7 Questions to Ask When Thinking About Installing Individual Incentives in Your Warehouse

With the increased difficulties of finding qualified labor for warehouse operations, many companies are turning to options that increase the productivity of their existing labor force.  One common way of doing this is to offer monetary incentives for the warehouse workforce.  Not only does this drive increased throughput and lower cost per unit, but it’s a great tactic for HR teams to recruit and retain top talent in a competitive labor market.

When considering individual incentive programs, here are 7 questions to ask:

  1.  Is the process standardized?  Are your SOPs accurate and are best practices being followed?  No operation is perfect, but if you don’t have standard processes, then you are not ready for incentives. 
  2. Is there a Labor Management System (LMS) in place?   Warehouse incentives are typically calculated off dynamically ‘Earned’ Hours and performance calculations versus a static rate (e.g. units per hour). To calculate dynamic performance, an LMS is typically needed.
  3. Is the Labor Management System established and tested?  When incentives go live, associate behavior typically changes, and this can be monitored in the LMS, but only if you have established baselines of a ‘daywork’ environment. It is imperative to have a period of testing and baseline data collection before implementing incentives.
  4. Are the Engineered Labor Standards (ELS) accurate?  Engineered Labor Standards need to be fair and accurate.  Individual incentives demand +/- 5% accuracy which means standards need to validate at that level.   Launching a program with inaccurate Engineered Labor Standards will create a long-term problem both financially and culturally.  
  5. Are operations ‘On Standard’?  To ensure a fair and equitable plan, the entire operation should be ‘on standard’ and included in the incentive opportunity.  Excluding departments establishes a culture of the “haves” and “have nots”.
  6. Is adequate support staff in place?  Incentives require additional support to administer and maintain.  Not only administrative, but also Industrial Engineering, front line Leads and Supervisors.  One fatal flaw is the set it and forget it approach.  Incentives plans require constant attention and maintenance to be successful.
  7. Is performance actively being managed?    Basic Performance Management fundamentals should be in place to support incentives.  Supervisors should complete daily observations to address performance and utilization issues and recognize good performance.  Incentive plans are not a replacement for front line supervision, they are simple another tool to help establish a high-performance culture.

If you can check the box on these qualifiers, then performance incentives may be a great solution to drive additional productivity.

The Good Jobs Strategy Revisted

To drive myself towards continuous learning, I will occasionally revisit my library and re-read a book that I have found impactful…

I recently revisited a book I read a while ago titled: The Good Jobs Strategy, by Zeynep Ton. Ton’s primary emphasis of the strategy is to establish a “virtuous cycle” by creating sustainable, good jobs for employees, which in turn will promote operational excellence in the stores, which in-turn will result in higher conversion, basket size, and sales. While this book was originally published almost ten years ago, I was struck by how incredibly relevant it remains today, and how closely her arguments align with the fundamental beliefs of the Connors Group.

There has been a lot of talk in recent years about the “Amazon Effect” and the coming retail apocalypse. While there is no denying the impact of the omnichannel shift, it should be noted that physical retail is still not only alive, but an integral piece of the shopping cycle…What is no longer tenable, however, is a physical retailer that is not focused, well-run and purposeful. Retailers cannot afford waste. Unfortunately, in the mindset of many retail executives this translates to minimizing labor.

Labor is essential to delivering the physical experience to the customer, but as Ton points out it is often managed as a short-term controllable expense:

  •  Stores cut the quantity of labor to hit short-term financial objectives, which creates unpredictability within the workforce.
  • The focus of hiring models is on part-time employees to reduce benefits liabilities and to maintain perceived flexibility in scheduling.
  • Employees are assumed to be able to operate in the retail environment with minimal training.
  • Wages are kept as low as possible while remaining somewhat competitive.

All these tactics are aimed at “optimizing” the second-largest expense line on the P&L. As the book illustrates, though, the longer-term impact of these tactics is often not seen until it is too late.

The “Good Jobs Strategy” proposes a different approach…

It is important to note that the motivation for this strategy is not altruistic in nature. It is founded on a genuine belief that if retailers offer better jobs it will establish a “virtuous cycle” that will pay off in increased top-line sales that far exceed the increased labor costs. Following this strategy, retailers invest in labor rather than cut costs. These investments are manifested in higher wages, fuller training, better benefits, and more-convenient and consistent schedules. While this is a sound strategy, it is important to note that this is predicated on an assumption that the employees are focused on doing the right thing.

Investing more in labor is not an altruistic endeavor…

The companies that Ton points to as examples not only invest more in their labor, but they expect more from their labor. This means that these are companies that understand the importance of labor in their service model. If an outlet brand invests more in their labor and expects proactive high-touch selling, it may not pay off if their customers value clean stores and full shelves.
Successful retailers have integrity in their expectations. They understand the balance between the customer value proposition, the associate investment and the profit model, and leadership systems are focused on maintaining and executing on this model.

At Connors Group our philosophy is aligned around this cycle…

We believe that first and foremost, companies need to understand and be honest about their service model. The cornerstone for all operations is understanding, through data not opinion, what customers value and how store behavior impacts their behavior. Once this understanding is established, successful retailers align the staffing model around the service model. This is where the good jobs strategy actualizes; but again, although this is necessary, it is not enough…In order to achieve high execution of the service model, a robust and focused leadership model must also be in place. This involves, among many other things, established expectations, accurate and relevant reporting and metrics, capable and trained leadership, and accountability through the constant and calibrated use of assessments…With these three elements (service model, staffing model and leadership model) in place, the optimization of the labor model is possible. Without any of those three in place, the returns from any optimization effort will be compromised.

The “Good Jobs Strategy” can work. It is true that good employees are a necessary component of delivering a good customer experience. However, this is predicated on an ecosystem that is balanced and aligned between the service, staffing and leadership models. This is what enables the return on investment that establishes the “virtuous cycle” espoused by Ton in her book… Connors Group was established to help our clients establish and maintain this balance, and it is why I am proud to be a part of this organization.

Current Trends and Business Challenges in Supply Chain Labor – Part 2: Optimizing the Workforce

Last week, we explored the business challenges and trends in supply chain labor. In part 2, let’s take a deeper look at how companies are addressing those challenges.
Best-In-class supply chains are addressing workforce challenges by taking a comprehensive approach to their labor strategy…

When observing workforce optimization in warehouse and distribution centers, we can typically refer to three areas that comprise the building blocks of effective Employee Engagement.

Experience shows that best-in-class companies take a Crawl – Walk – Run approach to the implementation of workforce optimization strategies. The overall journey typically requires a cultural transformation within an organization, but the benefits outweigh the efforts with improvements in employee engagement, retention and bottom-line results
If we take a closer look at the three areas, here is what’s working:

Lean Warehousing:

  • Process Standardization works because it produces documentation for processes across all shifts, reduces variability, makes training of new employees more effective, increases safety and provides a baseline for continuous improvement.
  • Establishing a Baseline for Measurement is important, because it can reveal how much improvement has occurred through incremental changes.
  • “Walking the Floor” is an ideal way to engage employees in real-time and provide opportunities for coaching and learning.
  • Process Improvement is continuous, effective, necessary and is at the core of Kaizen
  • Recruiting and Hiring Best-Practices are the hallmarks of any successful business with a people-first culture.
  • Eliminating Waste across all aspects of the business enables investment in additional resources.

Workforce Performance:

  • Establishing productivity, quality and safety targets is an effective way to set a reference point for expectations.
  • Engagement and Education is a favorable way to encourage positive behavioral change in employees.
  • Reinforcing desired work habits is a positive way to reiterate the goal of continuous improvement.

Workforce Staffing and Planning:

  • Utilizing Technology to establish Engineered Labor Standards with software products like LaborPro™ is an effective way to better manage ever-changing labor models.
  • Performance Reporting is imperative to highlight the effectiveness or shortcomings of established and agreed upon goals and targets.
  • ROI Analysis confirms that all efforts point to improvement to the bottom-line.

Final take…

The challenges in supply chain labor will continue to evolve, just as trends will continue to change. By Staying nimble and relying on tried and true Lean Principles and Performance Goals, best-in-class companies will not only endure but will also thrive in today’s challenging environment.

Winning the War for Retail Talent in $15/hr. Era

The starting hourly wage rates for many retailers are no longer at or slightly above the government mandated minimum wage. In the current economic climate, starting rates cover very wide ranges including many at or above $15 per hour. However, the requirements for these jobs are all essentially unchanged; they are entry level positions.

Historically, hourly employees would not change jobs for money alone. It would take a significant increase, normally an increase of $1 per hour or more, to induce an employee to leave a job. Many reasons, such as job comfort, enjoyment, relationships with their manager/team, recognition, etc., were enough to keep them in their role.  The reality is that $15+ per hour is giving employees a $3 to $5+ per hour increase in hourly rates – more than enough incentive to leave the comfort of their current job.

This poses a big problem for employers…

For those employers already at $15 per hour or employers who are unable to pay $15 per hour, how else can they compete for and retain talent?

“Competing for and retaining retail talent is often mistakenly seen exclusively as a HR issue,” says Jeff Peretin, President of Connors Group. He adds “balancing pay and benefits into a ‘total comp package’ is where HR Directors tend to focus. And, while that formula might show 2 or even 3 times the hourly rate, employees typically won’t focus there…where retailers can really make themselves more competitive and encourage more employees to stay is by making their retail stores a great place to work.”

Based on recent Connors Group client case studies, some of most common reasons why retail employees leave their employer (excluding pay) is due to the conditions of the workplace and the lack of proper training. Employees find it difficult to do their job or feel they are not setup for success if they don’t have the rights tools. As a result, they become unmotivated, performance suffers, and they ultimately leave. Retailers often overlook this important consideration for employee retention.

The formal mechanisms that have traditionally been the domain of HR in retail (pay, benefits, rewards, etc.) remain essential, but are no longer enough to win the war for talent. Company culture will trump formal mechanisms when companies can no longer afford to increase their “hard” financial investments. This culture manifests itself in stores through a great work environment; clear expectations, consistent two-way feedback, effective and ongoing training, a neat, clean and orderly workplace, and a clear understanding of how the role of an associate contributes to the company mission. In today’s challenging economy, the company that masters these at the store level will win the war for talent!

MODEX 2018 RECAP: Solving for the Labor Shortage

The newest supply chain solutions in automation, robotics, machine learning and A.I. were on full display at the industry’s leading supply chain conference. Each year, we continue to be impressed at the pace of the industry and amazed at the newest innovation.

Future Proof your Supply Chain was the main theme of the show and many of our clients were in attendance, actively assessing solutions to address one of the largest challenges that will face the industry…how to solve the impending labor shortage?

Many companies will claim the labor shortage is already here, but by 2030 the shortage will be so large, that some are labeling this as one of the biggest crisis to face every labor-intensive industry (i.e. supply chain, trucking, construction, retailing, fast food, manufacturing, etc.).

The solution seems simple…Just replace the humans with robots, right?

Of course, automation will be a significant part of the solution, but the majority will continue to require labor. The answer for the impending labor shortage will most-likely be a blend of the newest automated solutions along with optimizing the workforce through engineering practices and a sustainable high-performance culture. The one thing that is clear is that companies are shifting how labor if viewed; from once being a controllable cost, to now being one of the most important assets.

So, what are your thoughts?

  • How are you solving for the labor shortage?
  • What extra steps are being done, specifically for peak?
  • How are you engaging, motivating and retaining your workforce?
  • How are you creating a high-performance culture?
  • What gives your workforce a competitive advantage?

We’d love to hear from you!

Contact Us

The importance of integrating Labor and Workforce Management Systems

As Omni-channel continues to blur the lines between Distribution Centers and Retail, forward-thinking companies are beginning to leverage labor and workforce technologies outside their ‘traditional’ environments.

Under intense pressure from eCom giants, customer expectations and demands, retail stores continue their evolution toward becoming fulfillment, distribution and return processing centers. Labor Management Systems (LMS), which were born in the Warehouse / DC environment, are now being utilized in stores to track the performance of these tasks while providing timely feedback and performance coaching opportunities.

At the same time, 3PLs, Wholesalers and Retail DCs continue to feel the crunch of a tight workforce. To ensure warehouses have the ideal staffing level, companies are turning to Workforce Management (WFM) solutions to forecast demand and schedule optimization. Traditionally used for the schedule volatility of retail stores, WFM and advanced forecasting is finding a new home in distribution centers.

For companies adopting these technologies across traditional channels, the benefits are clear:

• A holistic view of operations
• Scheduling, utilization and staff plan synchronicity
• Consistent performance accountability across all departments
• Clearer forecasting
• Increased customer satisfaction and service
• Financial improvement

In a recent conversation with Jeff Peretin, President of Connors Group, he added that “Connors has always led the charge with our clients and partners by helping them navigate the complexities of a quickly-changing retail / supply chain environment. One area where we’ve seen an increase, is the focus on maximizing the utilization of different software platforms to identify efficiencies across the enterprise, specifically when it comes to labor.”

As companies continue to compete on costs, proven technologies for workforce and labor management will be blended together across channels to provide a holistic solution for workforce optimization. And the companies that embrace this new reality, won’t just survive, they will also thrive.

We’d love to hear from you!

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Does One Second Really Matter? (The purpose of labor standards)

We know what you’re thinking: “Does one second really matter all that much?” If you are in the retail business, the answer is a resounding “YES!” Time is money in the business world, and small amounts of time wasted can quickly add up into lots of lost profits. Let’s take a further look into the purpose of labor standards and why one second truly does matter.

 There’s not a second to waste, let’s get started!

The Measure of Success: Engineered Labor Standards

The foundation for all effective retail time management is engineered labor standards. These standards are the individual measures of how long every single activity that makes up your workflow should take to run at its most efficient and profitable. The more specific and accurate the measures of your engineered labor standards are, the more effective time management can become. Increased specificity comes from additional time standards that are distinctive to a particular store, which allows for an enhanced ability to excel with time management.

Think of the importance of implementing the most accurate engineered labor standards for time management through the following example:

  • If your engineered labor standards have employee time-measured segments divided into 30-minute intervals, it is mathematically possible to have 26 possible start and end times for employees during a 13-hour day.
  • If your engineered labor standards are divided into smaller, more precise segments of 15-minute intervals, there now becomes the possibility for 52 start and end times for employees during a shift of the same length

Now, consider that the measurement of engineered labor standards takes into account every motion and the time for every task. Consider that wasted motion and actions can be eliminated and that beneficial activities can be optimized. If your weekly payroll is $10,000 and, if introducing ELS can reduce reduce wasted time by 20%, not only will efficiency improve, but also you may well be able to reduce payroll expenses by $2,000 per week ($104,000 per year) and still deliver a higher degree of customer satisfaction by scheduling more effectively.

 A time managed schedule is a smart schedule.

Mastering Time Management

Additionally, engineered labor standards help streamline activities that could be detrimental to time management. For example, a manager could lose time dealing with a paper schedule that has to be manually updated and changed on a regular basis. Engineered labor standard implementation helps you identify areas such as this that can cause the misuse of time so that you can create processes to increase effectiveness.

Once all tasks have been enhanced to their maximum efficiency through engineered labor standards, time management can really begin to be seen. Managers can now properly prioritize and schedule required day-to-day activities.

One survey of executives found that their most successful time management tip was to maintain a balance between tasks. A great way to implement this in your business is to have certain recurring tasks designated a specific time each day, then maintain that schedule. We all know how easy it can be to start sifting through emails and, before you know it, most of your day is shot. By allowing certain amounts of time for each required activity, all needed activities will continue to be addressed without wasted time. Your business will be utilizing proper time management at the highest level.

 You go to quickly check your inbox and, before you know it, you’re two hours in…unless you have a time managed schedule and have already moved on to you next priority task.

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Running out of space: Do I really need a bigger building?

Is it starting to feel like the walls are literally closing in around you and your business’ warehouse? Do you feel like you have finally outgrown your space and are beginning to panic about where to go next? Take a second to breathe and consider that you might have all the space you need, but you aren’t using it properly.

 Let us help you relieve your warehouse panic with some helpful information!

Are You Really Capped Out?

Before calling your favorite real estate agent to start looking for a larger commercial building, consider this: How well are you utilizing the space you currently have? Is your building truly too small, or are you able to better utilize the space available?

When discussing available space, always consider capacity. For ELS purposes, the concentration should be on working capacity, since this is the realistic working value for your warehouse, by taking into consideration factors such as the way inventory is stored (e.g., floor versus racks). Theoretical storage capacity is helpful information to your business, but not for taking full advantage of well-executed ELS.

 Even the largest warehouses can be under utilizing available space.

ELS can be utilized to determine whether or not your business is operating beyond capacity. The foundation of ELS is to complete all required operational tasks with the least amount of effort and efficiency without sacrificing quality and standards. By tracking a scientifically determined measure for how long it takes employees to move inventory, both inventory optimization and workforce management can be improve.

Imperative: Inventory Optimization

It would be hard to downplay the importance of inventory optimization when speaking of warehouse capacity. The inventory is what is taking up your warehouse space. Not operating at most effectively and efficiently when it comes to ordering and stocking inventory will drastically impact your bottom line and available space.

Determining, tracking and maintaining ELS will allow for the most inventory optimization due to your ability to track the efficiency of your workforce. An abundance of inventory could decrease efficiency when measuring how long it requires your workforce to store or move said inventory. Too little inventory can reduce the productivity of your workforce as you are staffed inaccurately for the amount of work.

Keeping up to date with your ELS will allow you to make the proper adjustments to ordering trends and, ultimately, develop the most effective and efficient standard for this task.

Your Warehouse and Workforce Management

The implementation of proper ELS not only enhances workforce management across the board, but can also increase the space utilization of your warehouse. ELS is about optimization of all tasks, particularly the tasks directly involving the workforce. In your warehouse, this involves a great deal of interaction with inventory.

Utilizing the space you have available for your optimized inventory will impact your ELS for moving inventory from one location to another. Determining the best configuration for storage based on your own company trends can enhance your workforce’s ability to complete tasks as fast as possible. If you have a floor-oriented storage method, utilizing your ELS to determine the proper amount of space between pallet rows to allow for the most storage but the optimal space for employees to move at full speed and safety will ultimately provide you the most efficiency.

 Never forget your workforce is the key to your success, so you should strive to set them up with the best conditions possible to be top performers.

As always, it is important to remember your workforce is the key to your success, and space utilization factors into the safety of your workforce. Never sacrifice safety to try to enhance ELS; the purpose of having standards is to be the most effective and efficient without any sacrifices of quality and safety. Mismanaged space can lead to on-the-job injuries. In 2014, there were over 4,800 workplace fatalities in the United States. Safety should never be sacrificed on the altar of efficiency. Rather, it should be a key component of determining the most efficient methods and processes.

Request a free consultation and find out how else you can improve on the efficiency and effectiveness of your business operations.

The Proven Approach to Improving Customer Service Standards

Wanting to create the best standards for customer service in your retail business is more than a philosophy to which to aspire. For the sake of efficacy, customer service standards must be quantifiable. You must be able to measure, compare and improve upon these standards to excel. Think of customer service standards as the science of your success!

The Science of Standards: A Key for Process Improvement

Customer services standards should be a part of your business philosophy. After all, your customer is your top priority and customer service is of paramount importance. But the concept of customer services standards transcends from a thought into the realm of retail management solutions due to its inherent quantifiable nature.

 A happy customer is a repeat customer, and

a repeat customer is a recipe for revenue.

A standard, by definition , is “something set up and established by authority as a rule for the measure of quantity, weight, extent, value, or quality.” “Measure” and “standard” are definitively directly connected at their very foundation. To accurately judge or measure the success of your business, there must be a standard against which to measure. This standard must be concrete, not some philosophical ideal. It’s tangible versus thought; actionable versus abstract.

Developing your customer service standards is an important, multi-step process that requires specific attention and detail to be most efficient and effective. Utilizing a workforce management consultant for the implementation of the steps required for development, maintenance and improvement of customer service standards will allow for a quantifiable evaluation of best business practices and the creation of process improvement strategies.

 It’s like a game of chess. You must take multiple, well-planned steps to reach the end goal.

6 Steps for Setting Retail Management Standards

1. Discovery and Design: The first step to developing customer service standards is for a professional ELS team to acclimate to your retail environment. Learning your business practices and familiarizing with the physical store allow for the design of the project itself.

2. Observe and Capture: Once the base foundation has been laid, observation of the day-to-day can begin to further specify requirements. Time and customer services practices are studied during this phase, often using video observation and work sampling to establish the optimal time to be spent on each task.

3. Analyze and Build: With all required information obtained, the true development phase can begin. A labor model is created with process improvement observations based on the results from the previous step.

4. Validation: One of the most important steps in the process, validation, ensures to what degree the calculations are accurate and realistically applicable. Labor models and standards are reviewed to confirm accurate figures before implementation.

5. Deliver: Confirmed and completed, the labor standards are delivered with a full inventory of standards, drivers, attributes and additional recommendations for continuing process improvement.

6. Sustain: Maintaining customer services standards is as important, if not more so, than the initial development. Staying present by interacting with reviews and statistics allows for evolving process improvement to have the business change in the manner required to stay at peak performance.

 Keep yourself in the loop with your measured standards and you will always be able to have the best processes implemented.

Learn more about our retail management solutions and request a free consultation. Let us show you how we can help your business become more profitable by applying engineered retail labor standards.

The Secret of Retail Success: Engineered Labor Standards

What is the secret to long-term success in retail? Not settling for quick fixes. While, at times, these seem to be a smart idea and possibly profitable, there is no groundwork being laid for long-term return. Your business needs to build the foundation for the long term by creating superior workforce management tools through engineered labor standards.

ELS? What is That?

What does the term engineered labor standards mean in plain English? Identifying every employee task, measuring and validating the standard time needed for task completion, and implementing and maintaining the standards determined. The key to being able to create effective workforce management tools is to properly measure all tasks to objectively evaluate the efficiency of a company and, thus, is the purpose of engineered labor standards.

 You won’t need anything like this to calculate these measurements.

The best way to learn about this process is to examine one facet of what goes into the creation of workforce management tools for your business. Let’s learn more about an expense that is often the first to jump to mind when thinking about optimization:

 Here’s a hint for you on what this expense relates to…

Direct Labor Utilization

Payroll tends to always be up there in the accounting department, so having a method to measure the efficiency of your labor is invaluable.

Enter: direct labor utilization.

Direct labor utilization is a calculation used for identifying what percentage of total payroll expense is related to direct (or income producing) labor. Simply take the cost of direct labor divided by total payroll expense to calculate this percentage. The higher the percentage, the more efficient the direct labor. On average, businesses should be seeing at least 65% in their direct labor utilization calculation.

Keep in mind that some of the other expenses that contribute to total payroll expense are critical pieces to running a successful business, such as employee training. If a company has an extensive training program, chances are the direct labor utilization percentage will be lower. You have to look at the way your individual company runs to be able to interpret the percentage as it is applicable to you to assist with engineered labor standards and workforce management tools.

 It can be a delicate balance to decide how much training is needed when evaluating direct labor utilization for profitable purposes.

Engineered Labor Standards = Effective Labor Solutions

With a further understanding of the mindset of engineered labor standards and the role that these measurements take in creating effective workforce management tools, it becomes clear that the secret to long-term success in the retail business is implementing and maintaining these standards. A deep comprehension of your metrics will not only help you identify areas for improvement, but will also help to focus you on the areas that drive your business. A fundamental understanding of every element that makes up your day-to-day operations will not only improve the business, but also improve your skills as a successful retailer.

It’s not about the quick solution, it’s about the right solution. In the words of the late Steve Jobs, “If you really look closely, most overnight successes took a long time.”

Want more specifics about engineered labor standards and how we can help you achieve greater retail success? Contact us today and learn more!