The Last Mile: From the warehouse to the jailhouse

May 9, 2006
It took less than a month for the warnings sounded at the International Warehouse Logistics Association (IWLA) annual conference to become reality. Check

It took less than a month for the warnings sounded at the International Warehouse Logistics Association (IWLA) annual conference to become reality. Check workers' documentation, urged the speakers. If you find a discrepancy, give the worker five days to resolve it, and if they can't, terminate them. If you don't, you could be the one in handcuffs.

Four weeks later, in mid-April, nine managers and supervisors at IFCO Systems, a pallet and container maker, were in custody as part of a multi-state federal raid that also rounded up more than 1,000 alleged illegal workers. The federal probe reportedly examined nearly 6,000 employee records at IFCO and found more than half had "faulty" Social Security account numbers.

As Congress and the Bush Administration battle over how to reform immigration policy, the Department of Homeland Security's Immigration and Customs Enforcement agency marches forward enforcing current rules.

The IFCO experience demonstrates that undocumented workers are not just an issue in border states like California, Texas, Arizona and New Mexico. Talking to logistics professionals from other parts of the country reinforces the observation that logistics operations are dependent on the labor of low-wage, disenfranchised migrant workers. This isn't by design, it's just a fact of the competitive labor market.

Many warehouse managers are going into crisis mode reviewing worker records to uncover problems before they turn into criminal charges against the managers themselves. DHS has sent a clear message that it will pursue employers as well as the illegal workers, so it's in your best interest to dig into employee files and check the details on those applications. If you're contracting with a third party or public warehouse, you should ensure they are also screening for immigration status. As one warehouse manager points out, losing even a small percentage of your workers can be devastating.

In addition to a potential disruption in operations resulting from the loss of a number of workers, experts estimate the cost of hiring, training and replacing workers is much more than the initial salary. A $25,000 worker can cost as much as $50,500 to replace once the recruiting, screening, hiring and training costs are added to the costs of overtime and other expenses incurred while the job was vacant. Turn over 20 such jobs in a year, and your cost is over $1 million.

Those numbers don't sound too far out of line when you consider reports out of Southern California last year that suggest as many as 30% of drayage drivers had left the business when delays at ports and high fuel prices made it impossible for them to earn a living. Industry sources in the region note another contributing factor that was not reported was a Customs crackdown that snagged some of those workers who were undocumented and drove others deeper under cover.

So, you don't need a raid by Customs officials to lose a substantial portion of your workforce. Just the threat of increased enforcement could send some of your current employees scurrying for cover.

While you review and prepare for the enforcement issue, another question you should be asking is: What will this mean to warehousing operations and costs longer term? We can't afford to wait for a crisis like the trucking industry's long-haul driver shortage to hit our warehouses before we plan and act.

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