Translating Productivity into Prosperity

It’s becoming more apparent that the U.S economy is in a slow but accelerating recovery. According to the Institute for Supply Management (ISM) semi-annual forecast, the U.S. manufacturing sector will grow in 2011, with manufacturing revenue increasing by 5.6%.

ISM also predicts that business investment, a major driver in the U.S. economy, will increase substantially in the manufacturing sector. In the ISM survey, manufacturers also indicated that they expect employment in the sector will increase by 1.8%. Along with that employment increase, respondents said they expected labor and benefits costs to increase an average of 1.9% in 2011.

In positioning business to take advantage of the growing economic recovery, companies and organizations have to take a close look at their methods of operation and find ways to improve productivity in all areas, particularly in view of the potential for rising employee compensation costs.

In a strict economic sense, productivity is the ratio of the quantity and quality of units produced to the labor per unit of time. This means that improved productivity can and does have a significant impact on bottom line profitability by producing more for less. Therefore, to take full advantage of the economic recovery, it is imperative that businesses look to improving employee productivity as a means to ultimately improve profitability efficiency.

One area in many organizations and companies that is ripe for improvement is storage and retrieval operations. According to Operations and Fulfillment Magazine, in most warehouse operations, 45% of costs are for direct labor while an additional 16% are for indirect labor. Picking and packing activities account for the majority of those costs.