Four Keys to Operational Performance

If you were to categorize your distribution or manufacturing operations, how would they rank? Are they “world-class” or “middle-class”? Many of today’s most successful distribution operations have already employed these concepts and are reaping the rewards of higher throughput and lower labor cost. Take a moment to answer the following questions.

1. Are you getting the most from your labor dollar?
2. Are your associates self motivated, requiring minimal supervision?
3. Are your associates fairly compensated for their level of effort?
4. Are you able to track performance at the individual level?
5. Are your supervisors able to manage proactively?
6. Is your facility operating at maximum throughput?
7. Are you meeting customer service goals?
8. Are you able to retain quality associates?

If you answered no to any of these questions, by focusing on the “Four Keys to Operational Performance” you too can improve your manufacturing or distribution operations. In the world of high labor costs, increasing customer demand and tight budgets, the need for efficient production and timely order fulfillment is more important than ever.

1. Operations Improvement

Streamline, simplify and standardize. Operations are the foundation of efficient distribution or manufacturing. A solid foundation is essential. Inefficient product flow and non-value added activities need to be eliminated. Over-complication is very common in today’s distribution centers due to systematization and mechanization. Operating procedures must be easily understood by the associates, and all associates must be trained in the best methods to perform their tasks. Additionally, it is important to collaborate with line managers and associates to identify “best practices” for your operations. In most cases, a lot of good ideas within the organization never surface because input is not solicited or valued.

2. Productivity Tracking

What is tracked - gets done. Most companies track departmental or facility-wide productivity (UPH) and cost (cost per unit). However, this does not allow you to effectively manage labor or provide timely feedback to associates on their performance. Visibility of production and time recording at the individual level is imperative to effectively manage labor. Tracking productivity can be done in a variety of ways, but advances in technology have led to a new generation of automated productivity tracking software tools. These tools can be easily interfaced with a WMS to track productivity and calculate individual associate performance. When you know exactly who is – and more importantly – who is not performing up to standard, the manager can intervene to provide training or discipline as required. Another benefit of accurate productivity tracking is that the information can be used to plan and balance staffing by operational area, making best use of available labor assets – daily.

3. Engineered Standards

Everyone needs a goal. Engineered standards developed through time and motion studies are an objective tool to measure individual performance. While UPH (unit per hour) goals are better than not having goals, unless your product mix is consistent, they tend to be judged as “unfair” by associates. If the goals aren’t considered realistic, associates become discouraged. Engineered standards are the best way to provide accurate and fair goals for associates as standards take multiple production variables (e.g. unit, carton, and pallet) into consideration. As product mix changes, the standard adjusts accordingly. Also, standards allow you to set one performance goal facility-wide, 100% Performance. This is much simpler to track UPH goals, where they may be several in each operational area.

4. Performance Incentive Program

There are countless ways to reward performance. Motivation is the key to high performance levels. Human nature is such that people tend to only put forth maximum effort if there is something “in it for me”. Incentive programs are a way to motivate associates by rewarding them for their effort and performance. Incentive programs range from non-monetary “rewards” to “pay-for-performance” programs. Rewards include recognition clubs, raffles, merchandise giveaways, and lunches. Pay-for-Performance incentives reward associates with an hourly performance bonus for exceeding performance standards. As productivity increases, the company (lower labor cost) and the associates (increased earnings) share in the success; a “win-win” situation.

Summary

By focusing on the “Four Keys”, the following benefits are realized.

• Reduced labor cost through increased productivity (30 to 50% in most situations)
• Increased visibility of associate performance
• Increased facility throughput, extending capacity
• Increased associate retention and morale
• Improved management skills and effectiveness
• Enabled a self-directed work force through metrics and accountability
• Improved service levels

You too can improve your operational performance by implementing these four keys. The potential labor savings are significant, but do not underestimate the positive impact on your organization from increased management effectiveness and improved associate morale and retention. A positive, empowered workforce is priceless.