Analyst Insight: Operational excellence has been a mantra within the supply chain industry for decades. Think of it as a roof supported by five pillars: safety, communication, financials, quality and  talent development. And the most common failure point of operational excellence? Poor labor management.

Today’s cutthroat delivery expectations have led organizations to experience substantial daily volume fluctuations. A typical operation with poor labor management will utilize levers such as last-minute mandatory overtime to address volume surges. When an operation is constantly calling for mandatory overtime, the five pillars of operational excellence begin to crumble.

Mandatory overtime often results in disgruntled employees, which in turn causes increased turnover. Once the vicious cycle begins, employees are brought in quickly with very little training. This leads to safety incidents and quality issues, while talent development and communication fall by the wayside. And financials land far from budget.

There is, however, a simple strategy that any organization can implement: the PDCA (plan-do-check-act) cycle. Also known as the Deming cycle, it’s an excellent framework for your internal labor-management process. It’s practical, adaptable and, most importantly, quickly adoptable by your leadership team. Here are the steps:

Create a labor plan (Plan). Just two numbers are needed: volume and productivity. Many organizations will say, “You don’t understand, our operation is different! Our forecast is terrible, and our productivity numbers are complicated!” The reality is, you can make an estimate no matter how poor the forecast is, and every operation can divide its historical volume by the number of labor hours it used. It may not be perfect, but it’s better than being purely reactive. 

Execute the labor plan (Do). The true benefit of any plan is the work put into creating it, which then gives your organization the confidence in being able to pivot as reality sets in. Every day, reality will bring additional challenges. How are your processes for calculating and requesting changes in the labor force? Are you able to systematically shed labor from your operation? Having the right tools in place to execute your labor plan is just as important as creating it. 

Compare actual to plan (Check). You must have a daily process to compare the previous day's results with the plan. Going through this exercise will help you better estimate your volume and tighten your productivity numbers. Giving yourself a daily “plan-versus-actual” score will help your operation improve its labor management.

Adjust your future plans (Act). The results from the check step are pointless unless you integrate your findings into your next labor plan. This is the final step of the PDCA cycle, which, if done consistently, will take your labor management process to the next level.

Resource Link: https://shift-swap.com/ 

Outlook: The key to operational excellence is keeping your workforce stable, while flexing up or down to demand. This presents a golden opportunity, as most associates in the supply chain industry are seeking stable positions with some flexibility. Weaving in a flexible labor-management process is a simple yet highly effective method to achieve and sustain operational excellence.