Reinventing Exploitative Warehouses: Where Good Business Coincides With Decency
When appearing recently on a podcast (The Melting Pot by Dominic Monkhouse), it was suggested we check out Huboo. Supposedly, this company has found a way to create an alternative to the inhumane warehouses most of us are familiar with. After some research, this is definitely a company worth adding to our Bucket List. So, we reached out to Martin Bysh, co-founder of Huboo.
Huboo is a UK-based fulfilment company. They hold inventory and ship products for small and medium sized ecommerce businesses. Martin: "Paul and I founded Huboo in 2017. Before that, we were experimenting with online shops and needed fulfilment to facilitate the scaling of these experiments. We discovered that no fulfilment company wanted our business. We couldn't guarantee high sales volumes and therefore weren't interesting to such companies. When we ran into that problem, we knew we had to tackle the issue. That's when we started Huboo."
For many small and medium sized businesses, fulfilment is a problem. How can you outsource warehousing and logistics—a notoriously tough part of many businesses—without seeing your margins evaporate?
Martin: "We had to be clever. We had to come up with real optimizations to be able to provide such services without being terribly expensive. The answer (to us) was to run warehouses in more human ways."
Inhumanity in the warehouse business
First, let's look at the inhuman side of working in traditional warehouses. A good starting place is the main global player: Amazon.
As Vice reported earlier this year, "Lasting for more than a year as an Amazon warehouse employee is notoriously difficult. Some workers walk up to 15 miles a shift, while others pack hundreds of boxes an hour—moving in repetitive, forceful positions that lead to frequent—and sometimes lifelong— injuries to shoulders, necks, backs, wrists and knees."
A report by the National Employment Law Project notes: “What emerges is a troubling picture of Amazon’s business model—one in which the company views its workers as disposable and designs its operations to foster high turnover.”
It shouldn't come as a surprise that employee turnover at Amazon is as high as 37%! Imagine all the personal misery (and cost) that's baked into this 'business model'.
"We had to be clever. We had to come up with real optimizations to be able to provide such services without being terribly expensive. The answer (to us) was to run warehouses in more human ways."
Problems all around
Besides the fact that it's painfully inhuman to run warehouses like this, it doesn't make any business sense. At least, not if you ask Martin Bysh.
Martin: "Problems in warehouses are created by bad employers. By doing things differently, and with that I mean more humanly, you can solve many of these problems."
So let's look at how Huboo goes about that.
To break with the inhuman way of running warehouses, Martin and co-founder Paul Dodd came up with the concept of 'hubs'.
A hub, at Huboo, is a micro-warehouse. Each hub is run as a separate warehouse and can house several clients. Every hub is managed by one person, a hub manager. All the jobs of a warehouse have been rebuilt into the hub. The hub manager is therefore performing all the roles that are traditionally separated, such as picking, packing, posting, and even client support.
"We've combined the roles and therefore created a truly varied job. They're managing an entire warehouse for between 1 and 30 clients."
Because of the hub structure, scaling becomes easier. Hubs are highly independent and can be quickly added. Software connects them directly to clients and allows the company to move quickly while keeping bureaucracy and hierarchy to a minimum.
"But what I think is the real key to happiness of the hub managers is the role of support.", Martin adds.
Traditionally client support is done by account managers, which is mostly a one-sided job. At Huboo, the hub manager picks up that role and therefore has a direct relationship with the client, answering support queries and meeting the clients when they visit. As you can imagine, this makes the job so much more purposeful. Instead of picking orders for a completely unknown client, the hub managers know who they're supporting and how vital they are to their businesses.
Martin: "We regularly see that hub managers receive gifts from their clients because they're so happy with the level of support. This makes their work meaningful. And that's totally different from traditional warehouses where people just work for their paycheck. They simply have to work there to make money, and they surely don't feel valued by the company. They're treated like machines. It's like a long drawn out prison sentence."
"This is where good business coincides with decency. People work so much more productively because they're appreciated by their clients and not just by us. But also, they're part of the negative feedback loop. If something goes wrong, they hear about it before we hear about it. And they feel rewarded for solving those problems."
Another benefit of this more human way of running warehouses, is by avoiding some of the hidden costs of traditional warehouses. For example, the cost of layered support.
"Costs of layered support are huge. Someone calls a central support line and they speak to someone who knows nothing about their business. That person looks up online what data is available in their system and tries to figure out what is going on. This always takes more time than it should and the client is getting frustrated while the person on the phone is trying to make sense of something they don't yet grasp. Eventually they probably have to go to the warehouse. The warehouse manager will have to go to the picker, the packer or the poster. In turn, the picker, the packer or the poster goes back to the warehouse manager who goes back to the support person who goes back to the client. And then the client goes: 'This is not what I meant.'"
"This means you've just wasted 200 or 300 pounds on a process that did nothing but annoy your client. In our setup, we don't have those issues. Clients speak to a hub manager who directly handles their business."
A wealth of benefits
The varied jobs of hub managers unleash more benefits.
- Because of the micro-warehouse setup, the hub managers walk around 500 meters a day. That means Huboo got rid of roughly 9.5 miles (!) of walking compared to Amazon's average of 10 miles a day. Once again, it's not just good for people but also good for business. Martin: "This walking time is of course highly inefficient as the person doing the walking is not able to do anything else during this time. Huboo has been able to reduce this walking time, and therefore hub managers can do lots of other work at no additional cost." Huboo has been able to convert 95% of walking time into productive time.
- 75% of support costs associated with discovery and internal communication have been wiped out.
- Way more women are attracted to the varied position of hub manager. As a result, 60% of warehouse staff are women.
- Employee turnover is close to zero. It's the same rate as in the office. That's a good indication of people enjoying the thing they do. Plus, it saves a hell of a lot of recruitment and onboarding costs.
- This allows Huboo to employ all staff directly. There are no expensive agency fees unlike most other third party logistics providers.
Like many other Bucket List pioneers Huboo demonstrates good business does indeed coincide with decency.
This is where good business coincides with decency. People work so much more productively because they're appreciated by their clients.
A growing success
Two weeks after we spoke, Huboo closed another round of funding that will help them boost their expansion towards the European mainland. Currently, the company employs 120 people with an annual sales of ten million pounds. They project to grow to 200 employees by the end of 2020 and far beyond that over the next few years.
But the best thing about their model is that while growing quickly, the hub-structure allows the company to scale quickly while continuing to create meaningful, human jobs. Because of their modular structure there's no need for the traditional layers of dehumanizing bureaucracy.
Most importantly, there's no need to revert to the popular warehousing model of exploiting workers to the highest possible extent.
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That’s a very interesting warehouse operation indeed. Being familiar with design of traditional picking processes i am blown away by the 500m walking per day. There are office jobs that involve more walking!
How does productivity and cost per order compare to traditional logistics providers?
Yes Stowe, they've recently closed another funding round (https://au.finance.yahoo.com/news/huboo-full-stack-fulfilment-provider-080055196.html) to fuel their expansion to Europe's mainland starting in Germany I believe.
Gerald, the ideal number of people on a hub is whatever engenders a sense of ownership and provides a rich range of activities. One person per hub is the easiest way to achieve this, but because this is a methodology rather than a strict model it can be flexible in a number of ways. So clients that have volume that is too great for a single person can have a hub that has several hub managers sharing the entire range of tasks – but, crucially, the hub managers still have their own stations around the perimeter of the hub, and still experience the full rich experience of a complete micro-warehouse management and support role.
Koen, the hub model allows us to produce automated levels of productivity at human levels of cap-ex, with margins that track above traditional 3PLs, allowing us to provide our service at a price that undercuts competitors, and broadens the market to include SMBs that could not previously afford to use a 3PL. While, most importantly of all, providing jobs people enjoy.
As we're getting ready to launch the first cohorts of students for the Corporate Rebels Academy we are excited to release yet another sneak peek into the course content. Recently we shared the first video animation about the Chinese white goods giant Haier. Now it is time to release the second post in a series of videos on the world's most pioneering organizations. This time it is all about the Dutch health-care organization Buurtzorg.