shift work scheduling strategy: a labor management crash course
DESCRIPTION
In this session John Frehse, Chief Strategist at Core Practice, will share business strategies around labor management and how to remove costs from your organization. This exercise will not only educate, but will help you focus on the biggest opportunities available now. John will begin by sharing a list of the top hidden costs that most companies miss. He will then lead a short discussion about foundational labor issues including the importance of properly defining and creating a labor strategy that makes sense for your company with a closer look at pay policies. Next, strategic scheduling initiatives will be shared including how to manage variability. John will finish with a discussion about employee benchmark information that will be helpful to everyone in operations and human resources. He will accept questions at the end of the presentation.TRANSCRIPT
9 April 2023
Labor Strategy Session – Foundational Strategy
Proven Cost Reduction
2
Core Practice: Company Profile
Founded to create flexible, low cost scheduling options for companies that don’t have traditional “9 to 5” operations
Senior team members each have a minimum of 10 years experience successfully implementing cost savings and change management strategies
Rapid improvement methodology with a focus on operations and labor means cost savings are achieved within a short timeline (12 – 16 weeks)
Typical savings equal 11 to 17% of total labor costs
Implementation is done directly with the workforce
Heavy employee involvement means cost savings stick
Clients are Fortune 1000
Best Practices database with over 10 million data points
3
Share Best Practices From Other Industries
BHP
EDS
beach mold & tool,inc.
Niagara Regional
Police Service
4
2005, Core Practice Partners LLC
Results Oriented? It Must Be About Cost Savings!
5
4 Key Components – To Be Successful, You Must Use All of Them
Safety &Health
Operations& Labor
Employee Buy In
Implementation
6
Hidden Costs of Current Scheduling High overtime High inventory levels
Inability to staff efficiently for seasonal, monthly, weekly or daily demand
No full time/part time/temporary employee strategy
Uneven skills across shifts
Idle labor time (overall or pockets)
Hard to recruit and retain good employees
Outdated HR policies
Past changes have not achieved long term results
Consolidation or blending opportunities
Not maximizing current capital
Inefficient and/or numerous startups and shutdowns
Poor forecasting tools
Not meeting productivity potential/goals
High level of unplanned absences
Continued/Increasing health and safety problems
Hourly employees have morale issues
Us vs. Them employee/management mindset
Problems communicating to evening and night shifts
Inefficient vacation, lunch or break staffing
Green Room time underutilized – shift change inefficiencies
7
What is a Schedule?
A customer demand driven system for utilizing people and capital equipment, incorporating employee preferences, optimal HR policies, and high levels of flexibility to provide a low cost solution.
FORGET ABOUT SHIFT LENGTHS AND START WITH BUSINESS DRIVERS!!
8
2005, Core Practice Partners LLC
Correct Policies are Critical to Success
Shift Change Strategies $ 201,000Relief Staffing $ 104,000Absenteeism Policies $ 292,000Incentive Strategies $ 462,000Holiday Shutdowns $ 215,000Quality Incentives $ 126,000Off Shift Retention Plan $ 147,000Pay Differential $ 234,000“44th Hour” $ 615,000Break and Lunch Costs $ 725,000
TOTAL $ 3,121,000
9
2005, Core Practice Partners LLC
10
2005, Core Practice Partners LLC
0%
20%
40%
60%
80%
100%
Price/CostPer Unit
FixedCost
Labor
VariableCost
Profit
500,000 600,000 700,000Annual Units
6 Day 7 Day
Profit = 10%
Fixed Cost = 30%
Variable Cost = 30%
Labor = 30%
The Profit Greater As Utilization Increases?
Additional Profit
Currently: 5 Day Base Schedule
11
Finding The Long Term Low Cost Option
$3.50
$3.60
$3.70
$3.80
$3.90
$4.00
$4.10
$4.20
$4.30
$4.40
Input A Input B Input C Input D Input E
Cost per Case
Current Future
12 2005, Core Practice Partners LLC
For 100 core positions, the total annual mismatch cost = $552,000
80
100
120
140
160
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May0
100
200
300
400
500
Coverage Required Coverage Provided Staffing Mismatch Cost
Cost/Week/Position (Dollars)Weekly Operating Hours
Staff to the Average Workload (Average Hours of Coverage =132)
Seasonal Workload
13
What is your TLC (True Labor Cost)?
Average Wage =
Burden =
Pay Ratio =
Cost of Straight Time =
Cost of Overtime =
Adverse Cost of Straight Time =
Adverse Cost of Idle Time =
Adverse Cost of Overtime =
$12.00
30%
10%
$12.00 X 1.30 X 1.10 = $17.16
$12.00 X 1.5 X 1.0765 = $19.38
$17.16 - $17.16 = $0
$17.16
$19.38 - $17.16 = $2.22
Idle Time Is About 8 Times More
Expensive Than Overtime
14
The Implications of Different Staffing Strategies
Short Staffing Even Staffing Extra Employees
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10
15 2005, Core Practice Partners LLC
For 100 core positions, the total annual mismatch cost = $232,000
Cost/Week/Position (Dollars)Weekly Operating Hours
80
100
120
140
160
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May0
100
200
300
400
500
Coverage Required Coverage Provided Staffing Mismatch Cost
Optimum Staffing (Average Hours of Coverage = 116)
Seasonal Workload
16 2005, Core Practice Partners LLC
OVERTIME:
Working MORE OVER-TIME than you would like
Working LESS OVERTIME than you would like
Working just about the RIGHT AMOUNT of Over-
time
0
20
40
60
80
15.4
62.2
22.4
28.4
37.833.8
Client Normative Database
Per
cen
t
17
Out of Industry Example:
Lost Efficiencies (37%) Occur During Low Milk Supply Periods On Wednesday and Thursday At a Cost of $367,000/Year
0
2000000
4000000
6000000
8000000
10000000
12000000
14000000
Sun Mon Tue Wed Thu Fri Sat
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Line 0 Line 1 Emp. Hrs Worked
Employees Get Sick More Often On Fridays:
Sun Mon Tue Wed Thu Fri Sat0
10
20
30
40
50
60
70
80
90
Sum of SE Sum of SU
At Least 40% More Than Any Other Day
September is the Least Healthy Month
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0
5
10
15
20
25
30Sick Days
Sick Days
September is 63% Higher than the Avg.
14.75 Avg.
24
Vacation Distribution By Month
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0
20
40
60
80
100
120
140
160
180
200VAC Days
VAC Days
146 Avg.
Migrate Vacation to the Low Season
Shift Overlap Costs = $408,000
1st Shift2nd Shift
3rd Shift
Current: 3 – 30 Minute Overlaps6:30 AM 3:00 PM
2:30 PM10:30 PM
11:00 PM7:00 AM
FT : 112 * (1/3) * 14 overlaps * ½ hour overlap * 49 weeks = 12,805 hours ($30.02) = $384,000 Temp Employees: 21 * (1/3) * 14 overlaps * ½ hour overlap * 49 weeks = 2,401 hours ($9.94) = $23,866
22
Drive Employee Acceptance –
Great Ideas Are Worth $0 Unless You Can Implement
Narrow options to choices that meet both business needs and employee preference Heavy employee interaction and input Documented course correction based on employee feedback Buy-in achieved through combination of participation and benchmark results
23 2005, Core Practice Partners LLC
Scorecard
Percentage Answered YES Client Normative Database
Compared to other companies, working conditions at XXXX are good. 76% 80%
I really feel I am a part of XXXX. 47% 57%
I really feel I am part of my crew/team at XXXX. 70% 79%
The management team at XXXX really cares about its employees. 22% 39%
My employment is secure at XXXX. 32% *
The management team communicates well with the shift workers at XXXX. 16% 33%
24
Hidden Costs of Current Scheduling High overtime High inventory levels
Inability to staff efficiently for seasonal, monthly, weekly or daily demand
No full time/part time/temporary employee strategy
Uneven skills across shifts
Idle labor time (overall or pockets)
Hard to recruit and retain good employees
Outdated HR policies
Past changes have not achieved long term results
Consolidation or blending opportunities
Not maximizing current capital
Inefficient and/or numerous startups and shutdowns
Poor forecasting tools
Not meeting productivity potential/goals
High level of unplanned absences
Continued/Increasing health and safety problems
Hourly employees have morale issues
Us vs. Them employee/management mindset
Problems communicating to evening and night shifts
Inefficient vacation, lunch or break staffing
Green Room time underutilized – shift change inefficiencies
25
Optimization, Not Automation, Yields 23% Savings…
Find economies of scale across teams Minimize over-staffing Increase employee productivity Reduce staff turnover Develop pay policies Assess impact of business changes on costs (attrition, training,
etc)
Labor Cost Savings
23%
Up to 9%
Software
14%Operational
Best Practices
9 April 2023
Thank You For Your Attention!
www.corepractice.com