The secret to paying associates more while reducing costs.
What if you could pay associates and employees more while saving money with a system that pays for itself? (For example, with every dollar you save, you reinvest 25 cents back into the program). Leveraging insights gained from his own journey transforming a warehouse operation for a major retail appliance maker, Paul Vollmer shows you how you can save money while rewarding high-performing employees and incenting productivity. This is the
Retail workforce productivity is closely linked to customer service, profitability, and efficiency. Retail distribution operations are always looking for ways to boost productivity. Unfortunately, most organizations focus on the wrong thing to make that happen: extracting the minimum required output from employees.
Not surprisingly, this method rarely works. As it turns out, the most effective way to spark productivity combines standardized work processes and reward-based pay. Companies that implement Lean labor management with pay-for-performance practices do more with less and are better able to attract and retain quality workers, extend resource capacity, and achieve more consistent quality and safety.
The trouble with “we’ve always done it this way”
Historically, warehouse performance has been measured by a rational metric like lines per order. Within this framework, there are “good” lines and “bad” lines, determined by how many parts/orders are picked within a given timeframe. The issue is output-based systems apply the same metrics for very different processes. For example, one line might require a worker to go to one location to pick 100 parts. The other line might require a worker to pick parts from multiple locations. While it might take Worker B more time to pick 100 parts, they may have been working more efficiently than Worker A because of order size, weight or skid picks.
3 steps to ramp up productivity and save money with Lean Labor Management
Rooted in Lean manufacturing, Lean labor management improves efficiency by standardizing tasks and eliminating waste to simplify processes. Lean harnesses the power of an organization’s most valuable resource: its workforce. And, one of the best ways to make employees more productive is incentive-based pay. Here are three steps to make your warehouse more productive – and save time and money while you’re at it:
- Review current processes and identify opportunities for improvement
The first step in Lean labor management transformation is observing current processes to identify waste in associated utilization and methods. Engineers perform time and motion studies to analyze how workers perform various tasks. Then, they develop multi-variable labor standards that break down work sets into discrete parts.Work within a specific activity is broken down into work credits and assigned an average time of completion. That work set might involve walking/driving a known distance, picking one or several parts or standing at a pack station consolidating an order into a shipping container. Whatever the task, the average time becomes the standard for measurement. Using Multivariable Engineered Standards, workers are measured and rewarded based on standards that reflect the actual work required to perform a measured activity. The goal is to encourage workers to work at a reasonable pace all day. - Set up a positive feedback loop
With standard operating procedures in place, employees are rewarded for every hour they meet or exceed the standard. A sliding scale rewards them based on actual performance. For instance, they will receive $1.25 extra an hour for meeting the standard and $2.50 more for performing at 130 percent of standard. Remember, Lean labor management saves four times what it pays out. The reward system doesn’t just reinforce positive behavior. It also provides a model for under-performing employees to follow.The underlying principle is that, given the proper motivation, associates will perform with more focus and deliberate intention. Ideally, that motivation stems from a culture where fair and accurate performance standards blend with safety, process compliance and monetary rewards. This approach is in contrast to conventional policies and programs that focus on enticing employees to work harder. - Measure success and savings
In a warehouse setting where employees follow Lean practices and are rewarded for meeting or exceeding standards, workflow is more pull-driven rather than push-driven. Associates tend to seek out work from supervisors. Supervisors become more coaching-focused. This approach encourages employees to perform at top efficiency instead of pushing them to work harder and faster. Companies see performance improvements because associates make better use of their time and follow standard methods diligently, not because of a faster work pace. Lean Labor Management drives value through a wide variety of effects, which:- Motivate people to produce more in a shift
- Save time and money through better use of time and Lean processes
- Make rewards contingent on safety, accuracy and quality
- Enable warehouse operations to pay people more with no risk to the labor budget
- Result in smoother, more reliable work processes
- Boost morale and “ownership” of work
- Deliver higher customer satisfaction
Could a few strategic changes in your approach to labor management – including people involvement, standardized work processes and reward-based pay – help you save time and money, get more done faster and boost morale? Find out more by downloading our whitepaper on the subject.
Paul Vollmer is Senior Director of Customer Logistics at Ryder System Inc. He has extensive experience managing large, complex, labor-intensive operations and designing/operating global logistics networks. Throughout his career, Paul has been an active sponsor in transforming supply chain operations.