Offer employee incentives for the new year

If you want to improve your operations in 2008, implement an employee incentive program.

By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 12/31/2007

The new year is the perfect time to take a fresh look at where you are in your operations and where you want to go, says Steve Banker, service director of supply chain management for ARC Advisory Group.

“At the end of the year, most companies go through their budgeting process and ask their divisions, including distribution and logistics, how they are going to be more cost effective,” says Banker. “That’s why the new year is the time to start thinking about how you’ll meet the goals you’ll face in the coming year.”

Where do you start to become more cost-effective?

Banker suggests beginning with those areas of your operation that will make you look good when your superiors compare what you did versus your budget.

 Here are 3 ideas that Banker sees on a consistent basis from the best companies he talks to.

Idea 1.  Implement an incentive program: If you want to get more productivity from your employees, an incentive program is the first step. “There are a lot of different ways to run an incentive program,” says Banker. “You can put in a team-based approach, an individual program, or some combination in conjunction with a labor management program.”

Whichever flavor you choose, Banker says, almost all work. “I interviewed 200 logistics professionals on how they used incentive programs,” he says. “Over 63% had achieved productivity gains between 10 and 30% over a two-year period, while 13% had gains of over 30% over that same period.”

One tip: Don’t trade performance for quality. “If you’re getting mispicks because your operators are working faster, you’re not gaining anything,” says Banker. That’s why the best programs include a quality component to their programs.

Idea 2.  Reslot your warehouse: Given the fast pace of business today, it’s a good idea to reslot your warehouse at least once a month. But who has the time to move all that inventory? “The idea is that goods that are picked more often should be in a more central location to reduce travel time to the loading dock,” says Banker. “But while most firms, reslot as part of the process when they implement a WMS, most don’t keep doing it on a regular basis.”

The latest Tier 1 WMS systems combine slotting and labor management programs that allow you to run a what-if scenario: That allows you to figure out what it will cost from a labor standpoint to reslot compared to what you’re going to save from having inventory better positioned for picking. “But even without the software, most warehouses have down times,” says Banker. “That’s a great time to reslot.”

Idea 3.  Get OSHA ready: Almost all companies have safety programs. And all report incidents, like a lift truck damaging a rack, as OSHA incidents. “Most companies will talk about the incident at a weekly safety meeting,” says Banker. “But that’s not the same as developing an operational excellence program around OSHA.” Banker’s advice: In addition to reporting incidences, the best companies track them, assign a reason code to them, and then implement a step-by-step program to address them.”

What’s the key takeaway? Excellent companies are already doing all three of these,” says Banker, “but even though most companies want to be excellent, most companies don’t do them.”