Millennials, Manufacturing, and Money

With everyone talking about millennials these days in a mostly negative context, we did the research to figure out the truth. THE YOUTUBE VIDEO

Overtime Strategy For Shiftwork Operations

Overtime is an emotional topic at many shiftwork operations. Core Practice's Chief Strategic Officer John Frehse recently wrote on the topic and you can download the whole article for free HERE.

The Overtime Lie

How corporate strategy is holding hostage millions of dollars in profit
Recently, I stood before a plant management team sharing labor strategies that could help resolve some serious cost problems associated with inefficient shift schedules. The plant manager talked about some of their greatest achievements. Number one was keeping their overtime below 5 percent. Corporate listed low overtime as a key performance indicator, and minimizing it was critical to plant bonuses.

In environments where demand is flat, overtime is rarely used, typically only to fill vacancies. However, seasonal and variable-demand profiles present a very different problem. Customers want their product or service on demand. However, the fear of excess overtime has led management teams to overlook this mighty tool and make less-strategic decisions. In today’s world, cost competitiveness has magnified the impact of these shortsighted tactical decisions as more management teams are forced to reduce every unnecessary cost. The three most common errors are:

1. Peak demand staffing: Plant management teams can staff for peak demand and always have enough labor to get the job done on short notice. Additional full-time employees are expensive with all the fixed costs associated with health benefits, vacations and holidays, and taxes. A common practice in today’s environment is management teams carrying additional headcount to avoid what they assume are the high costs of overtime.

2. Disregarding customer service as a priority: This is not really an option because it results in lost opportunity and lost customers. Management teams can produce at a steady pace and sell out of items if production volumes cannot meet customer demand. This option is an automatic failure in today’s on-demand world, because customers do not tolerate shortages.

3. Overstocking, high inventory levels: Overproducing to have a “cushion” of extra product in the warehouse to handle volume fluctuations is another option. But this has a variety of problems. Companies may meet customer demand but at a very high cost. The carrying cost of inventory can force charging higher prices and mean losing the competitive edge. Also, obsolescence costs become a reality in a world where tastes change quickly and product expiration is always a concern.

The article continues on to teach readers how to calculate these costs. Click Here to get the whole article.

Shift Worker Productivity Need Not Be an Oxymoron###

Shift Worker Productivity Need Not Be an Oxymoron###

It’s Not about the Money

It’s Not about the Money

Pharma Workforce Training | Reducing Variability in the Pharma Workforce | Pharmaceutical Manufacturing

Pharma Workforce Training | Reducing Variability in the Pharma Workforce | Pharmaceutical Manufacturing

Pharma Manufacturing Magazine Interviews Shift Work Expert, John Frehse

Shift Work in the Pharma Industry - Interview with Shift Schedules Expert John Frehse

Employee Schedules, Six Sigma, and Labor Strategy in Life Sciences

We are just about down with are most recent article entitled "Six Sigma = Failure for Life Sciences" and we share it as soon as it is done. I blurb is posted below.

Six Sigma = Failure for Life Sciences

With all the talk about Six Sigma, the reality is in most cases it is a goal and not a requirement. All manufacturers are working towards an error free environment, and the Six Sigma methodology is an effective tool to remove error. However, Six Sigma does not mean error free. While that might be okay in most manufacturing verticals, it is a recipe for failure in life sciences. It simply isn’t good enough.

So What Is Six Sigma?

Sigma is the Greek word for standard deviation. Standard deviation represents a particular variation from a mean. In Six Sigma one tries to minimize this variation. Keeping a process the same every time can create a quality standard, remove waste, and improve the customer experience. With Six Sigma, variation is dramatically reduced, but it is not eliminated.

• 2 sigma = 68%
• 3 sigma = 93%
• 4 sigma = 99.4%
• 5 sigma = 99.97%
• 6 sigma = 99.9997% - At Six Sigma, there are still 3.4 errors/1 million processes

It is commonly thought that General Electric created Six Sigma. Although the methodology is embraced in every area of their business, they didn’t. And no, it wasn’t created in Japan either (that was Kaizen). It was, in fact, created by Motorola in the United States in 1984. It was designed as a tool to remove variability from process, therefore stabilizing controls and minimizing defects. The use of applied statistics is the foundation to achieve this desired result. It is not just the understanding of the numbers, but the application of analysis. Turning data into actionable information allows management teams to make decisions that affect real change - change that removes waste, increases capacity, and eventually increases profits.

The key principles are listed as:

• Customer focus
• Data Driven
• Rational
• Analytic
• Focus on Conformance

Is This Not Good for the Life Sciences Industry?

Six Sigma is good for the industry, just not good enough. When one reaches the sixth sigma it means they are making 3.4 errors per 1 million processes. If the aspirin we take for a headache was manufactured under this standard it wouldn’t just be a bad practice, it would be dangerous. If an insulin manufacturer gets the formula right 999,996.6 out of 1 million times, is that okay? When personal health and safety are at risk, companies cannot afford to make any mistakes.

What Drives Variability in Life Sciences?

People. To be fair it isn’t just people, but we are the largest contributors. People drive variability and for that reason need to be managed to drive effectiveness two ways. The first is to manage human variability. The second is to manage the care of production, distribution and lab equipment. People are responsible for that equipment. So what do we do about it? Can we create a system that allows people to perform at their best, and manage them by isolating variability in performance and making course corrections immediately? Yes, we can. There are a variety of steps one can take to push past the sixth sigma and get closer to zero errors per million.

Workforce Management Software - Worth It?

With more and more companies automating their workforce management situation, companies need an objective guide to pick the right software company and the right amount of software from the right vendor. We can help.

Core Practice is an objective consulting firm that will help you pick the right software for your contact center, manufacturing facility, distribution center, mine, utility, or retail operation. Every company is different, with different rules and labor strategies. Spend 3 hours with our Chief Strategist, John Frehse and go through a workshop where you will learn about what is available and discuss the strategies that may make sense to you. You will get actionable information to help make the right decision. Software isn't necessary for everyone. Is it right for you? Find out at CorePractice.com.

Employee Scheduling Experts - Shift Work Strategy

Employee Schedules? Talk to Core Practice. They have been awarded the coveted Excellence in Labor Relations Award from the International Institute on Labor Strategy. John Frehse received the award for his work on the relationship between seasonal demand and flexible, low cost schedules. He wasn't immediately available for comment, but he is active on this blog and we should hear from him soon! You can view his groundbreaking webinar HERE

Thanks!

Ethan

Ethan Franklin
Managing Partner
Core Practice
312-255-1646

Employee Schedules - Seasonal Demand Environments Implement Proven Cost Reduction

This free webinar (for manufacturing companies and distribution operations) from John Frehse is now available on demand and it is free! Learn real strategies to improve labor strategies and reduce costs in environments with seasonal or variable demand. Please go to HERE to sign up and you will be able to watch it on demand (at your convenience!). Kronos sponsored the event, but the first 30 minutes is all strategy and 90% of those who watched rated this webinar 9 out of 10 or higher in survey returns!

For contact center WFM experts, we haven't forgotten about you either. Go HERE for contact center specific labor scheduling strategies including examples of employee schedules!

Shift Work and Compensation Strategies - Are You Giving Employees What They Really Want?

Find the complete PDF in printable format HERE

The Chief Operating Officer (COO) of a leading international manufacturing company recently called me with a problem: He was under considerable stress because he was facing a union drive at one of his plants in Ohio. It was clear to him that
employee dissatisfaction was high and that the union had made significant inroads. He wanted to know how much he had to increase pay and other benefits to make sure the union vote didn’t pass. My colleagues at Core Practice Partners and I spent the following weeks researching the company’s labor practices and employee attitudes. The COO was right about one thing: The workers were unhappy, with 72 percent saying that conditions were getting worse on the job. But he was surprised to learn that 77 percent of the employees felt the current pay and benefits were perfectly fine.
Increased compensation would not solve the problem. If salaries weren’t right, attrition would be a key indicator, but employees weren’t leaving or threatening to.
So what did the workers want?

Over the past 10 years, we’ve conducted an in depth study into the attitudes of more than 100,000 shift workers at more than 150 companies around the world. Through face-to-face surveys taken during work hours, we sought primarily to gather information about what employees like and dislike about their work environment, the changes they hope to see, the health and safety issues they face, and how their work schedules
affect their personal lives. Of all the thousands of pieces of data we collected, one stood out: Eighty-one percent of employees surveyed felt that their pay and benefits
were adequate. In fact, when we determined what really affects productivity, compensation paled in comparison to good management–employee communications. In
other words, although most companies try to inflate employees’ morale by shoveling more dollars at them, less expensive strategies will do. Thus, when we looked into the problems at our client’s company, we were not surprised by our findings.
Forty-seven percent of the employees surveyed were working more than 11 hours of overtime each week. At some companies, that can be an attractive aspect of the
job, because it brings in extra income. But in this case, 56 percent said they were working more overtime than they wanted. And they were particularly negative about
the extra time at the plant because, according to 62 percent of the workers, their schedules weren’t sufficiently predictable to permit them to know when they would
need to work and when they would not. In an employee base populated primarily by single parents, workers were struggling both to maintain adequate child care
and to find time to spend with their kids.

To read the entire article on Booz Allen's website go HERE

Employee Schedules - The Creators of Flexible Schedules

Core Practice LLC designs and implements labor strategies for shift work operations requiring rapid and sustainable improvements. Our employee scheduling experts and operations and labor management professionals will work closely with your management team as well as shift workers and unions, to capture savings most firms miss. Our team of experts, using our proprietary and proven process, consistently captures 11% to 17% of total annual labor costs, starting 12 to 16 weeks from the beginning of the engagement. Employee morale improvement is also critical on every project we do. Core Practice works closely with shift workers in the manufacturing, mining, utility, contact center, and logistics facilities, as well as other service organizations. Our consulting firm has a passion for designing employee schedules with a focus on operations and labor management.

Employee Scheduling Strategies for Shift Workers - Food and Beverage Industry

Whether your business goals are to increase daily output, reduce costs, decrease the frequency of sanitation downtime, or implement extended runs, the pressure is on. The realities of today’s competitive food manufacturing industry, along with pressure from stakeholders, require business leaders to be more aggressive and creative with cost reduction initiatives.

Capital improvements, such as building extra warehouse space or installing additional robotics can be expensive and your return on investment can take years. Alternatively, the untapped cost saving opportunities built into your current labor schedule can be captured in 90 days and total in the millions of dollars. If your business experiences significant production demand swings, downtime due to sanitation requirements, or any of the problems listed in chart #1 on the next page, you can capture 11% to 17% of your current labor costs as savings, year after year, with the right operations and labor deployment system.

The seasonal nature of consumer demand for food products can result in unnecessarily high costs. If labor schedules are poorly designed, monthly volume fluctuations result in excessive product inventory levels during ramp-up months. When freshness or allergens are involved, daily product changes can trigger additional time consuming changeovers. The wrong labor schedule limits production flexibility and also creates unnecessary idle time. Recently, a well known breakfast food company in the Midwest spent over $200,000 in overtime pay, staffing the same employees six days each week. Employees received only one day off each week during the entire eight month busy season, including the production ramp-up months. Managers then spent the remaining four months in the slow season creating work for employees to prevent layoffs. Employees were frustrated, and the company was losing money. By implementing a scheduling system specifically built to meet varying production demands, Core Practice was able to help management reduce inventory levels and lower idle time labor costs. Months of inventory build-up turned into weeks, and employee morale improved with schedules that built-in two or three days off each week, while not limiting overtime opportunities.

Sometimes, there are opportunities for cost savings when processes have been altered but the scheduling system remains unchanged. Excessive overtime might be a result of changing a business process, without updating the scheduling system. Unlike overtime, which is easy to see, idle time, which is extremely expensive, can be difficult to measure and can remain a hidden cost for years. As an example, groups of employees, such as those on production lines, can be particularly susceptible to idle time, if the wrong scheduling system is in place.

Production downtime during sanitation periods limits capital utilization and typically creates idle labor time. Although timely sanitation is required, management teams sanitize based on the schedule routine, rather than the full time-frame requirement. Often there are opportunities to reduce labor costs and increase uptime, even in situations when sanitation processes are considered “optimized”.
Several years ago the business unit manager of a 400 employee food manufacturer implemented a system change, thinking he had fully optimized the sanitation process. He implemented extended runs to reduce the frequency of sanitation and cut the process to 4-hours. Unfortunately the production labor schedule was not changed. This meant the production, sanitation and maintenance schedules still were not synchronized. So, while the plant saved a little bit of money, they left an amount six times larger unclaimed (almost $1,150,000 annually). The schedules that Core Practice eventually designed reduced production idle time and cut start-ups and shut-downs in half, while increasing capital utilization by almost 10%. In addition to all the cost savings for the company, employees had more days scheduled off each week and still maintained a 40-hour paycheck with overtime opportunities for those who loved overtime. Sounds too good to be true? Our ability to quickly identify problems coupled with our experience in implementing real world solutions makes this a reality.

As you reflect on the opportunities in your own facility, understand that even small labor schedule changes can be emotionally disruptive to employees. Employee buy-in is critical for long-term success, and with employees, you only get one shot at successfully transitioning to the right operations and labor deployment system. With millions of dollars on the line, you cannot afford to make a change without a well thought out plan. While the right system can save you millions of dollars year after year, implementing the wrong system can cost you even more money than you are spending today. For example, a large snack-foods company called us after they implemented a schedule change on their own. They explained that their knee-jerk reaction to a forecasted increase in volume was to draft a new schedule quickly. Unfortunately, they did this without analyzing both immediate and long term business needs. Their current HR policies did not support the new labor schedule changes, resulting in more than $650,000 in unnecessary labor expenses per year. Not only did the business suffer, employees were caught off-guard and felt they were taken advantage of with the new labor schedule changes, despite the unintended bump in pay.

Core Practice has more than 25 years of experience helping companies just like yours. Implemented cost savings typically range between 11% and 17% of current labor costs. Additionally, profit making opportunities can be much larger. Our proven methodology starts with a detailed review of your operations and labor system, including a thorough HR policy review. We gain employee buy-in throughout the process by communicating the right information at the right times. We also build in several opportunities for all employees to participate in the change process, creating an open and honest environment. Using our extensive database of shift worker survey responses we can pinpoint the issues that are truly important to your employees. In addition to our focus on business savings and employee buy-in, we use our expertise in health and safety to design the right schedule. We develop a detailed plan to ensure all members of the leadership team, including the HR team, understand the change and are able to communicate the details effectively. In the final step, we meet personally with employees to discuss all facets of individual new work schedules to facilitate the transition from old to new.

Core Practice LLC is the world’s leader in Operation and Labor strategy, specializing in shift work and scheduling. If your organization operates outside the 9-5, Monday through Friday work week, contact John Frehse, Chief Strategist and Executive Coach at: JFrehse@Corepractice.com or call 1-212-534-0539

Executive Workshop

One can also learn about our free half day executive workshop on our website at: www.corepractice.com.

The Flexible Schedule - Employee Scheduling Strategies

In today’s “on demand” world consumers and businesses expect immediate results. It doesn’t matter whether you are a product manufacturer, call center or power utility, your customers want you to respond immediately. Or perhaps you are a mine that needs to increase production quickly to capitalize on a recent price spike in copper. The ability to react rapidly to changes in demand is one of the most crucial capabilities in business today. At one time you might have staffed extra people or carried extra inventory, but that is expensive. Every wasted dollar eats away at your margins. Whatever your industry, you need a way to respond quickly to fluctuations in demand while minimizing your costs. But what if you can do both? The right scheduling system customized for your unique demands provides the flexibility to meet these spikes in volume efficiently, without putting undue burdens on your employees. The three most important forms of schedule flexibility are outlined in this article. The first step is to understand how hourly cost structures help determine the right plan for flexing the workforce.

Cost—Where To Set The Bar

Flexibility is often synonymous with high levels of idle time and overtime. Before looking at different types of schedule flexibility, we need to understand any adverse costs associated with the existing employee schedules. The next step is to set the appropriate baseline staffing level and the base hours each employee will be scheduled to work. The flex up (overtime) or down (reducing hours) is driven from these base figures. Most employers assume that all employees should be scheduled for 40 hours a week. But what if random, short term slumps in demand occur? Scheduling less than 40 hours is not just more expensive because of the fixed benefit costs, but it is also a morale killer. How much overtime is reasonable from both a cost and employee safety standpoint for the companies that need to flex hours up? Many companies pride themselves on limiting overtime to 8% or less.

However, in many companies, overtime actually can be less expensive, and the employees often want overtime. With today’s employee benefit costs rising, especially health care coverage, the total employee benefit load can be very expensive. In most large companies, including 83% of those in the Fortune 500, fixed cost benefits, like healthcare and vacation, are based on 40 hours of work a week and are greater than $0.50 per dollar of the average hourly wage. Additional benefits do not accrue if full time employees work overtime. So, despite what many believe, overtime is less expensive than an hour of straight time, since the 50% overtime premium is less than the benefit cost burden. A facility’s biggest concern should not be overtime, but idle time, when an employee is onsite but not fully productive. Idle time ranges from 4% to more than 30%, depending on the industry and the current scheduling system, but most facilities average between 16% and 23%. In a 300 person facility with an average wage of $17 an hour, a reduction of 5% of idle time results in immediate cost savings of $816,000 annually. With an idle hour, the facility must pay for the benefits and the wage of that employee – all for non productive work. At least with overtime the assumption is that productive work is occurring because the company has gone out proactively and scheduled this extra time. As a result, the adverse cost of work done on overtime may be zero or even positive, versus having extra people on straight time. In other words, understaffing is always more cost effective than overstaffing.
Flexibility

The right flexible scheduling system allows you to meet unexpected changes in demand while lowering costs and minimizing employee disruption. There are three main types of flexibility, and each one serves a different demand profile. Some companies need short bursts of increased operation in order to fill customer requirements. Other companies need increases at the end of the week, either to compensate for productivity losses during the week or to fill last minute orders. In many cases, our clients need a carefully engineered balance of these scheduling abilities. The traditional set of schedules most companies use limits their ability to adjust strategically to meet customer demand in a cost effective way. Often existing schedules allow some flexibility but not enough to meet today’s on demand world. A business with a uniquely tailored scheduling system can most efficiently and effectively meet the special demands of its customers and the needs of its employees.
Horizontal Flexibility

For companies working more traditional Monday through Friday (or Monday through Saturday) schedules, whether it is one, two or three shifts, horizontal flexibility is the most basic system. However, horizontal scheduling is strongly disliked by employees, because these schedules are the most unpredictable. As the week progresses, productivity losses, last minute volume demand and unexpected downtime can often cause the business to need additional volume on scheduled days off. This forces the employees to work during their prized days off with little warning. Some companies attempt to overcome the predictability dilemma by scheduling Saturday or Sunday as overtime almost every week (See Graph #1). This is only a short term solution and will eventually result in productivity losses, as well as health, safety and morale concerns due to the number of days an employee works and the uncertainty of free time. Horizontal flexibility only works in environments that do not have day-to-day customer requirements that must be filled immediately. Companies fully covering 24 hours each day may only be able to flex out to the weekend, based on every hour already being utilized Monday thru Friday. As customer lead times continue to shrink, the end of week “make up period” will be a thing of the past.



Chart 1 (To View Click Here): Example of Horizontal Flexibility In an Environment With a Base Schedule Covering 16 hours, Monday - Friday

Vertical Flexibility

For companies needing short bursts of increased production, vertical flexibility may be the right answer. The call center or production line employees would work past their scheduled end times, but this schedule only works if there are unused hours in the day, and employees can either stay late or come in early (See Graph #2). This vertical flexibility can be used in small increments of time to capture short term increases in customer demand. Employees often like this strategy in the short term, because it can help keep them off weekend work while still providing overtime opportunities. The challenge is to avoid the reduced productivity sometimes associated with extended hours as well as the disruption to employee sleep patterns which can lead to increased accidents and errors.
The problem most often associated with traditional schedules set up to flex vertically is that they are hard to flex down. Although employees can add hours to their schedules, subtracting hours typically means going below 40 hours of work, angering employees and increasing the benefit costs per employee labor hour.






Chart 2 (To View Click Here): Example of Vertical Flexibility In an Environment with a Base Schedule Covering 16 hours, Monday – Friday

The Core Density ModelSM

Density flexibility combines the benefits of both horizontal and vertical but cannot be accomplished with traditional schedules. In this model, employees are asked to come in on their days off during the week while minimizing the possibility of weekend work (See Graph #3). In distribution and contact centers, and many other service businesses, density flexibility could mean bringing employees in one at a time instead of adding an entire shift of employees when only a fraction of the group is needed. Many manufacturing facilities require a whole crew to come in to run a line to augment production, which may limit this strategy’s effectiveness. However, the Core Density Model does work on production lines where speed can be increased with additional labor. This model might not be the low cost option in process manufacturing plants, but may handle short term bursts in customer demand, ensuring customer retention and the ability to profit during the longer periods of time when operations are run with lower cost models. However, many times the increase in short term variable costs may be offset by spreading the fixed costs over the additional units or by allowing maintenance to accomplish the preventive maintenance on the weekends which will boost productivity.

The Core Density Model works well when employees are working weekend schedules or shifts longer than 8 hours, such as 10 and 12 hour shifts, with days off during the week. Employee demand for overtime also can help make this plan successful. This density model is the best way to handle both planned and unplanned absenteeism. Regardless of your work environment, one employee at a time could be added to manage this challenge. Given the choice, employees would rather come in on a free Thursday if they could be certain of a free Saturday or Sunday. Predictability is crucial, and none more so than weekend predictability. This belief has proven true around the country and the world as the Core Density Model has gained popularity. Density flexibility can place needed manpower on any day of the week, utilizing the low cost of overtime to satisfy customer demand.


Chart 3 (To View Click Here) : Example of Density Flexibility In an Environment With a Base Schedule Covering 16 hours, Monday – Friday
Adding Additional Employees To Particular Days Increases Total Man Hours And Is Possible With Alternative Scheduling Methods
Conclusion

How well does your current schedule flex to meet both your business and employee needs? Does your company require horizontal, vertical, density flexibility scheduling, some combination of all three, or another innovative plan? You can increase profits, and satisfy customers AND employees with scheduling that responds to your current business needs as well as better positioning your facility for the future. Great schedules are within your reach. Satisfying the business and employees can be part of a solution that works for everyone. The reality is that the old, traditional schedules of the past do not provide the flexibility that is required in today’s competitive environment. The ability to meet your customer demand while minimizing costs is achievable with a customized schedule system.

Core Practice LLC is the world’s leader in Operation and Labor strategy, specializing in shift work and scheduling. If your organization operates outside the 9-5, Monday through Friday work week, contact John Frehse, Chief Strategist and Executive Coach at: JFrehse@Corepractice.com or call 1-212-534-0539

Executive Workshop

One can also learn about our free half day executive workshop on our website at: www.corepractice.com.

Employee Schedules

Education on employee schedules in shift work environments has now rolled out completely. To view the feedback from executive level participants and to download a one page document describing the private executive session, you can go to www.corepractice.com