How will the living wage rise impact warehousing?

As part of his Autumn Statement, Chancellor Jeremy Hunt announced that the national living wage will increase for over 23s from April 2023. The move is designed to alleviate the pressure on families across the UK amid the rise in the cost of living.

However, the increase in the living wage will naturally have a significant impact on businesses as it will lead to higher labour costs.

In this blog, we’ll explore how warehouses can reduce their cost to serve, despite increasing labour costs, by becoming more efficient with the help of Vitesse labour management software.


How does the living wage increase affect businesses?

From April, the living wage will go up by 9.7% from £9.50 to £10.42 for over 23s which equates to full time/or workers on a 40-hour contract having an extra £150 per month in their pockets.

Meanwhile, the national minimum wage for under 23s will increase by one pound for 21- and 22-year-olds to £10.18, while 18-20-year-olds will see their wages go up from £6.83 from £7.49.

But how does this increase affect businesses?

The Low Pay Commission, the organisation that advised the government on the recent increase, argued that due to the tight labour market and high vacancy rates means the economy should be able to absorb the increase.

Despite this optimism, some have pointed out at the increase in labour costs will force businesses to re-assess their workforces and perhaps lead to redundancies.

However, at Vitesse® we see things differently.

The rising costs doesn’t necessarily mean there needs to be job losses, amid the cost-of-living crisis it’s important that workers are paid a fair wage.

Instead, businesses should take this as an opportunity to evaluate whether their warehouses are as efficient as they could be and look to modernise.

Inefficiencies are plentiful and will no doubt be leading to higher hidden costs.


What are the hidden costs and how do they impact the cost to serve?

Many operatives may not realise the scale of the hidden costs in their warehouse as they’re unable to identify and subsequently minimise them. These costs, though known, are not easy to capture, are eating profits and if tackled, could help fund wage increases.

One of the biggest hidden costs is lost or wasted time.

This can be caused by a number of factors such as disparately located stock extending the pickers travel or equipment in the wrong place impacting fluency. It could also be under supervised staff not working to their potential.

Let’s use an example.

In this case, during a given day, each of the 100 members of staff will lose, on average, 40 minutes from their working time due to any of the aforementioned scenarios.

40 minutes may not seem like a great deal but over 5 days, at a new minimum of £10.42 per employed hour, this lost time can cost you over £3,400 and over a year around £176,000.

These costs are unnecessary and could be avoided, eliminating them can help reduce your overall cost to serve and make it easier for your business to accommodate the rise in labour costs.

However, in order to minimise these costs, warehouses need to operate more efficiently, and this is where Vitesse comes in.


How can Vitesse® improve warehouse efficiency?

Instead of units per hour, Vitesse® software measures efficiency and utilisation of employees in your warehouse.

Travel time can make up to 60% of picking time in a warehouse, when there is disparately located stock. This is costly time that could be spent completing other tasks and ultimately speeding up the overall operation of the warehouse.

Reducing travel time, and therefore costs, can be achieved using Vitesse® software as our location analysis significantly cuts unnecessary travel across the warehouse floor.

Our technology also calculates the number of metres an employee is travelling to complete each task, and in doing so creates a much fairer target task time for each individual employee.

The X, Y, Z map coordinates created by Vitesse® software are key to how these target task times are measured and provide valuable insights that enable these distances to be reduced or altered, where appropriate.

This contributes to greater warehouse operational efficiency.


How Vitesse® can help warehouses to reduce costs

Once the warehouse is geographically optimised, warehouse operatives can then use our data insights to get a precise measurement of employees’ productivity levels and understand who the highest performers are.

Those who perform well can then be rewarded and this will ultimately lead them to feel more valued as well as more dedicated to their role.

Individuals who are performing below standard can be identified and managers can look at implementing reward schemes as a way to incentivise staff to perform to their potential.

Whether its geographical or performance factors that are causing unnecessary lost time and money Vitesse is on hand to help.

Having an efficient warehouse, with motivated staff and well-located stock can contribute to a significant reduction in lost time will lower your warehouse’s overall cost to serve.

This will ensure that your business can adjust to the living wage rise and not have to make redundancies which would mean potentially losing talented staff, in the process.

To find out more on how Vitesse can help you to manage your warehouses in a fairer way and boost performances visit our website to find out more.

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Louis Hill

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