Squeezed middle is a term that has become familiar to us all over the past months but, in the supply chain, we have been well aware of this concept for some time. In a highly competitive market, the challenges that face transport and delivery companies are greater than ever. Fast-rising fuel prices and maintenance costs have put pressure on profitability, and most organisations have done what they can in these areas to trim costs.
It isn’t just rising costs that challenge profitability throughout the supply chain - customer expectations are high, too. With mounting turnover pressure on retail space, and retailers often charging for premium shelf space, many suppliers of seasonal products must ensure they have stock available throughout the peak selling period but not before. A three-to-four hour turnaround for stock to be replenished, from the manufacturing plant to the store, is not an unusual demand for many logistics companies. To hit these demands and deliver on time, an organisation needs real-time visibility into workforce quality and efficiency so decisions made have an immediate impact.
But it isn’t all doom and gloom, as there are some great opportunities around now. Manufacturing that had previously existed in lower cost labour countries in Asia is returning to Europe, and in order to grasp these opportunities, we are seeing companies putting employee productivity right at the top of their agenda.
Inevitably, labour is a major cost. In order to ensure a healthy bottom line when margins are so tight, companies have started to examine labour costs to maximise profitability, and many organisations have turned to a workforce management system to support this. This system allows you to increase workforce productivity, control labour costs and measure employee activity in real-time. This will in turn enable you to identify your most productive areas, highlight available capacity, reduce the need for overtime and agency costs and eliminate payroll errors. It is this desire to deliver productivity gains through employees that we are seeing increasingly today. Recently, we worked with an organisation that used its ERP system to record absence. The detected levels were not particularly high so ITit didn’t think it had a problem. But when we introduced one of our systems, the company recorded a 40 per cent increase in absenteeism. It goes without saying, the introduction of the system did not cause the increase in absence, it just provided visibility into an issue hidden by the previous data-capture process. Now that is a real problem, as absenteeism is a serious productivity killer.
Fashion retailer, New Look, despatches over 450,000 units every day via 80 lorries to 540 UK stores. Absence levels, stability (staff staying more than one year) and staff turnover were once unacceptably high resulting in the need to recruit new staff every week. To combat this, New Look developed the Competency Based Pay and Training programme to provide a career path for employees, to motivate them and to encourage them to stay. Staff were monitored on a set of competencies that included such things as productivity, attendance record and behaviour. As a result, productivity rose by 32.2 per cent, labour turnover fell by 31.9 per cent, absence was reduced by 23.6 per cent and stability rose by 25.9 per cent. It would not have been possible to set this scheme up without a system to measure competencies and attendance.
Using a workforce management system allows an organisation to plan and allocate the right people, to do the right jobs, at the right time. With skill capabilities recorded in the system, and tracking tasks as they are completed, any spare capacity can be immediately reallocated to a new task, reducing the amount of downtime amongst the workforce. Without a workforce management system in place and not knowing where your employees are and what they are doing means organisations can be wasting time and money, plus missing opportunities to improve the bottom line.
Vaillant Group, which manufactures and despatches boilers from its site in Belper, has employed lean manufacturing practices as part of its continuous improvement programme to overcome the challenges it has faced in the domestic heating market. This is a market that is shrinking in real terms but, despite this, Vaillant has grown its sales volumes and market share over the past three years. Lean thinking needs time standards, otherwise major decisions would be little more than guesswork. At Vaillant, time standards in SAP convert production capacity into the number of minutes required to assemble a boiler, to paint panels and to manufacture parts. These minutes convert into hours in order to accurately assess how many employees are required to meet production demand, and then data from the workforce management system is layered across manpower resources to highlight potential employee gaps. Vaillant relies on real-time information from its workforce management system to drive efficiency at the plant – in HR and payroll right through to logistics, assembly, manufacturing and maintenance.
A workforce management system can support cost-saving techniques throughout the production and dispatch cycle. Vaillant operates a just-in-time inventory strategy with boilers made to order rather than for stock. To do this, it is imperative that component parts are available when required, which in turn means that procurement and logistics staff have ordered and delivered stock in time for assembly. Vaillant uses its workforce management system to forecast labour levels and to highlight any gaps in staff availability to avoid any bottlenecks or hold ups in the supply chain. Using our system, Vaillant has seen some great benefits: planned labour requirements has seen a reduction in overtime, there has been an 80 per cent cut in productive time lost due to skill shortages and absence levels are down 31 per cent.
There are new demands facing employers, too. Changes to the demographics of the workforce are becoming more apparent, with scheduled increases in the retirement age resulting in the number of older workers in employment set to rise by over two million by 2020. Add to this the threat of a skills shortage, and employers now also need to plan to manage an ageing workforce. Flexible working options, the quality of the work on offer and up-skilling will be a key consideration for older workers facing a delayed retirement. Technology has a key role to play here, too.
In contrast to the challenges posed by an ageing workforce, younger employees – the Generation Y workers (born to the baby boomers) who are now coming up through the ranks – have a very different set of needs. They expect organisations to use technology to interact with their employees. Generation Y workers manage their lives on mobile devices, and expect to be able to use their mobile phone to request annual leave or express a shift preference, for example, and assume they will get an immediate response from their manager. This younger workforce expects an employer to capture and retain information on their skill set and working preferences to maintain the work life balance they require otherwise they will move job to achieve the benefits they require.
The challenge of managing your workforce to ensure productivity is more demanding than ever before, and employers must have the relevant systems in place to ensure that labour productivity is maximised. Not only that, companies also need to attract and retain the best employees.Simon Macpherson
Simon Macpherson is business development and operations director EMEA at Kronos Systems. Simon enjoys leading enterprise sales campaigns, delivering significant business value to customers and has a proven track record of success in winning complex, mutually beneficial agreements with blue chip organisations. He is a keen sailor gaining his full DoT Yachtmaster cruising instructor and believes the experience gained in leading successful teams on yachts has proved invaluable in the world of business.
Kronos helps organisations across a variety of industries manage their most valuable, and expensive, strategic asset — their workforce. How? By giving them the tools and services they need to help them control labour costs, minimise compliance risk and improve workforce productivity. The easy-to-own workforce management solutions and services from Kronos make complete automation and high-quality information a reality and deliver the experience our customers expect. For further information, visit: www.kronos.co.uk