Improving Labor Management: 6 steps to effective labor standards

For most logistics professionals, labor represents both a valuable asset and a high recurring expense. Costs soar when labor is over-scheduled, for example, but productivity lags when there aren’t enough warm bodies in the distribution center (DC) to cover all of the tasks at hand.

Achieving a balanced state between these two extremes is an ongoing challenge for most logistics organizations, yet one that can be effectively tackled through the use of established labor standards. According to top labor management practitioners, managers that take the time to assess their current operations, analyze their labor goals, set up labor standards, and leverage technology during the process can reduce the amount of budgeted funds spent on labor. 

“Variable labor can make up more than 50 percent of an organization’s spend,” says Jim Chamberlain, senior director of industrial engineering and continual improvement at DSC Logistics and Supply Chain Management. “To get their arms around that expense, companies need a disciplined way of predictably managing and delivering results with their labor forces.”

One of the best ways for logistics management professionals to start chipping away at labor costs while achieving productivity gains is by setting up labor standards—or, those principles that will drive their labor management strategy within the warehouse and DC. Following are six ways to start doing this today.

1. Be a silent observer. Get out onto the warehouse floor and look at how people do their jobs. Come up with a “Version A” (the existing processes) and a “Version B” (how you would like the job to be done) for each employee. Do this with an eye on building standards towards the best practice for that particular job, says Chamberlain. “Keep an open mind during this process,” he adds, knowing that the different behaviors observed will pave the way for the establishment of new behaviors, best practices, and standards.” Ultimately, the goal will be to provide employees with engineered standards that match the tasks that they perform on a daily basis.

2. Transform your firm’s culture of accountability. Once you have a baseline for both current and desired labor standards, focus on transforming your organization’s culture of accountability. In other words, everyone from the forklift operator to the frontline supervisor to the building owner should be—or should become—consciously accountable of the contribution being made to the overall organization. In return, Chamberlain estimates that companies can save anywhere from 10 percent to 20 percent on variable labor spend over time. 

3. Let employees know what they’re going to get out of it. By nature, humans don’t like to change—nor do they like their activities tracked and documented. To overcome these challenges, Don Cook, president of workforce management consultancy Cook & Associates, says shippers should take the time to tell workers exactly what they’re going to get out of the process.

“Be transparent and tell them what benefits they can expect,” says Cook. Let them know that they’re going to be objectively appraised, he adds, and that everyone is going to be operating under the same set of standards. And remember that you’re managing humans here, not equipment. “It’s not like making sure a machine is operating at 80 percent capacity versus 60 percent, or that system response times are two seconds instead of 12,” Cook points out. “Managing a labor force is a lot more complex.”

4. Figure out individual employee productivity. Use a flowchart to identify the key tasks that are performed by your organization’s employees on a daily, weekly, monthly, and quarterly basis. Next, set time standards for every one of these tasks and then use those standards as the common denominator for employee performance and compensation.

For example, says Cook, if one warehouse worker is paid for an 8-hour shift, ask yourself just how many standard hours that person worked in return for payment for that 8-hour shift. “If the answer is six hours,” he says, “then his or her productivity index would be 75 percent (6 divided by 8).”

5. Let your warehouse management system (WMS) play detective. Tasked with overseeing and orchestrating the movement of freight and people within the four walls of the warehouse and DC, WMS can play a valuable role in an initial labor standards roll out. “On a job-by-job basis, examine what the best practices are for the task at hand,” Chamberlain advises, “and then determine how each of those practices can be supported by your WMS.”

Look at current processes and the role that the WMS plays in those processes, Chamberlain adds, and then make changes to the system in a way that drives the behaviors that you’re looking for. “Throughout this exercise, aim to minimize the number of steps that can’t be tracked or driven by your systems,” he says. “That’s where the real savings will come into play.”

6. Get management on board early in the process. For labor standards to be most effective, management must be on board early in the game. That’s because management skills play a critical role in the overall success of a labor standards initiative. Put simply, management should be able to objectively take action on the evaluations that are being produced by the new approach to labor standards. “Management has to be able to step up and reward employees via incentives or encouragement,” says Cook. “These team members also have to be able to identify poor performers and get them trained and up to speed—or dismissed.”

Managers aren’t the only ones who should be introduced to the labor standards initiative early in the game. In fact, Chamberlain says that every department within the organization should be included in the process. “When you roll out this kind of a program, it touches every corner of your operation—from human resources to engineering to sales and everything in between. There’s no area of your business that isn’t going to be affected, and everyone will play a role in the success of the program.”

And remember, Chamberlain adds, that labor management isn’t just about rolling out a new set of rules and expecting your employees to fall in and start following them. “It’s about how everyone looks at their day-to-day activities and how they go about doing their business.”