Optimize Your Labor Resources

Dec. 1, 2009
Labor schedules can be aligned to put the right people in the right job to achieve operational excellence.

Coordinating schedules and managing your workforce are among the most basic responsibilities of running your distribution center (DC). After all, if there's no one there to load, unload, pick and ship, work comes to a standstill. Beyond that, you measure employee performance to determine if operational goals are being met — and when they aren't, you refine processes to make improvements.

But, it's very possible that poor productivity isn't being caused by your processes. It's because the right people aren't being assigned to the tasks at hand. When assigning work to employees, there is more to consider than each employee's particular strengths and weaknesses. There are a myriad of other key personnel and operational factors that impact cost and efficiency, and they need to be taken into account as well. That way, labor schedules can be optimized at the very beginning of a job rather than assigning personnel based on intuition and then hoping for the best when job performance is measured upon completion.

80 Million Variables

Job assignments are usually based on personal experience with your workforce and how much manpower is required to tackle a given workload. But, to bring the job in at the lowest possible cost, it is essential to factor in elements like seniority, cost, qualifications and individual past performance when assigning employee tasks.

You may be surprised to learn, however, that, in a typical DC, there can be up to 80 million personnel and operational variables that affect planning job assignments for the typical DC's workloads, service-level commitments and costs. These variables include elements such as:

  • Total number and length of shifts;
  • Number of full-time employees;
  • Historical employee performance;
  • Skill levels;
  • Overtime expenses;
  • Temporary staffing;
  • Employee availability;
  • Job specifications;
  • Time constraints;
  • Volume;
  • Equipment requirements.

Managing 80 million variables — all of which affect efficiency and productivity — goes far beyond what can be effectively controlled through manual calculations (Two-thirds of DCs are without automation.), spreadsheets and typical labor management systems.

Getting the Right Person for the Job

To effectively reduce costs and streamline operations, you should consider adopting a solution that can optimize DC labor by comparing available employees against user-defined constraints. The person with the right skills is then matched to job requirements across the entire enterprise — not just within operational silos.

For example, various supervisors have usually determined their core teams for specific tasks, like unloading, picking, etc. Then, in the course of operations, one activity inevitably becomes understaffed while another is overstaffed, so “sharing” labor becomes necessary. The overstaffed supervisor, however, is going to offer only his least effective performer (to preserve productivity within his own group), who may or may not be suited to the new job assignment.

In such a situation, an optimization solution examines a wide range of variables to create a scenario aimed at gaining facility-level visibility, creating job assignments that preserve efficiency and maximum performance in both areas and creating the lowest possible operational costs.

Bottom-Line Results

Experienced, knowledgeable supervisors can, in fact, create effective schedules that are 90% to 96% accurate in addressing facility needs and service-level commitments. However, labor costs make up a full 50% of DC operating expenses — and being off the mark by 6% in a facility with an annual payroll of $10 million means $600,000 in unnecessary expenses.

A labor schedule optimization solution, however, can capture that 6% and more by examining all factors on an enterprise-wide level, including pay rates, historical performance, historical throughput and future volume rates. As labor is customized to these specifications, not only are expenses reduced, but efficiency goes up, service levels are enhanced, throughput is increased and employee satisfaction is improved.

Simply managing employee schedules is no longer enough. Optimizing them — and being prepared for whatever comes your way by matching the right people to the job — can benefit the bottom line and provide potential advantages for maintaining operational excellence.

Peter Schnorbach is senior director of product management with Manhattan Associates Inc., a provider of supply chain solutions.

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