly limitless pool of people willing to take these jobs,
which can be grueling but require little training or education.
But with the unemployment rate close to a 10-year low,
competition for warehouse workers is fueling the biggest wage gains
inside warehouses in at least a decade.
Starting pay for warehouse workers rose 6% over the past year to
$12.15 an hour in February, according to an analysis by
ProLogistix, a logistics staffing firm. Hourly earnings rose 2.8%
across all professions over the same period, according to the Labor
Department's Bureau of Labor Statistics.
The warehouse and storage sector expanded dramatically as more
people shop online, and accounted for 945,200 jobs in March, up
5.3% over the year-earlier period, according to seasonally adjusted
Bureau of Labor Statistics data released Friday.
Warehouse workers typically earn a few dollars an hour above
minimum wage, though minimum-wage laws in places like California
and Massachusetts could narrow the gap.
Booming sales mean e-commerce operations have to ship more items
faster, and pay increases are imposing new costs. E-commerce
fulfillment centers require two to three times as many workers as
traditional warehouses, says CBRE Group Inc., a real-estate
brokerage. It estimates a $1-an-hour wage increase can raise labor
costs by more than $2 million a year at "big box" warehouses
employing as many as 1,000 workers.
Many new facilities Amazon.com Inc. is opening around the
country have 2,000 or more full-time employees, an Amazon
spokeswoman said. The e-commerce giant, which has more than 90,000
full-time workers across its fulfillment network, said Thursday it
plans to create 25,000 additional part-time warehouse jobs over the
next year.
Rising labor costs are speeding up the pace of automation and
influencing where new warehouses are built. And as poaching becomes
a bigger threat, employers are trying to make picker jobs more
attractive, with perks like employee barbecues and holiday
breakfasts, as well as more-flexible shifts.
It doesn't take much to lure workers away. "A guy who makes $10
an hour, you offer $10.25, he's going to leave," said Tom Landry,
president of Allegiance Staffing, which supplies logistics and
manufacturing workers. "That's another tank of gas."
Some warehouse operators are adding part-time positions or
compressed shifts that pack 36 hours of work into three days, in
hopes of luring students, working parents or retirees. Some firms
are tapping local organizations and community colleges. Incentives
deployed each fall for the holiday rush, like performance pay, are
becoming more common year-round.
"It's almost like peak [season] is never ending," said Meghan
Henson, chief human resources officer at XPO Logistics Inc., which
operates warehouses for large retailers like IKEA. "If a warehouse
is going up down the block, we want to find out what they're
paying."
Amazon.com and online furniture retailer Wayfair Inc. have
opened warehouses near Cincinnati/Northern Kentucky International
Airport. The delivery companies FedExCorp., United Parcel Service
Inc. and Deutsche Post AG's DHL also have operations in the area.
Average pay in 2015 for freight and stock employees, such as
warehouse pickers, in the Cincinnati metro area shot up to more
than $14 an hour, according to the Bureau of Labor Statistics.
Finding enough workers "is certainly a concern," said Dan
Tobergte, chief executive of Northern Kentucky Tri-ED, a regional
economic development agency. We've got pretty low unemployment in
the area," he said, and the population isn't "growing as fast as
the jobs are."
Competition for labor is intense in areas such as Southern
California's Inland Empire and Central Pennsylvania, within a day's
reach of millions of consumers. Demand is heating up in Midwestern
cities like Indianapolis and St. Louis, according to commercial
real-estate services firm JLL.
Radial, which handles e-commerce fulfillment for retailers like
Kate Spade & Co. and DSW Inc., increased wages at eight U.S.
locations in December, including raises of between 5% and 7% at a
facility in Redlands, Calif.
"Last year was really the tipping point for us," said Robyn
Jordan, senior director of human resources for Radial's global
operations.
Luis Ramirez, 26 years old, joined Radial in 2014, after hearing
it was paying $10 an hour at a new distribution center for Zara, a
retail unit of Inditex SA. That was 50 cents an hour more than he
earned at a warehouse job he got through a staffing agency.
Mr. Ramirez earned a $200 attendance bonus during the recent
holiday season and said Zara gives out $100 gift cards at the end
of the year. Employees also can get paid more if they exceed
targets during busy times, when apparel goes on sale. "For picking,
the rate is 65 [clothing items] an hour," Mr. Ramirez said. Workers
who exceed 70 items an hour "get a dollar extra for every hour you
hit that rate." He said he plans to stay at Radial for now.
Raising pay can reduce employee turnover and save companies
money on training. Experienced workers tend to be more productive,
said David Caines, chief operating officer at logistics provider
Kenco.
Some companies are investing in automated systems so their
facilities can handle more orders without hiring additional staff.
Software can direct workers to the right shelf faster and reduce
errors.
A new Kohl's Corp. e-commerce fulfillment center in Indiana will
be "three times as productive as our existing fulfillment centers,
given the level of automation," the company said in February.
"We used to do maybe one highly automated distribution center
out of 10," said Steve Osburn, a managing director at consulting
firm Kurt Salmon, an Accenture subsidiary. "Now it's 80% of the DCs
that we're dealing with."
."
(END) Dow Jones Newswires
April 09, 2017 08:14 ET (12:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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