Archive for labor management

The Basics of Labor Management – The Pitfalls, Myths and Keys to Success

In my last post about Labor Management, I indicated there were three cornerstones to the program – Planning, Monitoring and Measuring. This is nothing new to those who are familiar with Labor Management and engineered labor standards.  For those who are still not sure how Labor Management and a discrete engineered standards program can help improve productivity with minimum capital investment, let’s look at why Labor Management continues to be a topic of discussion.

Avoid Common Pitfalls – Measure, Monitor and Manage

Labor Management for distribution centers is a continual topic about supply chain journals, market analysts, and presentations at every trade show.  Why does this program seem to continue to have such media coverage but the embracement by companies is still not as mature as things such as warehouse management (WMS), automation (MHE) and other technologies?  Particularly when the benefits of a Labor Management implementation are presented at 15-30+% – sometimes as high as 45% – without major process changes?

To answer this, let’s address where the ROI really is in a Labor Management implementation, how you can avoid the common pitfalls, and most importantly how you can achieve sustainable success that is promised from engineered standard measurements, real-time monitoring and labor planning.

If you think you don’t need Labor Management because you already have Units Per Hour (UPH) and complex WMS reports that show key metrics by department or even individual, think again.  Remember, you cannot manage what you do not measure!  If you are only measuring the units per hour by function, than that is all you can manage to.  And the variation is orders and products is enough to make this an inconsistent measurement.  (Okay, if all you pick is one item of the same size in the same quantity from the same location – then yes, UPH is fine.)

Regardless of the economy, companies always need to know what it costs to run their business.  Labor is one of the largest costs and Labor Management is designed to help you manage it.  Additionally, Labor Management has evolved to provide real-time planning, quality monitoring, and dashboards that make it easier for managers and supervisors to know where the opportunities lie for improvement.

Top Labor Management Myths

For those still unsure of if Labor Management is a priority, or for those that have already dismissed the benefits as being realistic, let’s debunk the myths.

  1. MYTH: Installing a LMS will save us 15-30% without doing anything else. Yes, installing Labor Management does not save you 15-30% alone.  But a LMS will show your managers specifically where opportunities lie much faster and easier than typical reports.
  2. MYTH: Labor Management requires significant maintenance to maintain accurate measurements. Labor Management standards need to fair and consistent.  Too often people use the word accurate.  In fact, I would argue that accuracy is not even a word that should be used in this context.  Regardless, labor management can be as accurate as you want it to be, but in reality the multiple variables allow the standard to be fair and consistent for each associate regardless of the tasks being completed.
  3. MYTH: Labor Management systems require an incentive program to achieve the savings depicted. While the projected savings of 25+% do typically include an incentive program, companies should not ignore the 15-25% – or 10% for that matter – that can be achieved with just the LMS, engineered standards, and a continuous improvement program around the best practices.

How to Build a Foundation for Success

In order to achieve these savings and not approach the common pitfalls, it’s important that companies focus on the fundamentals.  While this list of 4 items does not encompass an complete implementation plan, these are definitely the foundation to success:

  1. Define the right way to do the job. Companies often indicate they have Standard Operating Procedures (SOPs), Job Descriptions or other process documentation.  The problem with these documents is that explain what to do for a job.  They do not explain HOW to do the job.  Best practices, preferred methods, or any true LEAN process document will outline the key steps on how the job should be completed.
  2. Coach your employees to the best method. Supervisors need to become coaches who help show where time is being lost in poor methods.  For example, in a pick to pallet operation, parking in the middle of the aisle vs next to the slot will cost you a significant amount of time.  Show me an SOP that calls out where to park the pallet jack.
  3. Measure what you want to manage. Remember, you cannot manage what you do not measure, but be realistic.  Pareto principle should apply when considering what to measure.  Where is 80% of the labor used – it’s likely only 20% of the operations.?
  4. Praise great performance as much as you counsel poor performance. Labor Management systems should be used to encourage and acknowledge great performance more often that counseling subpar performance.  This is often forgotten by management.  Remember, people like goals and like being acknowledged when exceeding expectations!

Hopefully this has given you a solid starting point for considering Labor Management as your next initiative.  In my next series, we will look at a roadmap of 7 key habits to instill into your operations management team to exceed the expectations and become a true learning organization on continuous improvement.

Read Other Posts from Supply Chain Logistics Series…

Plan, Monitor and Measure – The Cornerstones of Supply Chain Labor Management

It’s surprising how many companies have not yet considered Labor Management as their next initiative. Especially since most companies would agree that you first need to measure what the current state is to understand if the future state is an improvement right? The old phrase of “you cannot manage what you do not measure” was one of the focal points of the prior blog, so let’s pick up where we left off regarding managing your most important (and typically largest variable) supply chain cost – your workforce!

There are three cornerstones to Labor Management – Planning, Monitoring and Measuring. Your Labor Management program should be designed to support all three of those and each of them require one another to be effective. You cannot plan or monitor what you do not measure, just as you should not try and measure what you do not need to plan or monitor. For example, if you have 1 person handling returns out of 100 people, is it necessary to measure that returns process with 5 variables and discrete handling and traveling characteristics?

Planning with Labor Management

An effective Labor Management system should be designed to help you plan labor requirements by area, function, wave, or any other critieria that drives the execution of your distribution center. This plan should be derived from multiple variables supported by standards that are based on what it should take to complete the job.

Monitoring with Labor Management

We all know that the only thing right about a forecast is that it is wrong. So while a labor plan may give you a starting point, it’s important that a Labor Management system give your operational leadership the ability to monitor the workforce productivity in real-time. This real-time access to individual productivity will help managers make the necessary decisions about labor re-balancing requirements as the work plans progress during the day.

Measuring with Labor Management

Industrial Engineers know that seconds are for track meets (not labor standards) just as operation managers should know that UPH (units per hour) is for facility reports. Industrial Engineers who know work methods and measurements know that standards are in decimal minutes; and operation managers should know that labor performance of an individual is driven by work content. Utilizing multi-variant discrete standards provides a great view of labor, and coupling it with the workforce management systems to effectively track labor from clock-in to clock-out will uncover the lost time and productivity that can easily be regained. And by regained I mean get more out of what you already got.

In my next segment, we’ll look at the basics to Labor Management – where to begin and what to look for as you consider this initiative for your supply chain operational excellence.

Read Other Posts from Supply Chain Logistics Series…By Brian Lindenmeyer
Managing the Most Important Part of Your Supply Chain. The People.

Managing the Most Important Part of Your Supply Chain. The People (Labor)

Supply Chain Logistics Series: Labor Management

by Brian Lindenmeyer

As an industrial engineer who has worked in a variety of industries and verticals, my focus has always been how to get more out of what you’ve already got. And more often than not, in the supply chain of companies, it’s about labor. Labor management is one of those topics that has been around for a long time, but doesn’t seem to go away. While there are companies that have had fantastic results year after year, there have also been companies that have gone away from using the tool like they did before. Often the reason is that they claim that they have no embraced LEAN or some other continuous improvement initiative – but to say that Labor Management is not a part of LEAN is going to be something we discuss in other conversation.

The one thing I’ve learned in looking at the successes – and failures – of Labor Management implementations is that you get what you “P” for. And “P” could mean “pay”, but also “praise”, “practice”, among others.

So let’s look at why it’s important to manage labor, how you can set the right foundation to support continuous improvement, and ultimately understand how to effective plan, monitor and measure the results of your improvement.

  1. You cannot manage what you do not measure.

    My father was also an Industrial Engineer, and as a professor emeritus he stressed this to his students (and his three boys). There are a lot of measurements out there in the Supply Chain: Perfect Order, On-Time Delivery, Fill Rate, Units Per Hour, but in the end, what are you managing? PEOPLE. So if you are not measuring people, how do you expect to manage them properly?

  2. At the same time, you cannot manage all that you measure.

    The advancement in technology has created an easy means for companies to get into information overload. Reports, dashboards, KPIs, and alerts are just a few of the items that every company is proud to display. However, what is more important when you are driving, the rear view mirror or the windshield? Too often we get wrapped up in what reports show, but that’s only going to show you where you’ve been, and the key is looking for metrics and measurements that can help you navigate to a future (better) state.

  3. Understand what motivates your most important asset.

    I’m not going to say that Labor Management programs are going to point this out. But if you understand how to interpret the information Labor Management provides you, then you can equip your leadership team with the necessary tools to foster continuous improvement and operational excellence.

In the next supply chain segment, we’ll look at the cornerstones to Labor Management – Planning, Monitoring and Measuring.

ABOUT TRANSTECH CONSULTING

TransTech Consulting, A Blue Horseshoe Company is a privately held management consulting firm that has been providing expert supply chain consulting solutions to Fortune 500 and mid-market businesses throughout the world since 1983. Based in North America, TransTech assesses business needs and applies world-class business applications to improve profitability and increase efficiency. For more about TransTech, visit www.transtechconsulting.com.

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