Seven Keys to Improving Distribution Labor Productivity

Sep 17, 2012
Labor Management, Supply Chain

The last few years have seen very constrained budgets for major investments in new distribution facilities and material handling equipment.

As unit volumes increase, putting further strains on DC capacities, many companies must find solutions that enable them to achieve greater throughput from existing facilities without major investments in automation. In the face of these demands, distribution managers are aggressively looking for alternatives that can help them drive out costs and increase productivity.

The good news is that labor productivity improvements can substantially reduce fulfillment cost while increasing throughput and customer service. Better still, these results can be achieved with low risk and at moderate levels of investment that usually provide a return on investment in less than one year. In fact, labor productivity improvements in the range of 15% to 30% are possible and commonly achieved.

Despite the fact that productivity improvement initiatives have proven themselves in hundreds of companies, including many of the world’s logistics leaders, many companies are still unfamiliar with the key underlying principles of these successful initiatives.

By adhering to these seven principles as part of a productivity program, companies can reduce distribution costs, increase throughput, and gain competitive advantage through performance and service leadership.

  1. Start With Individual Accountability – Overall productivity in the DC is ultimately based on the accumulation of individual performance across operators and tasks. Yet, very few companies do a good job measuring individual performance. Productivity improvement starts with the notion of individual measurement and accountability.

  2. Build Standards Based on the Right Methods and Procedures – Standards based on sub-optimal distribution methods and procedures will miss significant opportunities for productivity gains. Yet many companies attempt to build standards on existing processes without first carefully evaluating whether they are appropriate or could be improved.

  3. Productivity Can Be Improved Through Either Software or Engineering, but Results are Maximized When Both Are Utilized – Performing the upfront engineering work to develop the right methods, using those methods as the foundation to build discrete standards, and then combining that work with labor reporting software that can dynamically calculate performance expectations based on those standards, clearly offers the largest opportunity for productivity improvement.

  4. Focus Management’s Attention on the Details – While clearly attainable, significant productivity gains are won and lost in the “trenches.” This means that management must focus on the details of the program for it to deliver maximum success. Simply stated, while the right strategies and planning for improved productivity are important, successful program execution is what ultimately delivers the results.

  5. Train Operators and Supervisors for Success – There is growing recognition of the essential role of high quality training in any supply chain improvement initiative. This is especially true in productivity programs, where training of operators and supervisors is fundamental to the very concept of the solution.

  6. Incentives Can Work – But Only if Done Well – In an effort to increase distribution productivity, many companies gravitate towards operator incentives to increase individual performance. While incentives can often be a key part of an overall productivity program, it is critical that they are well executed to avoid problems that outweigh the potential advantages.

  7. Utilize Formal Change Management Teams and Techniques – Organizational change doesn’t just happen. There is a proven approach to “executing the change” in productivity initiatives that enables realization of the improvement potential. Establishing formal teams and building a communication plan are important elements of this process.

In an era of increased logistics pressure and significant need in most organizations to reduce or control costs while maintaining or improving customer service, productivity improvement programs often represent the highest payback, least risk opportunity to achieve these challenging goals.