Is your problem: Too many people? Maybe it’s about knowing how to have better warehouse labor performance.
I just returned from a world tour of warehouses in Europe, the Middle East and Asia. One of my stops was India. I am always amazed by how many people live in cities like Calcutta or Bombay. People are everywhere you look. Running from place to place, everyone has somewhere to go and something to do. If only the warehouses in the developing world were more like the streets of their cities! I visit too many warehouses in developing countries where many workers appear to have nothing really to do. This is not because of some missing technology the developing world cannot afford. This is due to a misunderstanding about how warehouse managers can ship on time but also do it cost effectively with nothing more than paper, pens and a few spreadsheets.
Leading our Performance Excellence practice over the years, I have been involved with many warehouse performance improvement projects, and I have had the pleasure of working with some very good warehouse managers. They have taught me that keeping people busy happens gradually by following a proven 5 step process. Each step is a little harder but it saves a little more idle time and improves a team’s performance. Over a series of years, these little changes add up. You can significantly impact your teams’ cost/unit, cost/order, etc. if you do the following.
This doesn’t need to be exotic. Identify a good measure of inbound activity (PO lines received, cases in, pallets in, etc.) and then a single measure of outbound activity like lines picked, units shipped, or orders filled. It is best to choose measures that the finance or purchasing departments can understand too.
Keep a dialogue open between upper-level management and floor managers, by requiring your floor managers to report how many people they have in each department each day. Declare departments as either mostly inbound or outbound in nature. Then obtain the payroll for each department each month and calculate the facility’s Cost/Measure In and the Cost/Measure Out.
If you do the above, you will learn a great deal about the cost drivers and seasonality at your site. Layer into the model a forecast of in and out activity and you will discover how your workforce will need to change over time as you grow and how (in certain markets) you can use temporary labor to complement your full-time staff.
When I talk to warehouse managers in developing markets they often tell me there is no way to do the above because annual growth is anywhere from 20% to 35%. Meteoric growth is no excuse for not having some sort of labor budget. Having no budget is much worse than having an inaccurate budget.
This takes the budget to the next level of detail. Identify drivers-of-labor inside each department, e.g. cases picked in case picking, or orders packed in packing. Collect this information for each inbound and outbound department every day along with the labor there. State & track key assumptions about how many units are in a case or what % of your orders are single unit orders. Next track the actual man-hours (mhrs) per driver-of-labor from day-to-day. Investigate when these ratios vary from the norm.
Use the mhrs/driver figures above, the key daily assumptions and weekly forecasts to project the labor needs in each department per week. Staff accordingly. Good models will also factor in and track absenteeism and employee turnover and some even reflect the difference in the productivity rates of temporary labor (if needed) and your full-time team. Refine this spreadsheet over time. Refine the assumptions behind the model over time as well, and learn how they change throughout the year. Track the accuracy of the forecasts and don’t hire too many people if the forecasts suggest it is not prudent to do so.
Note that the above two steps can probably be accomplished by assigning one person and dedicating them full-time as a reporting clerk in most developing markets. All you have to do is save two associates and that clerk is easily paid for. Watch your performance improve.
You cannot track individual performance in a warehouse if you have too many people showing up; performance will vary too wildly. For example, if two pickers are in a zone where you only have enough work for one, their individual performance scores will be half what you would expect! If you follow the steps above, the number of associates on hand should be somewhat close to what you need (at most +50%). You now can start worrying about the performance of individuals.
Here too, I suggest you not get too exotic. Start by calculating and tracking performance at the KPI level, e.g. Lines Per Manhour Worked, Pallets Putaway Per Manhour Worked, etc. The information to fuel these calculations is easily obtained from your warehouse system or records and your time clock. Together this information encourages labor and management to jointly develop successful plans to accomplish organizational goals related to warehouse labor performance and productivity.
Post the previous day’s numbers for each employee on a board some place visible so everyone can see that the company cares about performance and you’ll be surprised by how most people respond to such feedback; no one wants to be on the bottom of the list! It’s okay if you can’t come up with measures for certain departments. Do this in the departments where you have the most people.
Be prepared to roll up your sleeves, too. Often, these programs identify issues with training. People that don’t perform very well don’t really understand the nuances of their job. If I have learned anything over the years, it is that informal, on-the-job training never works. The people who perform well ought to be identified, their methods clarified and documented and then they should be asked to formerly teach how they do the job to others so everyone can benefit. This is a great thing to do when forecasted order volumes don’t show up. Employees also like to show off what they know and they like to know their managers know as well. It is also a great way to identify future leaders. In developing markets, organizations need to develop future managers continuously because of the growth.
Finally, because KPI-based measurement of productivity is not very accurate in most warehouses, I don’t recommend that you fire or use pay incentives to people using such data, but this is still a great way to continue to improve labor performance in a warehouse through better methods and a little psychology.
All right… I admit this doesn’t necessarily drive people’s productivity or utilization up, but you need to do it before you get serious about efficiency or offer incentive pay. Too frequently this gets overlooked or is assumed to be simple – and it is not. You need to get quality measures in place and working before taking the next step to deploy engineered labor standards. Managers or a designated team need to be charged with checking people’s work periodically and recording the results in a spreadsheet. Without this, too many associates will be tempted to trade the quality of their work for speed – their productivity will likely not increase much and quality will suffer.
The ultimate is measuring utilization and individual performance using a formal labor standards / Performance Excellence program. Many managers are reluctant to do this because they think it will cost too much in money or time, or it cannot be sustained, but modern technology has changed the economics of these initiatives to the point that in a warehouse of 30 or more people, the benefits make it worthwhile. Firms that do this will find 15 to 40% labor savings. However, it does usually require a Warehouse Management System (WMS).
Again, be prepared to roll up your sleeves. Some of the savings derived from this step will be found in better and consistent methods. Even more will be found by improving the utilization of employees, which usually falls on the shoulders of management. Consequently, I will warn that some department managers can work under this system and there are some who just cannot grasp their role.
Allan Mogensen, the 1940’s famous industrial engineer coined the term, “Work smarter -not harder!” It’s important to note, these programs are NOT about improving people’s pace. They are about discovering why people are unable to perform at a reasonable rate. They highlight the problems lurking on the floor that no one is telling you. They showcase the uneven work flow. They nudge you on the days you brought in too many people. They reveal process quality issues such as missing inventory or bad inventory control practices you are not aware of. They really harp on the fact you have not trained your people and they are not doing their jobs in a smart way.
To complete this step, time studies are done and elaborate formulas are created to calculate how much time is needed to do work efficiently. Each person’s production is meticulously tracked and any time an associate has idle or is not spent doing value-added work is also tracked. This usually reveals all sorts of things that managers do that lead employees to be idle. It is a sobering realization but it is the best way to get the last of the lulls erased from your daily schedule.
If you are in a developing market and would like to see examples of any of the steps above to better warehouse labor performance, please email me and I’ll be glad to send you some examples from various places I have been over the years. Improving labor productivity should be a central goal of any warehouse manager. It applies to those where they pay associates $12/hour as well as those where associates are paid $.50/hour. If you follow the path above, any manager can do this. Be patient. Celebrate the incremental improvement.
As of September 8, 2020, Crimson & Co (formerly The Progress Group/TPG) has rebranded as Argon & Co following the successful merger with Argon Consulting in April 2018.