If you needed a warehouse headcount calculation and staffing based on volumes, how would you do it? There are many reasons you might have to calculate your warehouse, distribution center, or fulfillment center headcount.
For example, you might be planning a budget. Or building a business case for a new automation project. Or maybe it’s as simple as planning an org chart and departmental labor requirements.
When we at PL Programs are helping operations teams plan warehouse projects, we have to do this all the time. It is important to build a staffing projection for hiring and production as a new facility ramps up. Or when a piece of automation is added.
Building a good staffing model will give you and the executives confidence in being able to deliver the project.
Here’s the way to do it to make sure you get it right.
What Is Headcount?
First, it’s important to understand what “headcount” is. This means the number of people working in the warehouse. We can further divide this concept into several groups.
These groups include non-exempt (from overtime pay) and exempt employees.
Non-exempt employees can earn overtime pay. This means they are usually paid at an hourly wage rate and have scheduled shifts. They include direct and indirect labor.
Direct labor includes employees whose work is directly applied to producing units at the facility. For example, at a warehouse, these can include pickers, receivers, loaders, inbound associates, and so on. This is the group we’ll focus on when using planned volumes to calculate headcount.
But there are other important groups to consider too.
Indirect labor includes employees whose work is not directly applied to production but is still needed for the facility to function. These include groups like Quality, Inventory Control, Maintenance, and other supporting roles.
Exempt employees cannot earn overtime pay. They are usually paid on an annual salary. They include managers and can include salaried specialists like planners and engineers.
Our total headcount plan should contemplate all of these groups even if you just need to calculate a smaller set of them.
Why You Should Be Able To Calculate Headcount
Headcount calculations are very important to running a warehouse, distribution, or fulfillment operation. Here is where you’ll need to know your headcount requirements:
- Daily shift production management: if you have a daily volume plan, you need to know how many hours, and team members, you’ll need in production to meet your goals.
- Long-term planning: Hiring and training takes time. So you need to know what your need for employees is several weeks before you actually need them! You’ll need to balance turnover rates with new hiring and have a target headcount in mind. The way to get to that headcount is from volume-based calculations.
- Budgeting: Finance always wants to know how much you’ll spend. They’ll ask you what your headcount plan is, and you’ll need to tell them what you expect to spend. The best way to do this is through a volume based approach.
Now let’s figure out how to figure it out!
Calculate Direct Labor
Here’s how to go about the warehouse headcount calculation.
1. Determine the scope: First, identify all the functions that need staffing in your facility. This typically includes:
- Receiving
- Put-away
- Picking
- Packing
- Shipping
- Inventory control
- Quality control
- Supervision and management
- Maintenance and janitorial
2 . Establish Productivity Standards: For each function, determine the standard productivity rate. This is usually expressed in units per hour (UPH) or time per unit. For example:
- Receiving: 200 cases per hour
- Picking: 100 lines per hour
- Packing: 30 orders per hour
These rates can be calculated based on historical performance or developed by engineering studies. Either way, they should be included for your staffing calculation. They can always be updated later if you find more accurate information!
3 . Calculate workload: Based on your planned volumes, calculate the total workload for each function. For instance:
- If you expect to receive 16,000 cases per day, and your receiving productivity is 200 cases per hour, you need 80 hours of receiving labor per day (16,000 / 200).
4 . Factor in non-productive time: Account for breaks, meetings, training, and other non-productive time. Typically, this is about 15-20% of total time.
5 . Determine shift patterns: Decide on your shift structure (e.g., one 8-hour shift, two 10-hour shifts, etc.) and the number of days per week you’ll operate.
6 . Calculate Full-Time Equivalents (FTEs): Divide the total required hours by the hours in a full-time work week. For example:
- If you need 80 hours of receiving labor per day, and you operate 5 days a week, that’s 400 hours per week.
- If a full-time week is 40 hours, you need 10 FTEs for receiving (400 / 40).
7 . Account for absenteeism and turnover: Add a buffer for expected absenteeism and turnover. This is typically 10-15% additional headcount.
8 . Consider peak periods: Factor in any seasonal peaks or fluctuations in volume. You might need to hire temporary staff or cross-train employees to handle these periods.
Put It All Together
Now let’s put it all together.
In this example, we used Picking as the process path. We put a Daily Volume of 10,000 units in the plan and an employee picking rate of 200 units-per-hour. Both of these numbers can be adjusted based on your facility and employees and time of year (like peak or slow season). This is also why having forecasts is so important!
Then we calculated the direct hours needed. 10000 / 200 = 50 hours.
Then we added 15% nonproductive time on the direct hours to get to 58 work hours needed.
Then we added another 15% on that for PTO and Absenteeism. You could adjust this based on your site’s experience with absenteeism or PTO policies.
This gave us Adjusted Hours of 66 hours needed in the building. We then factored in Employee Training Ramp of 95%, as an assumption for if the employees are not fully trained. This could also be omitted or increased if your team was fully trained, or you knew the blended rate at which they’re expected to pick based on how far into their employment cycle they are.
We found we needed 70 hours of labor planned for the building to meet these requirements.
Then we divided by the shift length to find how many actual employees we need in the building. In this case, with a shift length of 10 hours, we need a total of 7 (rounding up) employees! If we had two shifts, then we would need 3.5 employees per shift (or probably hiring 3 employees for one shift and 4 for the second).
This type of calculation also sets good baseline assumptions to measure efficiency against later.
Taking Staffing Projections to Planning Level
Ok, so that’s great, but that’s one volume and one process. What does it look like if we have more departments and a longer time horizon?
You’ll need to build out forecasts and do the calculation for every increment of time you’re planning for. It will look something like this:
We could make some tweaks to this. Breaking out the training ramp, or getting more specific with headcount per shift allowed, or other things like considering warehouse quality impacts on staffing might make this more realistic. But you get the gist:
- Forecast volumes
- Include your planned efficiencies and rates
- Calculate headcount required
This type of projection will let you see what your likely requirement is, even very far out on the calendar.
The Forgotten Staffing: Indirect Labor Planning
It’s easy to get caught up in direct labor planning. Direct labor planning is easy because it’s based on forecast numbers!
But there are some other groups to plan for in a warehouse headcount calculation, too.
Inventory: You will need inventory control and problem solving team members. Usually this is calculated as a function of cycle counting productivity or as a percentage of overall labor in the building. So if you have an inventory control policy that requires counting every bin in the building once per quarter, you know how many cycle counts you’ll need to do. Figure out an average cycle count time, and use that as your rate similar to the volume-based calculations above. This will give you the number of Inventory team headcount you’ll need.
Then maybe add headcount based on requirements for other inspections, rework, or problem-solving that you foresee. This calculation is a function of the quality rates in the facility, and will affect how many people you need to hire.
Clerical and Lead labor is essential for keeping docks moving, freight going in and out, and controlling flow throughout the building. Some of this labor can be calculated based on units in-and-out, such as truck-check-in productivity. Other times, a clerk or lead is needed for a specific function. Leads especially are often staffed based on number of department headcount or the functions needing attention. Just make sure you cross-train to enable flexibility if that person goes out on PTO!
Maintenance: Maintenance tech time can be estimated from a good maintenance program outline and amount of equipment. The number of maintenance staff must provide more hours in the building than the number required to complete planned and unplanned maintenance events.
Supervisors: Supervisors are the front-line management for the non-exempt employees. The supervisor staffing is often calculated based on department and headcount, with a headcount ratio of up to 30 being a common denominator. Although we have seen supervisors in charge of departments as small as 5 employees and as large as 90 or more during peak times!
Headcount Calculation Conclusion
How to calculate warehouse headcount is important for planning operations, for getting recruiting, hiring, and training done on time, and for budgeting purposes. The staffing and headcount calculation can be volume-based for most direct labor positions, but there will be some common sense needed to staff other, less-direct roles. They are all important to make sure that the building runs smoothly and efficiently.
This type of staffing model happens often during start-up projects and during ramp planning. This is something that PL Programs has experience with as project managers and as Operations leaders. We can help you build a good staffing forecast and projection for your site projects.
Contact us or set an appointment to work through this with us at your side!