3 Replies Latest reply: Mar 7, 2012 3:43 AM by jack will RSS

how do you justify  a price increase for the warehouse space in relation to the headcount you have

sue ling Newbie
Currently Being Moderated

Hi,

 

I need help here

 

I was tasked to size up the warehouse space and also the number of people needed to keep the warehouse running, this is for an ongoing business but due to business volume is going down, and contrat nego is here. Although customer is charged based on variable rates for their inbound and outbound, i will have to think of ways to increase the cost for the warehousing portion and also to justify the headcount that i have. How should i go about this? I am at a loss

  • Re: how do you justify  a price increase for the warehouse space in relation to the headcount you have
    Kevin Dennis Newbie
    Currently Being Moderated

    I am out of the office and will return on Monday, 5/16/11.  Thank you.

     

     

     

    Kevin Dennis

     

    973-796-8659 (cell)

     

    kdennis@belart.com

  • Re: how do you justify  a price increase for the warehouse space in relation to the headcount you have
    Kevin Dennis Newbie
    Currently Being Moderated

    Sue,

    Not knowing all the details behind what your warehouse does I will relate a similar situation that we go thru pretty much each quarter based on business volumes from sales or from operations that we are consolidating from one facility to another. We review total output of orders broken down by LTL and UPS. Are we shipping more in one area?  How much has it changed from quarter to quarter? If there is an increase do we need to increase or decrease headcount or can we continue status quo because any additional incremental headcount that may allow us to ship more may not really be bringing us anything in terms of increase financial benefits. For example, we average 213 ups shipments per day, if we increased that by 10%, what does it really buy us?  The answer for us was nothing except we could ship more but it would mean we are simply making shipments earlier to customers because we have the labor to do so but we are not getting paid to do so therefore there is no cost benefit and/or justification for increasing the headcount.  We reviewed it the other way as well but found any decrease would jeopardize our service levels in that area and therefore didn't make sense.

     

    Cross training for us in the warehouse is an important variable because the more we cross train it could end up negating a cost increase in headcount because now we have two or three or more people with the ability to do multiple functions so that when there is downtime they are always adding value by working on something else.

     

    If you are trying to justify a cost increase because your expenses are rising meaning your rent is going up for the warehouse space, or utilities are going up for that warehouse space, then a specific percentage of those costs has to be allocated to whatever customer it is or customers you are trying to justify the cost increase to.  Then you have to have the ability to breakdown the percentage of how much of that business consumes the transactions of your existing labor. But you mentioned that the business volume is decreasing, so if I am on the customer you are trying to sell this to it would be a very tough sell. You must understand where your costs are coming from and pareto those costs in order to start to bring some focus to where the root cause of your increases are coming from.

     

    Kevin Dennis

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