A trip to get groceries isn't what it used to be. When you go to the supermarket these days, chances are you pick up a few non-food items along with the frozen peas and chicken parts: hair gel, a pack of batteries or maybe a pair of athletic socks. And chances are even better that you buy a lot of your groceries somewhere other than a supermarket. More and more Americans are picking up food items at drug stores, discount stores, wholesale clubs, convenience stores, and—most commonly of all— mega retail centers. Today, the nation's number one food retailer is not Safeway, Kroger or Albertson's; it's Wal-Mart.
The same winds of change that are sweeping through the grocery business are shaking things up one stop back in the grocery supply line, the distribution center. DCs are suddenly handling not just cases of canned goods, but also home electronics or cosmetics—and they're using new types of equipment and software to do it. At the same time, cutthroat competition has meant DC managers are getting slammed with demands to rev up efficiency (often with scant investment dollars).
But all too often they're still managing things the same old way with the same old labor standards—metrics that don't reflect changes in product mix or equipment. Operating with obsolete standards can actually inhibit productivity: Set the standards too low and performance will reflect that (and leave you overpaying for performance incentives). Raise the bar too high, and you're setting your staff up for failure. And if your standards apply only to direct labor (like order picking), you could be missing out on a huge opportunity to boost productivity among the growing proportion of employees who work in areas like clerical support, maintenance and cleaning.
For these and other reasons, a lot of DCs in the grocery industry are abandoning their rough "guesstimates" and historical labor standards in favor of engineered labor standards (ELS)—metrics developed by using engineering techniques to determine how much time it takes a qualified worker, working at a normal pace, to execute a specific task under certain conditions. Simply put, creating engineered standards means designing efficient work processes developed not through history (which could codify inefficient practices) but through time and motion studies. These metrics may be time consuming to develop, but the payoffs can be impressive.
Trimming the fat
Although not everyone's convinced there's a need for formal labor standards, we've yet to see a grocery DC that wouldn't be the better for crea ting ELS. Not too long ago, we were hired by a grocery chain to boost productivity at its DCs. As we worked our way down the chain, we encountered one holdout : A DC whose management team had negotiated with its workers to raise the previous average of 100 to 110 cases per hour up to 135, with an incentive for more. Now, some workers were pushing 160 to 170. Things couldn't get any better, the general manager argued.
Under pressure from the head office, the manager eventually opened the door to our team of industrial engineers, who had a pretty good idea of how to improve operations based on our experience with other DCs in this group. We first arranged for the staff to be trained in more efficient ways to pick cases, so that an average of 10 steps per case dropped to three. We also provided management training that emphasized the importance of making sure the DC was in top shape—with all equipment working—when the floor workers arrived each morning, as well as the importance of making sure each employee knew what he or she was expected to do, so they'd be productive from the moment their boots hit the DC floor.
Managers rose to the challenge and began to expect more from their direct reports, who in turn demonstrated their ability to do more. With no changes in equipment or layout, floor workers in this DC were soon processing 210 to 215 cases per hour—all for about seven days' worth of consulting time and some work from management. The overall project took 10 weeks to implement, with payback in less than two weeks.
This is not an isolated case. Introducing engineered labor standards to a grocery DC typically boosts productivity by 50 to 75 percent. Other potential benefits include less overtime and a reduced need for capital investments in equipment and facilities. With more efficient employees, we sometimes find we can eliminate the need to add another shift, and this saves on salaries for both hourly staff and management.
Food for thought
Given the complexity of developing engineered standards, it's no surprise that many times DC managers call in outside help. But all too often, the "experts" they bring in are less than qualified. How do you avoid that trap? Here are some things to watch out for:
- Solutions that set the bar too low. In developing an ELS system, it's important to get things right from the start. If you set the standards too low, it's very difficult to change them later on. In many cases, we have found that unqualified advisors will do just that, in part because they want to avoid a challenge from the union.Make sure the consultant you hire has a good track record working with unions.If the candidate lacks credibility with unions, you could face a tough time when it comes to getting acceptance for the new standards from the floor.
- Solutions that are light on the details. When you evaluate bids from consultants, look for a detailed proposal. A single-page proposal that is vague on the details could be a sign that the bidder has no real value to offer. Insist on a detailed plan.
You should also be wary if the advisor is unable to explain his or her plan in terms you can understand. That could be a signal that the bidder is unable to work through the process in a logical manner. Good advisors can provide a clear explanation of what they propose to do. - Solutions that call for hiring more people or buying more equipment. Some managers believe that if orders aren't being filled quickly enough, they need to hire more workers. By the same token, they think if the DC isn't clean enough, the best solution is to hire more staff.
That's not necessarily true. We recently worked with a DC that was close to being shut down because of sanitation and cleanliness issues even though it employed a cleaning staff of 25. Problem was, there was very little oversight. Once we developed an effective ELS system,this DC's cleanliness ratings soared even though the cleaning staff was reduced to 14. Sometimes, we've learned, hiring more janitorial employees doesn't guarantee a cleaner facility … just larger poker games!
