If this first story sounds familiar, it is - I touched upon it in my Productive Output post. A few weeks ago the owner of a local large online retailer (approx 10x bigger than us) visited the warehouse. George worked for him prior to starting DI, and he based much of early DI off of this particular website. After seeing our shipping process on the back-end of our shopping cart, the owner turned George and his co-owner and said “I could fire two employees if I had that technology”. I unfortunately was not there to hear this, but upon getting the story from my partners it made me feel about as good as a developer slash business owner can feel.
Thus far, features like the shopping cart are how we’ve gotten our competitive advantage, how we’ve gotten as far as we have as guys just out of college with no outside funding. Anytime something takes up a lot of time we’ve either automated it or eliminated it. However, we’re rapidly approaching the time when four people just can’t handle it all. Today Mike, George, and I spent from 9 AM - 3PM packing our orders from the weekend. That’s 18 man hours doing warehouse work! Don’t get me wrong, we shipped close to 60 orders - many of which were very large - but no owner in their right mind thinks that 3/4 of their resources should be poured into $10/hr work while the high level stuff (mostly marketing) gets ignored and pushed back.
So why not just hire right now? A couple of things add to the difficulties:
- 18 man hours is not the norm. The norm is probably 4/day, but it’s not uncommon to have a few slow days a week that only take 2 man hours. Mondays are always larger because you have an extra 2 days of orders being shipped. In short, the pure warehouse work is sporadic.
- We don’t really have a lot of other work for “warehouse workers”. Shelves need to be stocked for maybe 30 minutes to an hour a day. Inventory needs to be updated (15 minutes a day maybe). That’s about it unless we want to cross train them in other areas, which I personally do not think is a good business move.
- We recently instituted a new check/balance system where one person pulls orders and another packs. Both check the invoice against the products before passing it on (either to the packer or to the outgoing packages area). This prevents errors due to pulling the wrong item, and highly reduces errors from missing an item all together. We’re pretty serious about it: if you take the product off the shelves, you are absolutely not allowed to pack and ship it. If this is the case, do we hire 2 employees? Or do we still have an owner paired with the full-timer?
- Our salaries aren’t as high as we want them to be right now. We are all getting by, but still underpaying ourselves. Everyone is living tight and that is stressful. An employee will increase revenue long-term, but we’d like to get one more raise in there for us before hiring someone.
My gut tells me that in a few months we won’t have a choice: we’ll need to hire. IF our threshold is where I think it is (fingers crossed), we’ll already have our raises and it’ll be a question of: do we hire one full timer or two part timers? I’m leaning towards two part time college age students with flexible schedules. This eliminates the need for us to provide benefits, meets our check/balance requirement (if one isn’t working that day, one of us will chip in), and enables us to have them only come in 3-6 hrs a day. I realize that there are downsides to these types of employees, but I think the pros outweigh the cons. Who knows, maybe we’ll have 3 or 4 at some pt to ensure that we get 2/day.
The good news in all of this is we’re growing. Nonetheless, every “hump” is stressful. The “getting into a warehouse without going under” hump is passed and this is the next logical part of our growth. The warehouse stuff was only February, so things are happening fast, even though a lot of days it feels like growth is happening at the speed of molasses.
On a somewhat related topic: we’re considering getting an intern or hiring a virtual assistant (usually based in India) to do a lot of the more monotonous marketing and customer service tasks. One example would be to create a list of sites for us to contact to participate in our wholesale or affiliate programs. There are many many more, but those illustrate the point that there are long tedious tasks that us, as owners, shouldn’t be spending our time on.
On a completely unrelated topic: this heatwave is ridiculous. I was sweating balls all day long doing manual labor in the warehouse. Average high temps this year: ~70 degrees. Beautiful weather right? This week: close to freaking 100 degrees with humidity that makes it feel like you’re in a steam bath all day long. Our boxes - despite being “dry” - felt mushy when we were trying to pack orders. The packing slips and invoices were curled up like you took them in the bathroom with you while showering. Last time I checked I lived in Upstate NY…not the swamps of Florida.
On June 9th, 2008 at 8:02 pm
“That’s about it unless we want to cross train them in other areas, which I personally do not think is a good business move.”
I agree with about 98% of the things you say. But, I don’t think that’s necessarily such a bad business move. In order for any small business to grow, it needs a staff that is committed to being versatile, team players. Of course, this starts with the owners (you), but also extends to the initial employees as well. Without hiring a team player that can concentrate in one area, but still perform other tasks during downtime, you’re toast. Because the day you reach the point that you can fill 40 warehouse hours per week is the day that you and your partners are consistently spending far too many hours in the warehouse already. And if you let it get to that point, you won’t have enough time/patience/mental stamina to make a rational decision about an employee. Instead, the decision will be hasty and made mostly based on need vs. a quest to find the right candidate.
I guess the point I’m getting at is, at the very least, you should start lining up candidates now, while you’re head is still clear. Otherwise you’ll find yourself in the same position you were with your server - getting it done in a possibly sub-optimal way because it’s an emergency. That’s not a fun position to be in.
Also, you mentioned knowing that Monday is typically a busier day than the rest. Why not just hire a part-timer that works a lot of hours Monday, and sporadically throughout the rest of the week? At least it would allow you to refine your employee training process so that if & when things get busier, you can ramp up the existing employee’s hours or find another one, and not have to worry about the concerns you mentioned, since you would already have solved them during a less stressful time period.
On June 10th, 2008 at 8:47 am
Anthony,
Very true. Let me rephrase that sentence:
“That’s about it unless we want to cross train warehouse workers in other areas, which I personally do not think is a good business move.”
I want our warehouse workers doing inventory, stocking shelves, re-organizing the packing area, etc in their downtime. I don’t think it makes sense to have a $10/hr worker cross trained in customer service, marketing, or programming. If they prove themselves, I’d say we’d grow them into the “operations manager” role where they would actually work with our vendors on ordering inventory.
And I agree completely that we probably should get someone in for just Monday’s sooner than later…as long as we can find someone who can grow into more hours in the fall (usually the opposite of what students want). You’re right, we probably should start keeping our eyes out for anyone who would be a good fit.
As far as the server situation, I think that’s apples to oranges. We see this one coming. The server stuff had it’s annoyances in the past, but never any real downtime or issue like a nameserver going down. Had you asked any of us a week prior we would have said we could have probably stayed where we were for another few years. He had been hosting DI since 2005 with no major issues.
On June 10th, 2008 at 9:12 am
Fair enough.
As for the server, I know it’s apples to oranges, but that was kind of my point (ie. No sense in throwing away the benefit of foresight when you actually have it, only to get yourself stuck in a situation like you were with the server, which is something that only happened because you didn’t have that benefit).
On June 10th, 2008 at 9:34 am
Your comment actually sparked a pretty interesting discussion between George and I. Once I run it by the rest of the team I’ll share. I may have been under-estimating our financial situation at the moment which could open up a few more possibilities.
On June 10th, 2008 at 10:06 am
You’re also assuming that 15 mins of productive work for an entrepreneur is the same as 15 mins of work for an employee… They could take 30 mins to do a 15 min task, and then ask you when their break is.. haha.
I’m proud of you guys. I’m looking forward to seeing more sites and country-wide warehousing.. the sky’s the limit!
Adam Holland
On June 10th, 2008 at 10:26 am
Adam - I’m proud of you guys as well! Well done.
This is something I’ve been thinking about a lot too. I think you guys really need to decide what kind of business you want.
It seems like you guys are trying to create something that takes as little work as possible.
Or you might want to create the next ‘Zappos’ and attract outside funding where you have lifetime employees who are committed to your growth…
HUGE decisions that I think will make this decision a lot easier once you guys know what you want…
On June 10th, 2008 at 2:54 pm
Thanks Adam & Adam.
Holland - you are correct: it will take employees more time to do a task than it does us, especially at first. Over time I would hope they would be as good as or better considering they will be doing it more, but that may not necessarily be the case.
Gilbert - yes, I think the decision has kind of been made that we want to put the systems in place so that the business “runs itself” and we can remove ourselves from the day-to-day. Now, from there we may decide we want to scale big. But right now the focus is getting to those 3-6 employees that can replace what we do most of the time.
On June 11th, 2008 at 8:47 pm
How did you find this warehouse?
I having the most difficult time locating a small warehouse.
Did you ever post the steps it took to find your spot.
On June 12th, 2008 at 10:21 am
Rob -
It was REALLY hard. I haven’t particularly posted the steps, but the warehouse section of the blog has posts where I discussed it as it was happening.
http://www.adam-mcfarland.net/category/warehouse/
In the end, our best “technique” - and the one that ultimately worked - was to just drive around about a 15 mile radius and collect every single phone number of commercial or warehouse space to rent. We found a lot more signs than you’d think, but they all pointed back to the same handful of companies. So we called them all, and we had a few good options after doing that.
I hear what you’re saying though: finding a 10,000 or 50,000 sq-ft warehouse is a lot easier than a 1,000 of 5,000 sq-ft one.
Good luck. Drop me an email if there’s anything else I can help with.
On August 2nd, 2008 at 4:47 pm
[…] one point in the discussion I started talking about our hiring situation. He mentioned he’d keep an eye out for exceptional talent, which I said would be awesome. […]