Reader Question

I'm currently working on efforts to improve retention in our distribution facilities. We regularly research to ensure the pay is above market, we offer outstanding benefits, long-term growth opportunities, and numerous other benefits.

We find that retaining labor at the lowest levels is often the most difficult to solve. Any recommendations or best practices regarding retaining quality labor at the lower levels?

Operations Manager

Wholesale Distributor

Category: Distribution Management


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Expert Panelist Response: Dan Gilmore, Editor, Supply Chain Digest 

Retaining DC labor, even in this economy, is not easy, and will get worse again as the economy recovers. I recently spoke with one logistics executive from a major grocery chain who said that this was especially acute with younger workers, who simply assume being DC labor is not their ultimate career path and, hence, who are not really that worried about leaving or losing the job.


This has many companies worried, and is a reason – along with the potential for unionization if a Card Check law passes – that quite a few of them are looking at the potential for additional automation.


That said, if you are where you need to be from a wage perspective generally, I have these suggestions: 

  • Develop a recognition program that calls out and rewards employees with various forms of small incentives from your company. That can, of course, include things like “associate of the week/month,” but is much more effective if there are some real benefits. That can include premium parking, gift cards, company merchandise, or any number of other awards. The experts at Kurt Salmon, in one of our videocasts, said it was key to mix up these awards every couple of months or so. They also encouraged managers and supervisors to meet, along with HR representatives, to plan these awards out.
  •  Potentially, and desirably, tied to this kind of program would be adoption of a Labor Management System (LMS) that rewards employees with incentives for exceeding 95 or 100% of standard. I have never failed to see this type of program, if well executed, to increase retention. It has to be thought out in a way that is good for the employee and the company, but a starting point is that 50% of the savings over a certain threshold are retained by the company, and the other 50% is paid to employees in the form of increased pay.


One company that does this, similar to many, adds 50 cents to $1.00 per hour to an employee's next month's pay that achieves this extra level of productivity. This can have a powerful psychological effect.


It can be done without a full LMS, but is harder to manage and may be less fair to the company or the employees at times without it, but it can be done (See Gainsharing Your Way to Productivity Gains in Distribution.)


You might also look at how hard the physical labor is for these workers and, if excessive, look for investment in some automation to make the job easier. I think it is important in that case to factor in the cost of the turnover and how that might be reduced (though it is a guess) in cost justifying the investment.


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Don't underestimate the impact of employing a variety of recognition tools to ensure your team does not fall back to monetary rewards too quickly. Discover how the good employees like to be rewarded; deliver on that need with verbal, written, formal, informal, public, private, group, individual, executive-to-supervisor contacts. The secret is to be timely and re-enforce the specific behaviors that you want to see more of. And from my own experiences, make it genuine and memorable recognition. It is easy to turn off a high performer if he/she perceives the recognition to be incongruent to the effort he/she invested.

Ray Tribe
Director of Operations

Lynden International Logistics Co.