5 Ways Location Intelligence Can Optimize Warehouse Operations | Blog Post

Warehousing and fulfillment operations today face more challenges than ever in seeking higher operational efficiency in an increasingly competitive market. Location intelligence is changing how warehouses operate, from optimizing profit margins to ensuring safety compliance.

Location intelligence software can help your company improve efficiency, reduce unproductive hours and increase profits.

What is location intelligence?

Location intelligence is the use of geospatial data to identify and solve business problems. Geospatial data is used across industries but is particularly impactful in operations-focused categories such as workforce optimization, route planning, cost auditing, and employee safety.

Deeper data-driven insights into operational processes give companies the knowledge to optimize their operations and better address their customers’ needs.

1. Labor Analytics

Adequately forecasting and allocating labor takes stress off an already stretched-thin workforce, especially when 73% of warehouse operators can’t find enough labor. Understanding the location patterns of humans helps warehousing companies determine whether their labor needs are over- or under-resourced.

Location intelligence software analyzes data to reveal the labor impact at the operator, department, plant, and even corporate levels of the organization. Indicators of labor impact include both availability and performance.

Availability

The most basic criterion of an effective workforce, availability, is concerned with when an employee can be at a specific location. Factors influencing labor availability are indicated by the following:

• Absenteeism: Measures include approved and unapproved leaves, illness, and other company-defined activities such as training or meetings.
• Indirect Utilization: Indirect time includes idle time, shift changes, equipment downtime, or supply delays.
• Scheduling: Simply put, scheduling is having the right amount of people with the right skills at the right time. Beyond merely having workers on-site, granular availability data can show when and where your most skilled and expensive labor is needed most.

Performance

Performance measures your workforce output, determines your efficiency standards, and ultimately informs your production schedule to satisfy customer needs. Location data can provide valuable performance information such as:

• Incentivization: Identify and reward your most productive workers to improve retention and reduce labor turnover costs.
• Training and skills: Do employees know how to do their assigned tasks? Are employees completing tasks quickly and satisfactorily? Seek opportunities to retrain employees or teach new skills based on performance.

With accurate data on projected versus actual labor costs, operators can optimize hourly labor by making smarter business decisions about hiring, training, or scheduling. High visibility into productivity also helps companies audit temporary contractors to understand their efficiency and real value to the business.

2. Route Planning

Maps and geospatial data have already been used for route planning purposes for years.

One such example is the UPS routing software Orion, which calculates the best possible routes for trucks. GPS data informs fleets of optimal driving routes to reduce time and increase gas efficiency. Location intelligence data from UPS trucks revealed that left turns are on average slower and less fuel-efficient than right turns. By avoiding left turns, UPS saves an estimated 10 million gallons of fuel annually. The routing software considers this when planning routes and prioritizes right turns. Real-time traffic reports input additional location intelligence data to reroute drivers when roads close or accidents occur.

On a smaller scale, route planning can be implemented at the facility level instead of city-wide to create similar process efficiencies. Adding location intelligence to your warehousing facilities can collectively save hundreds of hours of time in transit each day.

On average, warehouse workers walk 10 miles per day to pick orders, sort items, and complete key fulfillment processes. In large facilities, workers may walk up to 30 miles per day.

Now imagine cutting that total distance in half, thus saving 5 miles of walking per worker per day, compounding into hundreds of thousands of hours per year in each facility. Location intelligence data informs the most efficient path possible between bins to reduce the distance a worker needs to travel. Proximity tasking can assign pick tasks to workers already nearest to the bin or conveniently on the way to another pick task, reducing both distance traveled and the number of trips a worker makes. Eliminate work process redundancies and cut labor costs associated with duplicate efforts to improve your bottom line.

3. Root Cause Insight

Location intelligence has a unique ability to inductively identify the cause and effect of investments. Traditionally, root cause analysis is supported by data from manual human observations. Advancing technologies in warehousing can now leverage location intelligence of assets and people to derive faster, more accurate analysis.

Time and motion studies are a critical method for obtaining data on process efficiency, however, conducting time and motion studies is often an expensive and manual process. Look beyond the days of sampling process step times over a worker’s shoulder with a stopwatch in hand. 

Our Volan technology enables real-time analysis of people’s movements, translating movement into actionable business insights. Instead of conducting a time and motion study to set efficiency standards annually, location intelligence software can conduct studies to audit these standards every week or even every minute. Location intelligence gives you true insight into the cause and effect of process changes to explain precisely what is happening across the warehouse in real-time.

For example, measuring the effectiveness of change is something everybody wants, but few have been able to do. With visibility into productivity across all parts of procedures, operators can identify specific steps for improvement. Instead of just timestamps for completing pick tasks, identify movement bottlenecks across the whole process and see precisely where productive time is being spent. Most importantly, the results of changes to operational practices can be monetized for ROI calculation and justification.

4. Accurate Accounting

Understanding your labor cost and maintaining accuracy is essential to running a profitable operation. With the rising labor costs in 2022, companies across the nation can allocate up to 70% of their expenses solely on labor.

The latest figures from the Bureau of Labor Statistics put annual warehouse turnover rates at 49%. It costs $8,500 dollars to replace a warehouse worker based on factors such as severance, pay, unemployment taxes, recruitment, and training. In a 100-person facility, the total cost at the annual turnover rate is $416,500 every year. Whether you’re looking to expand your workforce or downsize it, understanding worker performance and the returns on training or overtime are critical to fine-tuning your P&L.

Without accurate data on your labor force, there is no way of knowing how much each additional employee costs your organization. Furthermore, this lack of data makes it impossible to project current or future hiring capabilities. Perhaps most importantly, you cannot confidently price your goods and services without knowing the cost of labor associated with it.

Location intelligence uses worker location data to inform accounting accuracy by understanding not only when people are at work but also how productive they are. Some factors to consider include:

• Accurate P&L reporting with a detailed breakdown of labor cost by site, shift, role, etc.
• Audit projected vs. actual labor cost for better forecasting.
• True labor utilization (labor content vs. total labor content + idle time).
• Compare sites, shifts, roles, work zones, and jobs to identify the most productive and least productive labor utilization areas.
• Identify and reward your most productive labor. Identify opportunities for retraining when needed, thus decreasing turnover.

Volan Technology revealed over $3,000,000 in annual labor savings in a Fortune 500 client. The critical discovery was a $2.75M difference in their standard vs. actual labor cost. These factors inform how to optimize pricing strategies to increase profit margins by ensuring accurate billing of hourly labor and contractors.

5. Safety & Security

Location intelligence proves to be invaluable when it comes to adding an additional layer of validation to a warehousing facility’s security.  There are two main ways your company can leverage location intelligence for safety and security:

1. With geofencing and real-time alert systems, it is possible to know if the personnel is approved to be in restricted areas. Reducing unauthorized access to equipment and areas improves physical security and decreases the risk of injury to your employees.
2. Any change initiated to the configuration of the warehouse floor plan can be double-checked against the geo-fenced location of the user making the change, combining physical security standards with cybersecurity.

When paired with other facets of location intelligence, including route planning and labor analytics, your workers can accomplish more with less effort. Walk fewer steps, take fewer trips across the facility, and maintain optimal levels of labor utilization to reduce strain on an already stretched-thin workforce.