| Your business is growing, you are hiring more people, | | | | · Will allow for efficiency monitoring (across |
| everyone in your organization has gained | | | | stations, groups, shifts, locations) |
| responsibilities, you are working overtime, and yet, you | | | | · Will allow for productivity monitoring (across |
| are experiencing new problems that threaten to | | | | stations, groups, shifts, locations) |
| undermine your business plan. These growing pains | | | | · Will allow for production and process scheduling |
| are keeping you from your regular duties; you are | | | | loading |
| running around putting out fires, forcing orders through | | | | · Will allow for production and process monitoring |
| your system, responding to customer inquiries about | | | | and control |
| late or missed shipments, looking for solutions, and | | | | · Will allow real time access to actual part / |
| trying to determine how you are going to reorganize | | | | process status |
| your business structure to better respond to this | | | | · Will allow real time access to actual part / |
| increased workload, but whatever you try you can't | | | | material / process location |
| seem to get out from behind the eight ball. | | | | · Will facilitate future labor / process planning |
| SEARCHING FOR CAUSE | | | | Implementing a labor reporting system: |
| As is often the case, you have probably assigned | | | | · Determine if current MRP can be reconfigured |
| someone to monitor your production process and | | | | to add labor or if a new system would be required |
| track your orders throughout the system so you can | | | | Automating a system to track labor: |
| better balance the workload across shifts and across | | | | Use bar coding, RFID, etc. to input labor |
| departments. You attribute these new problems to the | | | | Employees would scan at start providing location, start |
| increase in business, too heavy a workload, new | | | | time, employee, physical location of in process |
| employees who are not quite up to speed yet, and | | | | materials |
| you are certain that with a bit more attention and a | | | | Employees would scan at end of each completed part |
| little more time these problems will go away. Perhaps | | | | providing location, end time, employee, physical location |
| you need to hire a few more people to handle the | | | | of in process assemblies |
| increased responsibilities and to help put those fires out. | | | | Employees would scan last part at end providing |
| The truth is, if you are like nearly every other business | | | | sequence end time |
| that has experienced these growth spurts for the first | | | | Real time location of components and all in process / |
| time, these problems will not simply go away, but will | | | | completed assemblies is now available to all with MRP |
| most likely get worse, and merely throwing more | | | | access (i.e. one part in shipping staging area, one part |
| personnel at it is not going to help. | | | | in inspection, three parts in process at assembly |
| ADDRESSING THE SYMPTOMS | | | | station, etc.) |
| I have been in a great many facilities with this problem | | | | Will allow for determination of bottlenecks |
| and in the vast majority of instances I see the same | | | | Will allow for determination of needed process |
| red flags: people running around franticly addressing | | | | improvements |
| the same recurring issues, manually tracking production | | | | Will allow for audit of process improvement |
| in an attempt to head off log jams and smooth out | | | | effectiveness |
| production, hourly employees working overtime and | | | | USEFUL TOOLS |
| moving from one production area to another to | | | | The following are a few useful indices: |
| address the local production bottlenecks. But you are | | | | LABOR PRODUCTIVITY MEASUREMENT: |
| on top of it, you have assembled those | | | | Based on routed standards |
| cross-functional teams to look for a better way to | | | | · Performance / Utilization |
| deal with customer issues and backed up work cells, | | | | · Hours to produce (1) Standard Hour |
| to address the need for even more employees, but | | | | Performance: |
| odds are you are addressing the symptoms of a | | | | Performance = (Earned Hours) / (Actual Hours on |
| much larger problem and not the root cause. All the | | | | Standards) |
| work you are doing is simply a band-aid on a gaping | | | | Earned Hours = (Standard Hours / 100*) X (QTY |
| wound that is not going to heal. | | | | Produced) [ * or other quantity dependent on your |
| THE ROOT CAUSE | | | | volume] |
| Your real problem is labor, and not labor in the sense | | | | Actual Hours on Standards = only hours clocked on |
| of the volume of labor, or the quality of your work | | | | Direct Labor which have established standards. They |
| force, but the means, or the lack thereof, as it applies | | | | can be measured or estimates. |
| to monitoring and managing the labor portion of your | | | | Measured Standards = must have documentation to |
| production processes. When you were smaller you | | | | back up the numbers through actual time studies, YTD |
| could easily see the problems start to arise and you | | | | data, or standards data. |
| could quickly address these issues with a short term | | | | Estimates are based on: similar to, educated guesses, |
| fix, but as your production increases dramatically, you | | | | or unverified data. |
| find you are overburdened by these daily hiccups as | | | | Cost Standards: can be measured or estimates. |
| they begin to snowball out of control. You are certain | | | | Utilization: |
| that the problem is not your workforce; they all work | | | | Utilization = (Hours on Direct Labor) / (Hours at Work) |
| hard, they all work steady and they all work efficiently, | | | | Hours to Produce (1) Standard Hour: |
| but in nearly every case, once you actually start to | | | | This index reflects the total labor hours, direct and |
| manage your labor correctly, you will see that this | | | | indirect, expended at a plant, measured against the |
| misconception could not be farther from the truth. | | | | hours earned on cost standards. It is a useful index in |
| There are four main components to your product sell | | | | that it allows you to benchmark your percentage of |
| price: overhead, raw materials, labor and profit. Of | | | | labor hours against your billable hours. |
| these four items the most volatile and usually the | | | | EXAMPLE: YTD / Weekly department performance |
| largest percentage of your costs will be labor, yet this | | | | analysis: |
| is more often than not the most overlooked | | | | DL = Hours on Direct Labor |
| component of your process. | | | | EH = Cost Standard Earned Hours |
| How can you verify your productivity and efficiency if | | | | IL = Hours on Indirect Labor |
| you do not track and monitor your labor? How can | | | | Direct Labor Hours to produce (1) Cost Standard Hour |
| you accurately estimate your costs if you do not | | | | = DL/EH |
| monitor, measure and control the labor portion of your | | | | Indirect Labor Hours to produce (1) Cost Standard |
| costs? How can you effectively address your | | | | Hour = IL/EH |
| production problems if you cannot accurately pin point | | | | Total Labor Hours to produce (1) Cost Standard Hour |
| where they are? How can you schedule your | | | | = (DL/EH) + (IL/EH) |
| workload to meet your demand if you do not have a | | | | · Reliance upon accuracy of standards and |
| handle on what you demand is? And lastly, how can | | | | reporting practices. These are not always very |
| you determine if the time and money you spent on | | | | accurate, but you can look at trends. |
| improvements actually made a positive impact if you | | | | · Things that affect the indices: Changes in |
| cannot measure the results? | | | | standards (increases or decreases); accuracy of |
| THE SOLUTION | | | | reporting, when an operator is on Direct Labor and |
| You need to map your processes and measure the | | | | when an operator is on Indirect Labor. |
| actual time spent on each and every activity within | | | | TAKE CONTROLAvoid falling victim to the standard |
| that process. You need to record those times on your | | | | excuse that you cannot afford the time necessary to |
| routings or travelers and within your MRP system. You | | | | track your labor. The only way you will ever create |
| need to monitor and verify those times against your | | | | time to get the job done is to monitor and control your |
| estimates. And most importantly, you need to control | | | | labor. So don't put it off. Embrace it and start |
| and adjust those times on a continuous basis. Only | | | | increasing your productivity, lowering your costs, and |
| then will you be able to estimate accurately, plan | | | | satisfying your customers. You must fully understand |
| accurately, and ship on time. Only then will be able to | | | | what your earned hours are and what portions of |
| determine where and what your real problems are. | | | | labor make up those hours since it is the earned hours |
| Only then will you be able to verify your improvements | | | | that produce your revenues, not the number of hours |
| and justify those new expenses. Only then will you | | | | your employees are at work! Understand your labor, |
| truly know your capabilities. | | | | take control of your production, and start growing your |
| Monitoring labor accurately: | | | | profits, not just your business. |
| · Will provide checks and balances to estimating | | | | |