Labor cost continues to be the largest variable cost in high volume, complex distribution centers. And each year throughout most of the US, the availability of reliable, trained people to work in these facilities gets more limited.
Many companies are looking to labor management programs to help make the best of this situation and to prepare for their future needs.
One of the largest stumbling blocks in developing a program is understanding the terminology of how performance is measured and evaluated. Two key measures are needed. One measure, time utilization, is pretty straightforward. This is usually measured as the percentage of time per day that an individual spends working on their assigned tasks (such as putting away cases, picking orders, or packing cartons) as opposed to time spent waiting for work, machine downtime, meeting time, etc.
The other key measure, performance, is used to measure the level of worker output during the time they are working on their assigned tasks. This is calculated as the ratio of the amount of work completed over a given amount of time. For example, if someone completes one hours’ worth of work in one hour, their performance is 100%. But the often confusing part of this equation is deciding how much work has to be done in an hour to equal 100% performance.
The confusion is often due to the fact that there are two scales for what 100% means:
- On a “High task” scale, 100% performance = the average performance for trained, motivated workers. It is usually necessary to offer workers a performance bonus to maintain this level, in addition to providing feedback on results and setting expectations for achieving this level.
- On a “Low task” scale, 100% performance = the average performance for trained workers. This performance level can usually be maintained by providing feedback on results and setting expectations. The difference between these two scales is about 25% in work output per hour.
If standards are set on a high task scale, individual worker performance of 80% is usually considered to be acceptable. But on a low task scale, individual performance of less than 90% is usually not acceptable. Either scale can be used effectively, as long as there is a clear understanding of which one is being used and what results should be expected with that scale. This distinction is particularly important to make when a labor management program is being developed by managers and engineers with backgrounds where different scales were used.
Getting the most out of your existing operation is dependent on maximizing the contribution of your workforce. At LogistiPoint, all of our staff are skilled in working with your associates and management to achieve their maximum performance. We work with your team to implement new productivity tools, and teach your management how to use these tools. Increased productivity is mandatory in today’s competitive environment, and our team has the experience and know-how to do it right. Learn more about our Performance Improvement programs here.