ATLANTA -- Hannaford Bros., Scarborough, Maine, said it is greatly improving warehouse operations by placing employees in the driver's seat.
Hannaford's warehouse in Schodack, N.Y., is partially run by teams of employees through representatives they elect. Wage-earning employees, rather than salaried managers, write budgets and schedules, hire and train new employees and handle customer service for retail stores.
The management structure has resulted in reduced error and product damage rates and savings from decreased employee turnover and workman's compensation costs, said Andrew Westlund, vice president of distribution, who outlined the program at the CIES Logistics Management Program here late last month.
The warehouse is overseen by a director of operations, but many key decisions are made by a leadership team of 21 employees, eight of whom are hourly paid and elected by their coworkers.
"Fifty percent of the time we don't have a salaried manager in the warehouse -- the team members run the facility," Westlund said.
Since the program began six years ago, he said, it has resulted in substantial benefits, including:
Enhanced customer service. The Schodack warehouse currently achieves a 98.5% on-time delivery rate and a 99.98% customer service level.
"We are 25% better than the published national average in our industry and 10% better than our traditional facility in Maine," Westlund said.
Reduced misorders and damaged products. The warehouse currently reports 1.81 errors per 1,000 products selected; the industry average error rate is more than double that figure, he said. Product damage amounts to 3 cents per ton, vs. an industry average of 35 cents.
"The team members are aware of the ramifications to the business because of errors," Westlund added. "That is why our inventory accuracy level is incredibly good."
Fewer employee injuries. The warehouse experiences one injury for every 12,000 hours worked, compared with the industry average of three injuries for the same time period, he said.
Reduced injuries lead to solid savings. While the retailer budgeted $450,000 last year for workman's compensation, only $38,000 was used.
Westlund credited the warehouse's low turnover rate -- 3% vs. an industry average of 20% -- to the empowerment of the warehouse employees.
"We feel very passionately about empowering our associates," he said, adding that Hannaford is experimenting with "employee involvement in every
area of our operations, from our retail stores to the offices, from truck drivers to maintenance."
Warehouse teams are given financial incentives for good inventory counts, he said. Teams can also take part in gain-sharing programs, where they are paid based on how the warehouse performs against the budget.
"For us, team goals are driven by the budget," said Kerry Donovan, a warehouse team member. "That's why we're involved in the budgeting process. In our facility, we had 35 people involved in making the 1995 budget, where five years ago three people made it.
"We do our own budgeting, hiring and firing, training, setting of goals," he said. "We do our own scheduling. Imagine 24 people in a room developing, picking and living by their own schedules -- we do that."
Training is also crucial, because employees need to be able to perform a number of different tasks to make empowerment work, he added. "In the first 18 months an associate will have a minimum of about 220 hours of training. Some will have up to 600 hours of training," Donovan said.
"When you first walk in the door you get 80 hours of orientation training -- that's more than the average supervisor gets in a lifetime."
No matter what their job description, each employee is responsible for handling customer service. "Everyone in the distribution center has called someone at one of our stores, or have gone out to the stores," he said.
Donovan added that relations between warehouse and retail stores have improved, because instead of a manager communicating with a manager, "people that pick up the boxes are dealing with people who deliver the boxes."
