QUESTIONS
TO ASK FOR
BETTER LABOR
MANAGEMENT
Managing
People & Process
Productivity
Evaluation
Program
Cook & Associates | Management Consultants
About the Author
Don Cook is President of Cook &
Associates, located in New Brunswick, NJ.
After serving as an officer in the U.S. Coast
Guard, he joined Booz Allen & Hamilton,
management consultants. Following this
position, Don founded Cook & Associates.
With the firm, he has provided consulting
assistance to a wide variety of clients and
has done extensive work to improve
productivity and service in retail activities. This includes buyers’
offices, merchandise checking & marking, receiving & shipping,
storage & picking, order fulfillment, credit handling, check-out
counters, and garment alterations. He created the Labor
Management System PEP (Productivity Evaluation Program) and
has directed over 200 PEP installations.
Don holds a B.S. degree in Industrial Engineering from Rutgers
University and an M.B.A. degree from the University of
Washington. He is a registered Professional Engineer and
member of Beta Gamma Sigma, a business honor society. He
has published articles on productivity improvement, efficient
workplace layout, and the use of simulation to solve golf course
waiting line problems. Don is a member of the Rutgers Industrial
Engineering Advisory Board.
This booklet is based on a webcast produced for Logistics Management, a Peerless Media, LLC publication.
Cook & Associates | Management Consultants
Cook & Associates | Management Consultants
What is Labor Management
Are You Doing the Best with What You Have
What is the Labor Management Payback
Are there Cultural Challenges
What are the 6 Most Important Concepts
How about Labor Management Software
What are the Implementation Time & Costs
Why do Companies Wait
THE QUESTIONS
1 Cook & Associates | Management Consultants
The people working in supply chain operations—distribution and
fulfillment centers—are among the most important resources in
any organization. To ensure that these individuals and the
overall process are highly productive, it’s important to apply
effective labor management practices and techniques. So, what
is this “Labor Management” that we are talking about?
In very simple terms, a Labor Management Program is the
system and the skills used by managers to help them reach an
Effective Operating Level.
THE LABOR MANAGEMENT SYSTEM (LMS) is the methods
& procedures designed to gather data, and the software
that efficiently consolidates that data into meaningful &
action-oriented operating reports.
THE SKILLS are acquired through extensive “Change
Management” training and are needed to reach the desired
results. These skills allow management to interpret and use
the LMS reports to:
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WHAT IS LABOR MANAGEMENT?
Develop Comprehensive Management Techniques
Provide Timely Employee Feedback
Reward High Performers and Coach Low Performers
Identify Processing Problems and Bottlenecks
Implement Methods and System Improvements
Cook & Associates | Management Consultants
Components of a Labor Management Program will be detailed
later, however, this graphic gives some hints as to the techniques
used to …
Reach the Effective Operating Level by Doing The Best with What You Have.
Now remember, once you get to the Effective Operating Level,
you have to be sure to maintain that level. But that’s not the
end. As methods and conditions change, this same learning
process must be repeated under the revised operating
environment to continue to do the best with what you now
have ...
And your Program must be flexible enough to again provide the right tools.
Another way of looking at this—how often have major capital
expenditures not achieved the projected return on investment?
Is it possible that you lack the right tools to manage the new process effectively ?
2
Although benchmarking is a popular consultant’s approach to
determine how your organization compares with your peers, its
use is limited. If the data is favorable, everyone is happy. If it’s
not, managers spend a lot of time justifying their ranking. They
normally fall back on the reasons their operation is different
such as: types of merchandise, value-added services, processing
systems, and the merchandising & logistics philosophy. Very
often they’re right – the low ranking is due to the operating
differences, not their operating effectiveness!
Operating Differences Make Benchmarking Difficult.
It turns out you can get a better idea about whether a company
is having trouble reaching an Effective Operating Level by
listening to the managers’ problems.
Courtesy of Solution Selling® Blog
ARE YOU DOING THE BEST WITH WHAT YOU HAVE?
Cook & Associates | Management Consultants 3
Cook & Associates | Management Consultants
Many of these telltale conversations go something like this:
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Often we are asked to visit a facility to see whether the right
labor management tools are in place. We start by asking some
questions such as: 1
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If the answers to these types of questions are not satisfactory,
the right tools are probably not in place. Of course, good
consultants should check on some of the answers. A quick story
shows what might happen:
How many employees are in each area and does it
include temps and loaned & borrowed hours?
What techniques are used to flex staff to balance
labor with work volumes?
Are high & low performers identified and how are
they rewarded or coached?
What key tasks comprise most of the workload and
are there any bottlenecks or problem areas?
I don’t really know what my people are doing, or
what they should be doing
We use a lot of temp staff and overtime, but I’m
not sure they are cost-effective
Some employees ask me why they’re paid the same
as others who do half the work
Stores say merchandise isn’t ticketed properly and
it doesn’t arrive on time
4
We were told by a company in the U.K. that they go into their computer screens to see what an employee did for the previous day and their productivity index. One of the managers went through the process. It took the manager about 8 minutes to obtain the data for one employee, whose unrealistic productivity index was 10%. Let’s not spend too much time on how to calculate that productivity index now since we will provide more details later on. Simply, the employee earned 45 standard minutes of work or ¾ of an hour for the day, and was paid for 7½ hours. Therefore, dividing .75 by 7.5 resulted in a productivity index of 10%. Obviously something was wrong with the data – or at least, we hope there was. The manager’s embarrassed response was: “Well, I knew this data was available, but to tell the truth nobody ever uses it.”
The Simple Moral of the Story:
If you’re evaluating whether effective labor
management tools are in place, be sure
to check in the real world to see if the
management process actually works
the way you’ve been told.
Cook & Associates | Management Consultants 5
Cook & Associates | Management Consultants
Companies sometimes think that stories of productivity gains
are over-rated. But, there are a lot of what appear to be
documented stories that show productivity gains in the 30-40%
range. Honestly, it’s not easy to measure the gains with a high
degree of accuracy since companies don’t operate in a
laboratory environment where labor management is the only
productivity improvement effort. It’s normally incorporated with
various system and facility improvements.
However, we did take pains a few years ago to survey some
clients and tried to strip out productivity gains by means other
than our PEP (Productivity Evaluation Program). We also
intentionally selected clients where the operating environment
was more stable.
WHAT IS THE LABOR MANAGEMENT PAYBACK?
Program Results
6
Cook & Associates | Management Consultants 7
The results for clients using PEP showed significantly higher
productivity, improved work quality, and reduced service times.
The initial productivity increase was in the range of 16%, with an
additional gain of 12% for clients moving on to incentives. 50%
of incentive gains were shared with employees. Also, work
quality improved 8% and merchandise turn times were actually
reduced by about 12%.
Remember, most productivity gains are achieved
by using efficient methods and reducing idle time - not by putting employees on a treadmill !
In addition, our experience shows that project breakeven, based
on Cash Flow analysis, is somewhere between 10 and 14
months. You have to admit that’s pretty impressive. Can other
capital expenditures match that return?
Bottom line: There are significant gains that can be achieved by implementing an effective
Labor Management Program.
Normal Average Payback: 10 to 14 months
Project Breakeven
$0
$200
$400
$600
$800
$1,000
$1,200
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Do
lla
rs (
00
0’s
)
Months
Cook & Associates | Management Consultants
As with any new initiative, there will be some challenges.
However, if you start by creating a sense of pride, it will increase
the chance of success. In other words ...
You have to be good to work in This Company!
The cultural challenges will vary based on current conditions and
the overall labor environment.
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No matter what the challenge, management must always reserve the right to manage.
About 40% of our clients are unionized. If management has
maintained a good working relationship with the union, and has
preserved their right to manage, there normally is no problem
with implementing an equitable program.
ARE THERE CULTURAL CHALLENGES?
Current Conditions: The number and difficulty of the
problems will vary based on the type of relationship
management has already created with the employees,
and if applicable, the union.
Labor Environment: Naturally, acceptance of the
Program will be much easier if the productivity
improvements are going to be used to absorb higher
work volumes rather than to reduce staff.
8
Cook & Associates | Management Consultants 9
Employees get credit for the work they perform and know they will be objectively evaluated
Managers get data to monitor their employees and a true picture of their operating effectiveness
Both Employees and Managers can get incentive rewards that will further strengthen their support
However, if an organization has forfeited the right to manage its
employees, it could well be that the cultural challenges become
a major issue. In some countries in Europe with very aggressive
unions, individual employee work measurement is almost
impossible.
So, how is the challenge met? Use the Program to establish a
strong employee and manager team for productivity
improvement.
This means there must be total transparency with all involved
parties and everyone must understand what they will get out of
the Program. As an example…
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Acceptance and morale can actually go up with the proper implementation of a
Labor Management Program.
PROGRAM
LABOR MANAGEMENT
Cook & Associates | Management Consultants
2
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3
4
5
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WHAT ARE THE 6 MOST IMPORTANT CONCEPTS?
Work Measurement
Employee Feedback
Performance Quality
Employee Incentives
Staff Scheduling
Data Summarization
Work Measurement Philosophy
Approach to Setting Time Standards
Narrowing the selection to just the six most important concepts
is somewhat difficult since a good Labor Management Program
integrates many important management techniques. But, let’s
give it a try…
These six concepts provide the basic framework for effective
labor management. The discussion emphasizes how to design a
practical program that will be accepted by the employees and
useful to all management levels.
In other words, the Program must really work !
WORK MEASUREMENT
Since work measurement is the nucleus that everything revolves
around in a Labor Management Program, more time will be
spent discussing this concept than the others. The concept can
really be divided into two topics:
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Cook & Associates | Management Consultants 11
Work Measurement Philosophy: Ideally, measurement is by
individual employee, or if not practical, by team or group. The
type of measurement is based on how the work is performed
and the availability of production data. In most PEP installations,
70 to 90% of measurement is individual.
THE NUCLEUS
The goal is to provide equitable measurement of all employees
and work centers. A key to having a program that works well is
to avoid micro-managing. Although labor management software
has the capability to monitor employees hour-by-hour, is this
really a good long-term approach? It might work for a short
period, but over a longer period, it can become a labor relations
concern, and the maintenance burden is too high for the
program to survive. Even during implementation, the micro-
management approach significantly increases employee
acceptance problems.
Balance the Level of Detail - More is Not Necessarily Better, and Less is Often Not Useful !
Cook & Associates | Management Consultants
In PEP, we get excellent results by using a more people-oriented
approach that measures an employee’s work for an entire day
and compares that to the hours paid. Good consultants know
how to balance the level of detail.
Approach to Setting Time Standards: The complexity of the
time standards, and the methods used to set them, can be a very
lengthy discussion. This booklet only covers the overall
approach and hits some selected points. Let’s start by showing
why time standards are even needed. The illustration below
uses a tailor’s job to show how time standards are used to
convert production data into a Productivity Index.
As can be seen in the example, the tailor performs three
different tasks: Cuff Pants, Shorten Jackets, and Line Sleeves.
By using time standards, the tailor’s production is converted into
6 Standard Hours of work. Dividing this number by 8 Paid Hours
results in a Productivity Index of 75%. Now you can see why
time standards are needed to account for the wide work
variations in the calculation of the Productivity Index.
Units
Completed
Per Day
1. Cuff Pants 20 cuffs 80
2. Shorten Jackets 6 jackets 180
3. Line Sleeves 2 sleeves 100
360
6
8
75%
50 min. per sleeve
A. Total Standard Minutes Per Day ……………………….……………
B. Total Standard Hours Per Day (360/60)…………….……………
C. Total Hours Paid ……………………………………………………………
D. Productivity Index (6/8)…………………………………………………
30 min. per jacket
PRODUCTIVITY CALCULATION
Task Standard
Minutes
Per Unit
Total
Standard
Minutes
4 min. per cuff
12
Cook & Associates | Management Consultants 13
These time standards can be set using a variety of techniques,
such as: stop-watch studies, standard data, time logs, work
sampling, video analysis, etc. Properly applied, any one of these
techniques can normally be used to obtain acceptable time
standards. The key is to make sure the standards are as simple
as possible and that standards maintenance will not outweigh
the benefits gained through the work measurement program.
Another problem with the short-interval measurement,
previously mentioned, is that it requires more complex time
standards. The rule of thumb is the shorter the measurement
period, the more detailed the standards. A realistic approach to
setting and maintaining standards is more important than an
engineering masterpiece.
That’s what we mean about being practical !
EMPLOYEE FEEDBACK
The Labor Management Program must promote Employee
Feedback between managers and their employees. In PEP, daily
reports point out high and low performers. This allows
immediate action to be taken to show appreciation to the high
performers, and to help low performers improve. In addition,
there are two features that facilitate the required feedback:
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Employee On-Screen Review: Viewing this daily network screen
shows employees and managers how well they are performing
and how the Productivity Index (%) is calculated. The current
and previous week’s data is available by day and the total week.
Employee On-Screen Review
Employee Performance Review
2
Cook & Associates | Management Consultants
The screen clearly shows how work in multiple tasks is
summarized by using engineered time standards. The resulting
Total Standard Hours credited to the employee, divided by the
employee’s Total Available Hours to perform the work, produces
an accurate Productivity Index.
Employee On-Screen Review
As you can see, Mary Jones had a very good week. Her
Productivity Average was 99% for the week compared to her last
100 hours of work at 95%, and the work center average of 92%.
Incidentally, the colored fields will be used later to show how
Incentives are calculated.
Employee Performance Review: PEP also reviews all employees
weekly and prints a graph for any employee whose last 100
hours of measured work falls below a minimum acceptable level.
An integrated three-stage review system is included to track
retraining efforts and monitor probation periods.
No Task Name Measure Time Std Units Mins
01 Start Picking Cycle Cycle 2.00 49 98 Total Payroll Hours
02 Full Cases Picked Case 0.31 424 Minus Special Projects
03 Partial Cases Picked Piece 0.16 522 Training (120 Min.)
04 Loose Pieces Picked Piece 0.10 500 Minus Paid Relief
05 Distance Traveled Feet/100 0.48 302 Minus Hours Loaned Out
06 Locations Visited Location 0.05 263 Plus Hours Borrowed In
Standard Minutes
Total Standard Hours (Standard Min. ÷ 60) Total Available Hours
=
EMPLOYEE DETAILS
Employee: MARY JONES 95Current Productivity % Last 100 Hr Productivity %99
92
COMPLETED WORK HOURLY DETAILSCategory Hours
Data Period: ENTIRE WEEK PEP Center: PICKING PEP Center Productivity %
35.16 35.50
40.00
1369 2.00
3264
4998 2.50
630 0.00
5253 0.00
2109
PRODUCTIVITY INDEX CALCULATION
STANDARD HOURS: 35.16 ÷ AVAILABLE HOURS: CURRENT PI %: 99 35.50
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Cook & Associates | Management Consultants 15
Employee Performance Review
As you can see, Tom Jones was an above average employee until
Week 45. At that point this graph was generated. Now he
would be put in the initial training stage—Status 01. The
effectiveness of his training would automatically be monitored
and, based on his results, he would either be put in the second
training Status (02), or in a probationary period.
PERFORMANCE QUALITY
Employee Performance Quality is an important part of the
overall Program. It must be carefully monitored to establish and
maintain high service standards. It’s even more important if
you’re paying incentives. Obviously, you don’t want to pay for
poor quality work.
3
Employee: TOM JONES
GOAL: PI %:
PEP Center: PACKING Status: (00) CURRENTLY NOT ON REVIEW
Reason for Report: POOR PERFORMANCE
EMPLOYEE DETAILS
PEP Week NumberPEP Week NumberPEP Week NumberPEP Week Number
10
0 H
r A
vg
PI
& G
oa
l1
00
Hr
Av
g P
I &
Go
al
10
0 H
r A
vg
PI
& G
oa
l1
00
Hr
Av
g P
I &
Go
al
40
50
60
70
80
90
100
31 32 33 34 35 36 37 38 39 40 41 42 43 44 45
Cook & Associates | Management Consultants
Productivity Cannot be Increased at the Expense of Quality
A potential quality problem was brought to our attention in the early stages of our software development. One of our clients, a Canadian retailer, was concerned that since they started paying incentives, work quality might have gone down. Whether our client had a real or perceived difference in quality was immaterial. We realized they did not have the right tools in place to know the answer, and quickly remedied the situation by including a comprehensive Quality module in the Program.
Performance Quality can be based on a 100% inspection process,
or on quality sampling procedures. Just as in work measurement,
based on the availability of the data, quality statistics are by indi-
vidual employee; if not, by team or group. The Quality results
can also be automatically factored into incentive awards.
EMPLOYEE INCENTIVES
For many clients significant productivity and quality improve-
ments can be achieved without employee wage incentives.
4
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Cook & Associates | Management Consultants 17
However, if an organization chooses to pay for performance,
even higher levels of productivity and quality can be reached and
the benefits shared with the employees. If monetary incentives
are not part of the program, some type of incentive should be
developed to let your high performing employees know they are
appreciated. Approximately 60% of our clients use wage
incentives, which are calculated weekly.
Individual or Group – Monetary or Other
Share Productivity & Quality Gains with Employees
The biggest bang for the buck is individual employee incentives.
Where individual incentives are not practical, team or group
incentives can be used to be sure everyone participates in the
Program.
But make no mistake, incentives must be carefully controlled and your Labor Management Program
must provide the data to do this.
PRODUCTIVITY MEASUREMENT
QU
AL
ITY
ME
AS
UR
EM
EN
T
Cook & Associates | Management Consultants
Incentives are based on sharing the labor hours that employees
save the organization when they perform at a higher level than
the pre-set goal. The Hours Saved calculation not only includes
measured work, but also includes Special Projects (non-
measured work) such as helping to train other employees.
This graphic shows how an incentive award is calculated in PEP.
The colored fields relate back to the Employee On-Screen
Review illustration:
Using the productivity data for Mary Jones, the above details
how she saved the company 8.8 Labor Hours. This was shared
50% with Mary and resulted in a weekly Bonus Award of $44.
STAFF SCHEDULING
Naturally, if the number of employees is not matched to the
processing volume, either productivity or timeliness will suffer.
5
1. Productivity for the Current Week 99% 5.
2. Productivity for the last 100 Hours 95% 6.
3. Total Available Hours 35.50 7.
4. Special Project Hours 2.00
8. Percent Improvement from Goal ( 99% - 80% ) ÷ 80% 23.8%
9. Hours Saved by exceeding Goal 35.50 x 8.4
10. Percent Improvement from Goal ( 95% - 80% ) ÷ 80% 18.8%
11. Hours Saved by exceeding Goal 2.00 x 0.4
12. Total Labor Hours Saved 8.4 + 0.4 8.8
13. Hourly Savings Shared 8.8 x 4.4
14. Employee Bonus 4.4 x
50%
Hours Saved on Available Time
Hours Saved on Special Projects
Employee Weekly Bonus
Productivity Incentive Goal
Percent Savings Shared
Bonus Hourly Rate
18.8%
=
=
=
=
FROM THE PRODUCTIVITY CALCULATION VALUES SET BY THE CLIENT
80%
50%
$10.00 $44.00
$10.00
CALCULATION DESCRIPTION CALCULATION RESULT
23.8%
=
=
=
18
Cook & Associates | Management Consultants 19
If a Labor Management Program is to achieve the desired results,
Staff Scheduling and the ability to flex staffs are an absolute
necessity. There are several techniques to accomplish this
balancing. They are too numerous to describe here, but they
center around the use of some of these techniques:
cross-training & the sharing of employees among departments,
part-time workers & agency employees, overtime & multi-shifts,
reduced hours or layoffs, voluntary time off, and the assignment
of special projects.
The number of variables in scheduling makes the process
somewhat difficult. Thanks to computers, the complexity
problem can now be solved. As an example, PEP uses simulation
and feedback technology to perform the numerous calculations
needed to generate accurate schedules. The Program handles
the variations in daily and weekly workloads, and creates the
complicated internal network of inter-relationships among
operating areas. Once schedules have been generated, it is
equally important to monitor their accuracy and the actual
performance against the schedule.
What good is a neatly prepared schedule if it is not accurate, or managers do not
respond to the information ?
Cook & Associates | Management Consultants
Sometimes, adhering to the schedule is a challenge. Either the
staffing requirements are difficult to achieve in a short period of
time, or there are significant financial constraints. This story
illustrates the problem in the real world:
We attended a scheduling meeting for a fashion distributor in the United States. One of the supervisors presented an interesting situation: “Suppose the budget would be exceeded if I used the labor called for in the schedule. Should I stay within budget constraints, or meet the company’s timeliness goals?” In this case, our client’s management team placed a priority on getting the merchandise out on time, and authorized the labor called for in the schedule. What would you have said - service or budget?
DATA SUMMARIZATION
Up to this point, in discussing the six most important concepts in
labor management, the focus has been on managing people.
Data Summarization now focuses on managing the process. This
is accomplished by compiling meaningful data for all levels of
management. In PEP, this is done by producing two reports:
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Daily Flash: This report automatically summarizes information
for each department and the entire building. The report is
produced daily as work progresses throughout the week, and is
customized to contain key statistics that evaluate operating
effectiveness. The graphic on the next page shows a partial
sample Daily Flash for an actual picking operation:
6
The Daily Flash
The Weekly Historical Profile
20
Cook & Associates | Management Consultants 21
Let’s take a look at the above illustration and analyze some of
the results. For our purposes, focus on the data circled in red for
Wednesday. As you can see, the Wednesday Picking
Productivity Index (line 2) and Pieces Picked per Hour (line 5) are
appreciably lower than the other four days in the week. You can
also see (line 3) that Wednesday had the lowest volume.
Has the picking manager taken effective action to balance the
staff with the reduced volume? Line 4 shows that the staff was
reduced from the other four days; however, the low Productivity
Index indicates that it has not been reduced enough. Could the
manager have done more Stock Consolidation (line 13)? Could
the manager have Loaned Hours to some other areas (line 18)?
And why is the manager still using Agency Staff (line 23)?
This is one example of how the Daily Flash can be used to
evaluate manager and process effectiveness.
LineNo Mon Tue Wed Thur Fri Avg Cum Avg Cum
1 PRODUCTION SUMMARY2 Picking Productivity Index 88.9 94.1 80.3 91.0 89.1 90.23 Total Pieces Picked 23328 21685 15480 23966 21115 84459 22788 911514 Staff Used (FTE's) 11.0 12.0 9.0 11.1 10.8 11.85 Pieces Picked per Hour Used 264.5 225.4 215.0 271.1 245.0 242.26 Work Complexity: Std Min./Piece 0.176 0.217 0.193 0.174 0.189 0.1907 VOLUME SUMMARY8 Pct of Pieces - Full Case 66 52 64 54 52 539 Pct of Pieces - Broken Case 15 22 15 21 22 25
10 Pct of Pieces - Loose 19 26 21 26 26 2211 Distance Traveled (Ft)/Location 9 10 11 8 9 912 Pieces Picked per Location 3.8 4.1 4.0 3.9 3.9 4.113 Reserve Cases Consolidated 20 142 64 18 61 244 0 014 PEP SUMMARY15 Productivity Index - Regular 100 97 83 97 94 9816 Productivity Index - Transfers 71 100 0 92 88 9117 Productivity Index - Agency 66 74 57 68 68 6018 Hours Loaned Out 8 0 0 8 4 16 6 2419 Hours Borrowed In 16 16 0 16 12 49 16 6420 Total Hours Used 88.2 96.2 72.0 88.4 86.2 344.8 94.1 376.521 Percent of Staff - Regular 63 67 89 63 70 6622 Percent of Staff - Transfers 18 17 0 19 14 1723 Percent of Staff - Agency 18 17 11 18 16 1724 Percent Time Available 87.2 86.8 86.1 86.3 86.6 85.025 Percent Special Projects 6.5 6.9 7.6 7.4 7.1 8.7
PICKING FLASHKey Index Name
Days in Week This Week Last Week
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This Last Last Pct This Last Pct This Last Pct LastWeek Week Year Diff Month Year Diff Year Year Diff 52 Wks
1 PRODUCTION SUMMARY2 Productivity Index 89.8 88.0 87.2 3 89.2 88.0 1 90.7 83.7 8 89.83 Total Pieces Processed 165826 178346 168980 -2 171366 165040 4 167250 163952 2 1684544 Total Hours Used 4757 4460 4103 16 4635 4204 10 4374 4182 5 42725 Total Labor Dollars 72164 68015 60519 19 70545 62345 13 66004 61852 7 644226 Pieces Processed per Hour Used 34.9 40.0 41.2 -15 37.0 39.3 -6 38.2 39.2 -2 39.47 Labor Cost per Piece Processed 0.435 0.381 0.358 22 0.412 0.378 9 0.395 0.377 5 0.3828 Work Complexity: Std Min./Piece 1.377 1.150 1.093 26 1.275 1.154 10 1.229 1.094 12 1.1719 VOLUME SUMMARY
10 Total Pieces Received 176717 66340 122877 44 162121 151367 7 158882 152887 4 15721611 Total Pieces Shipped 153009 184682 140205 9 158812 156792 1 155414 150984 3 15385412 Pct of Pieces - Hanging 24 18 14 76 22 16 38 20 17 17 1913 Pct of Pieces - Marked 31 25 15 98 26 15 74 24 17 42 2314 Average Pieces per Carton 18.9 20.8 21.1 -10 19.3 21.2 -9 19.6 20.9 -6 20.215 PEP SUMMARY16 Productivity Index - Regular 98 95 93 6 97 94 3 99 89 11 9617 Productivity Index - Agency 67 61 66 0 63 61 4 65 62 5 6418 Percent of Staff - Regular 64 70 74 -13 66 73 -10 67 71 -6 7119 Percent of Staff - Agency 22 16 13 66 19 12 53 17 14 23 1320 Percent Special Projects 4.7 6.7 7.7 -39 5.7 7.7 -26 7.7 8.7 -11 7.721 Percent Quality 99 97 95 4 97 93 4 98 94 4 9622 Merchandise Turn (Days) 1.4 1.3 1.7 -17.6 1.5 1.6 -6.3 1.4 1.8 -22 1.523 INCENTIVE SUMMARY24 Total Incentive Dollars 2762 2593 2139 29 2670 2309 16 2389 2096 14 240325 % of Empl's Earning Incentives 72 68 62 16 70 64 9 66 61 8 6526 Average Incentive per Employee 41.25 40.56 38.77 6 40.57 39.22 3 40.22 38.17 5 39.75
TOTAL BUILDING PROFILE (Average Per Week Values)LineNo Key Index Name
Weekly Data Month to Date Year to Date
Weekly Historical Profile: This report automatically summarizes
information for the current week and makes historical
comparisons. As in the Daily Flash, the data includes key
statistics that show the true operating picture of each
department and the building. In addition to the data shown on
the Daily Flash, the Profile normally contains Labor Costs,
Incentive Statistics, Quality Control Results, and Staff
Scheduling Data. The following shows an excerpt from an actual
distribution center Profile report:
The above illustration can be used to analyze some of the
building’s results. Let’s focus on the Year-to-Date data circled in
red. The results show an anomaly. The Productivity Index (line
2) has increased 8% over the previous year, but the Pieces
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Cook & Associates | Management Consultants 23
Processed per Hour (line 6) has decreased 2%. Lines 8, 12, 13,
and 14 provide a hint as to why this situation occurred. The key
is line 8 which shows Work Complexity increased 12%. In other
words, even though the staff operated more efficiently, the
amount of work required for each piece processed was greater
than the previous year. Line 12 shows that Processing Hanging
Merchandise (normally more time-consuming than Flat
Merchandise) increased 17% over the previous year. In addition,
line 13 shows that the number of pieces that had to be Marked
increased 42%. Also, the Average Pieces per Carton (line 14)
decreased 6%.
Analyzing results like these is a fundamental part of managing
the process. Should the Distribution Center be redesigned to
handle more hanging merchandise? Should marking methods
be made more efficient, or does the merchandise purchasing
program not highlight the need for pre-marked merchandise?
Should the sortation process be re-tuned for fewer pieces per
carton? This example shows one of the ways that the Profile
Report can be used for both short and long-term planning and
improvement.
Cook & Associates | Management Consultants
Obviously, the software should provide the management team
with what they need, and have the flexibility to respond to
ongoing operational changes. (Graphic 29)
As shown in the graphic, the production data must be integrated
with the Time & Attendance System (T&A) for effective labor
management. Without this integration, you can never be sure
that all the paid hours are accounted for. The software must
also be capable of accepting files from various Warehouse
Management Systems (WMS) and Warehouse Control Systems
(WCS). Using these files reduces clerical effort and improves
data accuracy.
HOW ABOUT LABOR MANAGEMENT SOFTWARE?
24
Cook & Associates | Management Consultants 25
However, the most important feature in the Labor Management
Software is that it contain a wide variety of user-defined options.
(Graphic 3
0)
Users need the ability to customize their Labor Management Program without having to customize the software.
This means, as new software versions are released, they will be
applicable to your current installation and will not require
significant upgrade costs to change previous customization.
(Graphic 31)
Currently, the software is available through labor management
consulting firms such as ours and most WMS providers.
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Specialize in designing and implementing Labor Management Programs
Software accepts a wide variety of legacy and WMS, WCS and T&A files
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The Labor Management module is purchased as part of WMS software
Production files are built-in to avoid any file integration issues
Cook & Associates | Management Consultants
Labor Management Consultants: One of the advantages of
using software from consulting firms is that they specialize in
designing and implementing labor management programs. In
addition, the software can accept various WMS, WCS, T&A and
legacy system files. Data from these multiple sources ensure
that all operations are included in the program.
WMS Providers: The advantage provided by WMS providers is
the ability to purchase the Labor Management module as part of
the WMS software. This means generating the production data
is simple since the production files are built-in to avoid any file
integration issues.
In either case, check that the software not only includes work
measurement, but all the other necessary modules that were
previously discussed. And, above all, make sure that the team
doing the implementation has the qualifications and track record
in all of the disciplines.
Don’t be misled ... as you will see in the next section, the real
implementation effort is not involved with the installation of
software.
The Labor Management Software is very important, but it should be less than 5%
of the Program implementation time and costs.
26
Cook & Associates | Management Consultants 27
WHAT ARE THE IMPLEMENTATION TIME & COSTS?
As previously mentioned, implementing a Labor Management
Program goes far beyond the installation of software. There are
many facets to a successful program, including significant
training of managers and staff to make the program work. The
software installation actually requires very little in-house IT
assistance and can be accomplished in a short period of time – in
PEP, about 2 hours. Obviously, it’s totally different from
installing a Warehouse Management System.
Implementation Time: The sample Project Workplan shows a
typical implementation with 12 steps over a 30-week period.
1111 2222 3333 4444 5555 6666 7777 8888 9999 10101010 11111111 12121212 13131313 14141414 15151515 16161616 17171717 18181818 19191919 20202020 21212121 22222222 23232323 24242424 25252525 26262626 27272727 28282828 29292929 30303030
I.T. GroupI.T. GroupI.T. GroupI.T. Group
STEPSSTEPSSTEPSSTEPSWEEK NUMBERWEEK NUMBERWEEK NUMBERWEEK NUMBER
1 Flowchart & Key Tasks
2 Task Descriptions & Time Stds.
3 WMS & Time & Attendance Files
4 Forms & Employee Training
5 Daily Flash & Profile Reports
6 Office Set Up & Software Install
7 Start Up & Manager Training
8 Employee Quality Control
Seminar & Management MeetingsSeminar & Management MeetingsSeminar & Management MeetingsSeminar & Management Meetings
9 Staff Scheduling
10 Fine Tuning
11 Performance Review & Coaching
12 Incentive Parameters & Bonuses
Labor Management TeamLabor Management TeamLabor Management TeamLabor Management Team
Cook & Associates | Management Consultants
Although the implementation time can be reduced by assigning
additional consultants, we like to stay on site at least 18-20
weeks to be sure the consultants are available for hands-on
consultation. In summary, here are the steps:
Steps 1 & 2: Flow-charting and time standards. This
part of the project can be expanded to
include methods improvement
recommendations and the standardiza-
tion of the various processing functions.
Steps 3 & 4: Data collection methods.
Step 5: Daily Flash and Weekly Profile reports.
Step 6: Software installation and support
training.
Step 7: Program comes on-line. Extensive
management training.
Steps 8 & 9: Employee Quality Control and Staff
Scheduling modules.
Step 10: Fine-tuning the overall Program.
Steps 11 & 12: Employee Performance Review and, if
desired, incentive parameters and
simulated payments.
Notice that the stars represent Management Meetings and a
Seminar that is held prior to starting the implementation.
28
Cook & Associates | Management Consultants 29
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Time: 20-30 Calendar Weeks Consulting Costs: $150,000 - $200,000 Software License & Support: $150 - $200/Wk Ongoing Expenses (for every 100 employees):
½ Clerical
¼ Industrial Engineer Hardware: 1 PC & Printer + Network Space
This seminar is important to get everyone on board and to have
them understand their responsibilities. It also includes role-
playing and addresses any potential issues that might arise. The
interim meetings assure that everyone is kept abreast of the pro-
gress and encourage manager and employee feedback.
Implementation and Operating Costs: Project costs are based
on each specific assignment; however, in an effort to provide
some cost guidelines, the following summarizes the estimated
cost for a sample company implementation. It assumes approxi-
mately 100 employees and six operating areas: (1) Receiving,
(2) Put-away, (3) Picking, (4) Sorting, (5) Packing, and
(6) Shipping.
Hopefully this section gives some idea about the work and the
time & costs to implement a sound Labor Management Program.
Cook & Associates | Management Consultants
If Labor Management has such a good payback, why does it take
some organizations so long to implement a program? Perhaps
they have doubts about achieving the estimated return on
investment, and are also reluctant to tackle some of the
challenges that were discussed earlier. In many cases, however,
Operating Changes and Capital Competition are the reasons
given for delaying implementation.
Graphic 37)
Operating Changes: This normally is not a valid reason—
productivity improvement is an evolving process. Dynamic
companies should be looking towards continuous productivity
improvement and therefore the change process never ends.
Most operational changes should not hold up a project, as long
as the program and the software are designed with the flexibility
to respond to the company’s revised processes. Actually, the
Labor Management Program should provide the information
WHY DO COMPANIES WAIT?
Why Wait?
Operating Changes
Capital Competition
30
Cook & Associates | Management Consultants 31
needed to identify areas where methods improvements are
required, and then be able to monitor the effectiveness of the
changes.
Capital Competition: Labor Management Projects have to
compete for capital with much more glamorous physical
changes. If management wants to leave a legacy, it’s easier to
see changes in a modernized facility, exciting sortation
equipment, and sophisticated systems. All these physical
improvements, if they are justified with a sound Return on
Investment, certainly should be pursued. But in fairness, maybe
the Rate of Return should be compared to that of an effective
Labor Management Program.
Incidentally, some of the highest interest is now being shown in
developing countries with escalating wage rates. They are
looking at ways to continue their cost competitive advantage. In
many cases, pay for performance incentives have a lot of appeal.
How to Get Started on a Project: Finally, if a company is serious
about Labor Management, here are the initial steps:
Make the Right Decision !
Evaluate the Need
Contact a Labor Management Consultant
Have the Consultant Visit your Facility
Obtain a Detailed Proposal
Check References and Visit A Site
Verify Funds & ROI, and if They Look Good ...
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Cook & Associates | Management Consultants
About Cook & Associates
Cook & Associates was established over 25 years ago to provide
professional industrial engineering consulting services to a wide
variety of clients. The firm specializes in Labor Management in
retail distribution and fulfillment operations. Over the years,
Cook & Associates has successfully provided consulting services
and implemented their proprietary PEP (Productivity Evaluation
Program) for many leading organizations in the United States,
Canada, & Europe including:
© This publication cannot be copied or reproduced without the
written consent of Cook & Associates.
• Abraham & Straus • Macy's
• After Hours Formal Wear • Matalan
• American Consolidation • McGraw-Hill
• AT&T • Merry Go Round
• Barneys • Neiman Marcus
• Bergdorf Goodman • Nordstrom
• Bloomingdales • Nordstrom Direct
• Checkmark • Saks Fifth Avenue
• Chemical Bank • Simpsons of Canada
• D & R Management • State of New York
• Daffy's • Syms
• David's Bridal • The Singer Company
• Duplan Corporation • The Travelers
• Dynamic Distribution • Thomas & Betts
• EPA • Tommy Hilfiger
• Hudson's Bay • Toys 'R Us
• Kaiser Permanente • Transworld Entertainment
• Kids 'R Us • Us Angels
• Kimberly Clark • Villeroy & Boch
• Lacoste • Warner Bros.
• Liz Claiborne • Zellers
Cook & Associates | Management Consultants
1050 George Street - 18M • New Brunswick, NJ 08901 USA
(732) 246-3600 • [email protected]
cookpep.com • thepepblog.com
How Can WeHow Can WeHow Can WeHow Can We Increase Productivity and Service Increase Productivity and Service Increase Productivity and Service Increase Productivity and Service
When We When We When We When We . . .. . .. . .. . .
Can’t EvenCan’t EvenCan’t EvenCan’t Even Measure Them?Measure Them?Measure Them?Measure Them?
Don’t Schedule Don’t Schedule Don’t Schedule Don’t Schedule Staff Correctly?Staff Correctly?Staff Correctly?Staff Correctly?
Won’t Share Gains With Employees?Won’t Share Gains With Employees?Won’t Share Gains With Employees?Won’t Share Gains With Employees?