VOLUME 23 • NUMBER 1 • DECEMBER 2007VOLUME 23 • NUMBER 1 • DECEMBER 2007

The Challenge of Staffing Your WarehouseEditor’s Note: A number of published sources inspired this ar-ticle: Out of Our Minds — Learning to be Creative a 2001book by Ken Robinson; Aberdeen group’s “Contract LaborB e n c h m a r k R e p o r t ” b y J . B a s i l i , C . J . D w y e r a n d S .Bharadwaj; a 2007 white paper by Prof. Robert B. Handfieldof North Carolina State University, “Strategic Labor Manage-ment in a Mass Customized World,” and, an article by MaryAichlmayr, in the October, 2007 issue of Material HandlingManagement, titled “The Secret Workforce.” KBA

The Battle For Skilled PeopleIn the United States, as in much of the Western world,

the gap between the availability of and the need for skilledlabor is massive. The most acute shortages are supervi-sion and other jobs requiring leadership and creativity.

A crisis in public education compounds the problem.Author Ken Robinson asserted that in the United King-dom, 20% of the adults are functionally illiterate. At thesame time, 21st century warehouse workers are expectedto be computer literate. A lack of computer skills can re-sult in serious consequences.

The National SceneBefore the 1980’s, most logistics companies were orga-

nized by international unions, such as the Teamsters. Atthat time, a transition began to a union-free environment.The following events stimulated the dramatic change:

Deregulation of common carriers.The breaking of the PATCO strike.

The common carrier industry had been regulated by thefederal government ever since the passage of the Inter-state Commerce Act, during the 1880’s. Hailed as the firstconsumerist legislation in the history of the United States,by the 1970’s the ICC was under attack by Ralph Naderand others, as an oligopoly that created protective pricingfor the carriers, unreasonable wages for workers, andguaranteed jobs for government bureaucrats and lawyers.

Since deregulation, prices for transport have declinedand carriers have been under increased pressure to controltheir costs.

The 1981 strike of the Professional Air Traffic Control-lers (PATCO), was the most significant labor dispute ofthe 20th century. Ronald Reagan won the 1980 electionwith support from organized labor, including the Team-sters, who hoped that he would reverse the move toward

deregulation initiated during the Carter administration.Reagan, former president of the Screen Actors Guild, wasbelieved to be a friend to unions; however, he took a firmstand against PATCO’s illegal strike and used militarytraffic controllers to maintain control while replacing thestrikers. The long-standing alliance between union lead-ers and the federal government was over. The changingclimate at the National Labor Relations Board enablednon-union companies to remain union free. The competi-tive environment in motor and air freight increased thedifficulty of survival for unionized carriers. New un-ion-free carriers expanded rapidly, while older union car-riers died on the vine.

The majority of present day logistics service providersare union free, and nearly all want to remain that way.

Increased Labor RequirementsThe search for skilled warehousing employees is ag-

gravated by an increase in the amount of touch laborneeded in many warehouses. Mechanization has reducedthe amount of labor needed for conventional materialshandling, but far more labor is required in those distribu-tion centers that provide fulfillment services than wasneeded for bulk warehousing.

In addition to handling smaller, more difficult ship-ments then in the past, warehouse operators now are askedto provide a wide variety of value added services, includ-ing price marking, repackaging, package filling and evenfinal assembly of the product. Additional labor is neededto support those services.

In order to provide competitive customer service and tofully utilize real estate assets, an increasing number of dis-tribution centers are operating on a multi-shift basis, withmany running on a 24/7 schedule. These schedule changeshave resulted in a need for more labor per square foot ofwarehouse space than in the past.

Using Contract LaborIn a study of staffing services users by the Aberdeen

Group, the benefit most frequently mentioned was flexi-bility to add to and reduce the workforce. In the warehous-ing industry, flexibility has always been a high priority,because distribution centers are called upon to meet widevariations of demand. While the cost of contract labor issignificant, respondents ranked it sixth, and then consid-ered only benefit costs.

The Chief Strategy OfficerBy R. T. S. Breene, P. F. Nunes, & W. F. Shill, HarvardBusiness Review, October 2007, pg 84.

One of the nagging challenges in strategy develop-ment, is getting people to adhere to the strategic rulesthat have been developed. Does anybody in your or-ganization have the authority to say, “What we’vebeen doing isn’t in line with the company’s strategy,and we need to fix that?” While every CEO has theability to do so, most are unwilling to spend their timeenforcing the rules. The chief strategy officer must bea person who is trusted deeply by the CEO, but also amaster of multitasking. That person is a doer, not justa thinker; an influencer, but not a dictator. Above all,the CSO must be perceived as objective.

Solve The Succession CrisisBy Joseph L. Bower, Harvard Business Review, No-vember 2007, pg. 91.

In a recent poll of large US companies, it was re-vealed that 60% of the respondents have no succes-sion plan for the chief executive officer. As a result,when replacement of the CEO is necessary, they areforced to look outside the company. Those companiesthat manage it well, recognize that succession is aprocess, not an event. The article includes a list ofquestions that should be asked by any executive whointends to become a company leader. Some of thequestions are asked at recruitment, while othersshould be asked after starting the job. For example:“Why are you being hired?” Is it just the job for today,or is there a career path?

Dousing the FlamesWERCsheet, July/August 2007, pg. 6.

This review of fire safety issues is based on inter-views with experts from insurance and risk manage-ment professionals. Even storage of low riskmaterials, such as metal parts, creates a hazard be-cause of cardboard packaging. Steel structures willbegin to lose strength, and possibly collapse at 600°C,a temperature that can be reached within 10 minutesof a fire taking hold. Common fire risks include:

P Use of solid shelving in storage racks.P Changes in commodities stored.P Changes in storage containers.P Changes in layout.P Bulk storage of empty pallets.

The importance of competent inspection was em-phasized. Major insurance companies employ fireprotection engineers who perform such inspections.Another source is the Society of Fire Protection Engi-neers (www.sfpe.org).

Lean To A Fault?By Steven A. Melnyk, Supply Chain Quarterly, Q32007, pg. 29.

At a time when “lean” has become a favorite busi-ness buzzword, Professor Melnyk has the courage tosuggest that, carried to extremes, lean can be hazard-ous to a corporation’s health. He suggested that slack,as well as lean, should be part of a healthy corpora-tion. Slack is needed for innovation, to compensatefor failures, and to reap the benefits of a very success-ful product introduction. He fears that emphasis onlean will stifle necessary innovation.

Selecting Warehouse Software (second edi-tion)By Phillip Obal, ©2007, 203 pages spiral-bound,available at www.idii.com.

This publication continues to be the best availablesource of information about warehouse software. Thesecond edition is an improvement over the first with a55 page addition, and new material including dia-grams and pictures in every chapter. A chapter aboutimplementation has been added. Warehouse opera-tors who are considering the purchase of new soft-ware need to study this book.

Don’t Get Mad – Get Even (Tempered)By Mark Taylor, Parcel, September 2007, pg. 34.

This thought-provoking article is focused on thechallenge of anger management. The best tactic maybe to “call a timeout.” Author Stephen Covey advisespeople to “begin with the end in mind,” and believesthat the ideal outcome must be one in which problemsare resolved with dignity and respect.

Three Avenues to Cost ReductionBy Patrick Penfield, Supply Chain Management Re-view, November 2007, page 30.

The author, a professor at Syracuse University, il-lustrated how all cost-cutting can be divided intothree areas:

P Material cost reduction.P Process cost reduction.P Overhead cost reduction.

Descriptions and examples are provided to showhow each type of cost reduction is handled in the sup-ply chain. For example, the author suggested thatoverhead costs could be controlled by using tempo-rary workers and reducing the full-time employeeworkforce, with its higher benefits cost.

In a survey of human resources executives from 40companies around the world, we learned that nearly allhave an insufficient pipeline of high potential employeesto fill key roles. We frequently ask senior managers if theyhave, in-house, the manager who will operate their nextdistribution center. Relatively few respond positively, as-serting that it is too expensive to have future site managerson the payroll. In assessing your growth capability, con-sider these questions:

Do you know what skills your company needs toexecute its growth objectives?Do you have a process for identifying the next gen-eration of leaders?Do you have a development program, or high po-tential leaders?Do you hold your managers accountable for identi-fying and developing undiscovered talent amongtheir direct reports?

Many executives claim that people are their most im-portant assets, yet, they neglect the development process.

Disability DevelopmentIt is obvious that certain disabilities are not incompati-

ble with productive work in a warehouse. We visited ashoe distribution facility in which the services of employ-ees who are deaf mutes were utilized for order selection.These individuals were perfectly capable of doing every-thing involved in picking orders. The only special precau-tion needed was to make certain that lift truck operators

were particularly careful, since the individuals could nothear the approaching trucks. Recently, we read thatWalgreens is building distribution centers in SouthCarolina and Canada that were designed to set aside onethird of the jobs for disabled workers.

Developments of this kind are not an act of charity:Even when the labor market is not full, disabled people arean excellent source of reliable and productive workers.Furthermore, these employees are likely to stay with thecompany, rather than seek other employment. Dependingon the nature of the disability, there are many warehousejobs that can be effectively handled. If you are finding itdifficult to locate dependable workers, it’s time to take alook at this alternative.

Saving Money VersusBuilding Business

Sadly, the history of the logistics industries is a storyabout cutting costs. When transportation was regulated bythe federal government, the primary emphasis in all logis-tics management was a search for lower prices.

This should have changed as transportation graduallywas deregulated after 1980, but old habits are difficult tochange. Fortunately, the progressive people in the logis-tics business recognize that supply-chain management ismore than saving money: It is about building business. Alogistics service provider with an innovative service canhelp customers offer services that were not previouslyavailable, resulting in new sales, as well as attractive pric-ing. When the sole emphasis is price, any product or ser-vice becomes a commodity. Commodity buyers usuallyaward contracts to the lowest bidder. We admire those lo-gistics service providers who recognize that quality ismore important than price, that innovation is more impor-tant than mere availability, and that continuous improve-ment is a necessary part of 21st-century corporate culture.

Do YouHave A

Talent Factory

Planning for DisasterNot long ago, we accepted the responsibility to moder-

ate a wholesaler/distributor panel of executives who hadsuffered a variety of disasters, ranging from hurricane Ka-trina to fire and flood. The single refrain repeated by ev-ery participant was the regret that their company had notplanned for an emergency in advance. Each of these peo-ple now has an emergency plan in place, and they urgedmembers of the audience to develop one for themselves.

One sample emergency plan contains the followingsections:

The plan to stay in business includes an alternatelocation, if the primary one is not accessible.

Primary and secondary emergency contacts areprovided, as well.Listed in the disaster preparedness plan are thepeople who participate on the emergency planningteam, and a prioritized list of critical operations.Included in the business continuity plan, are listsof suppliers and contractors together with alternatesources.The same plan has another page that provides a de-tailed evacuation plan, as well as a shelter-in-placeplan.On a communications page, ways of contacting co-workers, and the process for protecting computerhardware and software backups, are outlined.Finally, employee emergency contact informationis listed.

The staffing service must maintain a margin betweenthe price of labor and the selling price. That margin, ormarkup, covers not only profit, but the cost of recruiting,benefits, and withholding taxes. The markup used bymost temporary labor staffing agencies, is 28 to 40%.

In the study, ability to provide the best match of skillsto requisitions was ranked highest as the criterion forchoosing staffing services. In other words, quality wasmore important than price.

The second most important criterion was compliancetracking, which includes background checks, complianceto federal labor standards, legal status for immigrantworkers, and ongoing drug testing.

Nearly all users of contract labor reported a savings,with most ranging from 5 - 8%. Some reported a savingsof more than 19%.

The “Temp To Perm” BenefitThe fifth most popular benefit found in using contract

labor was the right to hire outstanding temporary workersas full-time employees. The majority of companies usingstaffing services have negotiated the right to hire workers,usually by paying a placement fee to the labor provider. Ineffect, the “temp to perm” tactic greatly reduces the riskof hiring an undesirable worker, because management isable to measure the quality of each worker before decid-ing whether or not to hire.

A Hidden Source of WorkersMillions of potentially productive and loyal workers

are overlooked as part of the labor force, because theyhave a disability. Yet, these disabilities do not disqualifythem from performing some jobs needed in distributioncenters. Blind, deaf or mentally handicapped individualsoften can learn repetitive tasks, such as packaging, kit-ting, or light assembly.

While direct recruitment of handicapped workers ispossible, social agencies such as Goodwill Industries op-erate sheltered workshops, and provide staffing servicesfor the handicapped.

The Piecework OptionSome workers are paid according to the number of

units that they produce. This was common practice in thegarment industry a century ago, and, in developing coun-tries, such as India, piecework compensation is found fre-quently in warehousing. In the trucking industry, manylong haul truck drivers are paid by the mile, which, in ef-fect, is piecework.

In the warehouse, an early use of piecework was thehiring of specialists for loading or unloading, commonlyknown as lumpers. The lumper was frequently hired by atruck driver wanting to avoid the work involved in han-dling floor loaded (unpalletized) cargo, or by warehousemanagement, for the same reason. Any cargo that cannotbe palletized efficiently, such as tires, is likely to beloaded or unloaded by lumpers. These people always arepaid piecework.

A new use of piecework is offered by some staffing ser-vices. These workers go beyond the loading and unload-ing of cargo, filling nearly every job in the warehouse.Piecework rates are established for put-away, order pick-

ing, cross docking, re-warehousing, cycle counting andvirtually every other task performed in the distributioncenter. The staffing service pays workers on a pieceworkbasis, and charges the client on the same basis, plus a suit-able markup.

If the piecework rate is too low, a diligent worker can-not make a good living and will not stay on the job. If therate is too high, neither the staffing service nor the ware-house operator can be competitive. Ideally, the pieceworkrate enables a very productive worker to earn an above av-erage income, and the price allows the warehouse opera-tor to get the work done for less than the cost of hiringfull-time staff.

However, the engineering work must be flexible aswell as precise. Changes in product, alterations of averageorder size, or new shipping requirements will change thelabor content in any warehouse. When conditions change,the piecework rate may require adjustment.

Supervision and PieceworkA key role for the warehouse supervisor is to monitor

labor productivity. With piecework, the responsibility forproductivity is transferred from management to worker,and there is no need for the supervisor to act as “strawboss.” Conventional warehouse productivity measure-ment may no longer be necessary.

No staffing service that we interviewed was willing totake responsibility for inventory control. Responsibilityfor quality is limited, and, to some extent, the worker whois paid for output may become more interested in speedthan in quality performance. The job of supervisorschanges when piecework pay is utilized. Some users ofpiecework compensation report that picking errors de-creased after the service was installed.

Hedging the RiskThe wholesale distributor or logistics service provider

who installs a piecework system, removes one of the big-gest risks in warehousing, the possibility that the rate bud-geted for materials handling will be lower than the actualcost of getting the job done. In effect, the risk is trans-ferred from the warehouse operator to the staffing serviceand its workers.

While some risks are hedged, new ones are created. Forexample, if there is pilferage or mysterious disappear-ance, the staffing service will not assume liability. House-keeping is a quality barometer, and workers who are paidon piecework may not maintain a neat workplace.

The Future of StaffingChanges in demographics dictate corresponding

changes in the workforce. Managers will find it increas-ingly difficult to attract and retain high-quality, hourlyworkers for their warehouses. Staffing services offer onepotential solution, and hiring handicapped labor, with orwithout a staffing service, is another option.

Finally, the use of piecework through a staffing serviceoffers unique advantages by hedging the risk of poor pro-ductivity, and/or inaccurate engineering and pricing.

In a survey of human resources executives from 40companies around the world, we learned that nearly allhave an insufficient pipeline of high potential employeesto fill key roles. We frequently ask senior managers if theyhave, in-house, the manager who will operate their nextdistribution center. Relatively few respond positively, as-serting that it is too expensive to have future site managerson the payroll. In assessing your growth capability, con-sider these questions:

Do you know what skills your company needs toexecute its growth objectives?Do you have a process for identifying the next gen-eration of leaders?Do you have a development program, or high po-tential leaders?Do you hold your managers accountable for identi-fying and developing undiscovered talent amongtheir direct reports?

Many executives claim that people are their most im-portant assets, yet, they neglect the development process.

Disability DevelopmentIt is obvious that certain disabilities are not incompati-

ble with productive work in a warehouse. We visited ashoe distribution facility in which the services of employ-ees who are deaf mutes were utilized for order selection.These individuals were perfectly capable of doing every-thing involved in picking orders. The only special precau-tion needed was to make certain that lift truck operators

were particularly careful, since the individuals could nothear the approaching trucks. Recently, we read thatWalgreens is building distribution centers in SouthCarolina and Canada that were designed to set aside onethird of the jobs for disabled workers.

Developments of this kind are not an act of charity:Even when the labor market is not full, disabled people arean excellent source of reliable and productive workers.Furthermore, these employees are likely to stay with thecompany, rather than seek other employment. Dependingon the nature of the disability, there are many warehousejobs that can be effectively handled. If you are finding itdifficult to locate dependable workers, it’s time to take alook at this alternative.

Saving Money VersusBuilding Business

Sadly, the history of the logistics industries is a storyabout cutting costs. When transportation was regulated bythe federal government, the primary emphasis in all logis-tics management was a search for lower prices.

This should have changed as transportation graduallywas deregulated after 1980, but old habits are difficult tochange. Fortunately, the progressive people in the logis-tics business recognize that supply-chain management ismore than saving money: It is about building business. Alogistics service provider with an innovative service canhelp customers offer services that were not previouslyavailable, resulting in new sales, as well as attractive pric-ing. When the sole emphasis is price, any product or ser-vice becomes a commodity. Commodity buyers usuallyaward contracts to the lowest bidder. We admire those lo-gistics service providers who recognize that quality ismore important than price, that innovation is more impor-tant than mere availability, and that continuous improve-ment is a necessary part of 21st-century corporate culture.

Do YouHave A

Talent Factory

Planning for DisasterNot long ago, we accepted the responsibility to moder-

ate a wholesaler/distributor panel of executives who hadsuffered a variety of disasters, ranging from hurricane Ka-trina to fire and flood. The single refrain repeated by ev-ery participant was the regret that their company had notplanned for an emergency in advance. Each of these peo-ple now has an emergency plan in place, and they urgedmembers of the audience to develop one for themselves.

One sample emergency plan contains the followingsections:

The plan to stay in business includes an alternatelocation, if the primary one is not accessible.

Primary and secondary emergency contacts areprovided, as well.Listed in the disaster preparedness plan are thepeople who participate on the emergency planningteam, and a prioritized list of critical operations.Included in the business continuity plan, are listsof suppliers and contractors together with alternatesources.The same plan has another page that provides a de-tailed evacuation plan, as well as a shelter-in-placeplan.On a communications page, ways of contacting co-workers, and the process for protecting computerhardware and software backups, are outlined.Finally, employee emergency contact informationis listed.

The staffing service must maintain a margin betweenthe price of labor and the selling price. That margin, ormarkup, covers not only profit, but the cost of recruiting,benefits, and withholding taxes. The markup used bymost temporary labor staffing agencies, is 28 to 40%.

In the study, ability to provide the best match of skillsto requisitions was ranked highest as the criterion forchoosing staffing services. In other words, quality wasmore important than price.

The second most important criterion was compliancetracking, which includes background checks, complianceto federal labor standards, legal status for immigrantworkers, and ongoing drug testing.

Nearly all users of contract labor reported a savings,with most ranging from 5 - 8%. Some reported a savingsof more than 19%.

The “Temp To Perm” BenefitThe fifth most popular benefit found in using contract

labor was the right to hire outstanding temporary workersas full-time employees. The majority of companies usingstaffing services have negotiated the right to hire workers,usually by paying a placement fee to the labor provider. Ineffect, the “temp to perm” tactic greatly reduces the riskof hiring an undesirable worker, because management isable to measure the quality of each worker before decid-ing whether or not to hire.

A Hidden Source of WorkersMillions of potentially productive and loyal workers

are overlooked as part of the labor force, because theyhave a disability. Yet, these disabilities do not disqualifythem from performing some jobs needed in distributioncenters. Blind, deaf or mentally handicapped individualsoften can learn repetitive tasks, such as packaging, kit-ting, or light assembly.

While direct recruitment of handicapped workers ispossible, social agencies such as Goodwill Industries op-erate sheltered workshops, and provide staffing servicesfor the handicapped.

The Piecework OptionSome workers are paid according to the number of

units that they produce. This was common practice in thegarment industry a century ago, and, in developing coun-tries, such as India, piecework compensation is found fre-quently in warehousing. In the trucking industry, manylong haul truck drivers are paid by the mile, which, in ef-fect, is piecework.

In the warehouse, an early use of piecework was thehiring of specialists for loading or unloading, commonlyknown as lumpers. The lumper was frequently hired by atruck driver wanting to avoid the work involved in han-dling floor loaded (unpalletized) cargo, or by warehousemanagement, for the same reason. Any cargo that cannotbe palletized efficiently, such as tires, is likely to beloaded or unloaded by lumpers. These people always arepaid piecework.

A new use of piecework is offered by some staffing ser-vices. These workers go beyond the loading and unload-ing of cargo, filling nearly every job in the warehouse.Piecework rates are established for put-away, order pick-

ing, cross docking, re-warehousing, cycle counting andvirtually every other task performed in the distributioncenter. The staffing service pays workers on a pieceworkbasis, and charges the client on the same basis, plus a suit-able markup.

If the piecework rate is too low, a diligent worker can-not make a good living and will not stay on the job. If therate is too high, neither the staffing service nor the ware-house operator can be competitive. Ideally, the pieceworkrate enables a very productive worker to earn an above av-erage income, and the price allows the warehouse opera-tor to get the work done for less than the cost of hiringfull-time staff.

However, the engineering work must be flexible aswell as precise. Changes in product, alterations of averageorder size, or new shipping requirements will change thelabor content in any warehouse. When conditions change,the piecework rate may require adjustment.

Supervision and PieceworkA key role for the warehouse supervisor is to monitor

labor productivity. With piecework, the responsibility forproductivity is transferred from management to worker,and there is no need for the supervisor to act as “strawboss.” Conventional warehouse productivity measure-ment may no longer be necessary.

No staffing service that we interviewed was willing totake responsibility for inventory control. Responsibilityfor quality is limited, and, to some extent, the worker whois paid for output may become more interested in speedthan in quality performance. The job of supervisorschanges when piecework pay is utilized. Some users ofpiecework compensation report that picking errors de-creased after the service was installed.

Hedging the RiskThe wholesale distributor or logistics service provider

who installs a piecework system, removes one of the big-gest risks in warehousing, the possibility that the rate bud-geted for materials handling will be lower than the actualcost of getting the job done. In effect, the risk is trans-ferred from the warehouse operator to the staffing serviceand its workers.

While some risks are hedged, new ones are created. Forexample, if there is pilferage or mysterious disappear-ance, the staffing service will not assume liability. House-keeping is a quality barometer, and workers who are paidon piecework may not maintain a neat workplace.

The Future of StaffingChanges in demographics dictate corresponding

changes in the workforce. Managers will find it increas-ingly difficult to attract and retain high-quality, hourlyworkers for their warehouses. Staffing services offer onepotential solution, and hiring handicapped labor, with orwithout a staffing service, is another option.

Finally, the use of piecework through a staffing serviceoffers unique advantages by hedging the risk of poor pro-ductivity, and/or inaccurate engineering and pricing.

VOLUME 23 • NUMBER 1 • DECEMBER 2007VOLUME 23 • NUMBER 1 • DECEMBER 2007

The Challenge of Staffing Your WarehouseEditor’s Note: A number of published sources inspired this ar-ticle: Out of Our Minds — Learning to be Creative a 2001book by Ken Robinson; Aberdeen group’s “Contract LaborB e n c h m a r k R e p o r t ” b y J . B a s i l i , C . J . D w y e r a n d S .Bharadwaj; a 2007 white paper by Prof. Robert B. Handfieldof North Carolina State University, “Strategic Labor Manage-ment in a Mass Customized World,” and, an article by MaryAichlmayr, in the October, 2007 issue of Material HandlingManagement, titled “The Secret Workforce.” KBA

The Battle For Skilled PeopleIn the United States, as in much of the Western world,

the gap between the availability of and the need for skilledlabor is massive. The most acute shortages are supervi-sion and other jobs requiring leadership and creativity.

A crisis in public education compounds the problem.Author Ken Robinson asserted that in the United King-dom, 20% of the adults are functionally illiterate. At thesame time, 21st century warehouse workers are expectedto be computer literate. A lack of computer skills can re-sult in serious consequences.

The National SceneBefore the 1980’s, most logistics companies were orga-

nized by international unions, such as the Teamsters. Atthat time, a transition began to a union-free environment.The following events stimulated the dramatic change:

Deregulation of common carriers.The breaking of the PATCO strike.

The common carrier industry had been regulated by thefederal government ever since the passage of the Inter-state Commerce Act, during the 1880’s. Hailed as the firstconsumerist legislation in the history of the United States,by the 1970’s the ICC was under attack by Ralph Naderand others, as an oligopoly that created protective pricingfor the carriers, unreasonable wages for workers, andguaranteed jobs for government bureaucrats and lawyers.

Since deregulation, prices for transport have declinedand carriers have been under increased pressure to controltheir costs.

The 1981 strike of the Professional Air Traffic Control-lers (PATCO), was the most significant labor dispute ofthe 20th century. Ronald Reagan won the 1980 electionwith support from organized labor, including the Team-sters, who hoped that he would reverse the move toward

deregulation initiated during the Carter administration.Reagan, former president of the Screen Actors Guild, wasbelieved to be a friend to unions; however, he took a firmstand against PATCO’s illegal strike and used militarytraffic controllers to maintain control while replacing thestrikers. The long-standing alliance between union lead-ers and the federal government was over. The changingclimate at the National Labor Relations Board enablednon-union companies to remain union free. The competi-tive environment in motor and air freight increased thedifficulty of survival for unionized carriers. New un-ion-free carriers expanded rapidly, while older union car-riers died on the vine.

The majority of present day logistics service providersare union free, and nearly all want to remain that way.

Increased Labor RequirementsThe search for skilled warehousing employees is ag-

gravated by an increase in the amount of touch laborneeded in many warehouses. Mechanization has reducedthe amount of labor needed for conventional materialshandling, but far more labor is required in those distribu-tion centers that provide fulfillment services than wasneeded for bulk warehousing.

In addition to handling smaller, more difficult ship-ments then in the past, warehouse operators now are askedto provide a wide variety of value added services, includ-ing price marking, repackaging, package filling and evenfinal assembly of the product. Additional labor is neededto support those services.

In order to provide competitive customer service and tofully utilize real estate assets, an increasing number of dis-tribution centers are operating on a multi-shift basis, withmany running on a 24/7 schedule. These schedule changeshave resulted in a need for more labor per square foot ofwarehouse space than in the past.

Using Contract LaborIn a study of staffing services users by the Aberdeen

Group, the benefit most frequently mentioned was flexi-bility to add to and reduce the workforce. In the warehous-ing industry, flexibility has always been a high priority,because distribution centers are called upon to meet widevariations of demand. While the cost of contract labor issignificant, respondents ranked it sixth, and then consid-ered only benefit costs.

The Chief Strategy OfficerBy R. T. S. Breene, P. F. Nunes, & W. F. Shill, HarvardBusiness Review, October 2007, pg 84.

One of the nagging challenges in strategy develop-ment, is getting people to adhere to the strategic rulesthat have been developed. Does anybody in your or-ganization have the authority to say, “What we’vebeen doing isn’t in line with the company’s strategy,and we need to fix that?” While every CEO has theability to do so, most are unwilling to spend their timeenforcing the rules. The chief strategy officer must bea person who is trusted deeply by the CEO, but also amaster of multitasking. That person is a doer, not justa thinker; an influencer, but not a dictator. Above all,the CSO must be perceived as objective.

Solve The Succession CrisisBy Joseph L. Bower, Harvard Business Review, No-vember 2007, pg. 91.

In a recent poll of large US companies, it was re-vealed that 60% of the respondents have no succes-sion plan for the chief executive officer. As a result,when replacement of the CEO is necessary, they areforced to look outside the company. Those companiesthat manage it well, recognize that succession is aprocess, not an event. The article includes a list ofquestions that should be asked by any executive whointends to become a company leader. Some of thequestions are asked at recruitment, while othersshould be asked after starting the job. For example:“Why are you being hired?” Is it just the job for today,or is there a career path?

Dousing the FlamesWERCsheet, July/August 2007, pg. 6.

This review of fire safety issues is based on inter-views with experts from insurance and risk manage-ment professionals. Even storage of low riskmaterials, such as metal parts, creates a hazard be-cause of cardboard packaging. Steel structures willbegin to lose strength, and possibly collapse at 600°C,a temperature that can be reached within 10 minutesof a fire taking hold. Common fire risks include:

P Use of solid shelving in storage racks.P Changes in commodities stored.P Changes in storage containers.P Changes in layout.P Bulk storage of empty pallets.

The importance of competent inspection was em-phasized. Major insurance companies employ fireprotection engineers who perform such inspections.Another source is the Society of Fire Protection Engi-neers (www.sfpe.org).

Lean To A Fault?By Steven A. Melnyk, Supply Chain Quarterly, Q32007, pg. 29.

At a time when “lean” has become a favorite busi-ness buzzword, Professor Melnyk has the courage tosuggest that, carried to extremes, lean can be hazard-ous to a corporation’s health. He suggested that slack,as well as lean, should be part of a healthy corpora-tion. Slack is needed for innovation, to compensatefor failures, and to reap the benefits of a very success-ful product introduction. He fears that emphasis onlean will stifle necessary innovation.

Selecting Warehouse Software (second edi-tion)By Phillip Obal, ©2007, 203 pages spiral-bound,available at www.idii.com.

This publication continues to be the best availablesource of information about warehouse software. Thesecond edition is an improvement over the first with a55 page addition, and new material including dia-grams and pictures in every chapter. A chapter aboutimplementation has been added. Warehouse opera-tors who are considering the purchase of new soft-ware need to study this book.

Don’t Get Mad – Get Even (Tempered)By Mark Taylor, Parcel, September 2007, pg. 34.

This thought-provoking article is focused on thechallenge of anger management. The best tactic maybe to “call a timeout.” Author Stephen Covey advisespeople to “begin with the end in mind,” and believesthat the ideal outcome must be one in which problemsare resolved with dignity and respect.

Three Avenues to Cost ReductionBy Patrick Penfield, Supply Chain Management Re-view, November 2007, page 30.

The author, a professor at Syracuse University, il-lustrated how all cost-cutting can be divided intothree areas:

P Material cost reduction.P Process cost reduction.P Overhead cost reduction.

Descriptions and examples are provided to showhow each type of cost reduction is handled in the sup-ply chain. For example, the author suggested thatoverhead costs could be controlled by using tempo-rary workers and reducing the full-time employeeworkforce, with its higher benefits cost.