Labor typically represents the largest operating expense category in the supply chain, accounting for anywhere from 35-65% of your expenses. It’s astonishing how many companies still neglect to measure or understand how to improve the performance or return on investment of this significant expense. To ensure efficient resource utilization, you need to focus on labor planning, performance tracking, and coaching and feedback as key elements of an effective labor management strategy. As operations leaders, we often fall into the habit of neglecting the long-term relationship between resource planning and overall S&OP outcomes. When I ask operators why they aren’t actively measuring labor performance using a labor planning tool, these are the common responses I hear:
We don’t have it in our culture.
This response is frequently encountered during site visits. Unfortunately, by not tracking employee performance, you are actively reducing accountability within your organization. It becomes challenging to have factual conversations with employees without sufficient data to support observations. Implementing a labor management tool allows you to recognize high performers (potentially with incentive pay) and provide coaching to underperformers. This ultimately boosts company performance and fosters a culture of continuous improvement.
We fear turnover or unionization.
Humans crave feedback. How often do you provide timely and accurate feedback to help employees improve their performance? When considering labor management, companies often focus on coaching poor performers or singling out lagging employees. However, providing feedback and recognizing top performers is equally important for the rest of the team. Companies that consistently provide feedback achieve a 15% lower turnover rate compared to those that don’t.
We don’t have the right tools.
Supply chain practitioners sometimes unnecessarily complicate things. Planning, tracking, and coaching labor can be accomplished with simple tools. A company can implement a well-tailored Excel tool or utilize complex labor management systems provided by tier 1 WMS software companies. LIDD has successfully implemented basic, yet highly functional labor management tools using PowerBI and would be pleased to demonstrate how these tools can significantly enhance your operations.
In summary, as operations leaders, it is crucial to control and manage expenses related to the supply chain. With labor shortages affecting the market, now is an opportune time to implement a labor management strategy. This ensures effective planning, tracking, and feedback provision to employees, fostering a culture of continuous improvement.