People Innovation Excellence

Good Eats with Engineered Labor Standards

http://www.aviano.af.mil/News/Photos/igphoto/2001077005/

ISE Magazine Volume : 49 Number: 10
By George Bishop

Traditionally, engineered labor standards (“ELS”) were used mainly in manufacturing operations to manage large numbers of employees who performed repetitive tasks. Through the years, management realized that the benefits associated with implementing engineered labor standards weren’t confined to manufacturing, which resulted in its application throughout the supply chain.

Food distribution, specifically food retail distributors (supermarkets, convenience stores, big box) and food service distribution (restaurants, cafeterias, hospitals) rely on the information provided by engineered labor standards to conduct their daily operations and remain competitive in a rapidly changing landscape.

A challenging industry

Many factors make food distribution one of the most challenging industries. Some of these challenges come from the industry itself, while others are related to the distribution process.

  • Low profit margins:Food retailers and food services operate in a fiercely competitive environment with low profit margins that hover around 2 to 3 percent.
  • Labor costs:Typically, labor costs represent the most important component of these distribution facilities’ total operating budget.
  • Large distribution centers:Food distribution centers vary greatly in size, with smaller facilities in the 100,000-square-foot range to larger sites that occupy more than 1 million square feet.
  • Unionized environment:Food distribution centers tend to be unionized more than other types of distribution facilities. Two unions are prevalent in this industry: The International Brotherhood of Teamsters (IBT) and the United Food and Commercial Workers (UFCW).
  • Automation is not the magic solution:Businesses often rely on automation to address productivity issues. This has been a trend in the manufacturing sector.

The evolution of productivity measurement in food distribution

Productivity measurement in food distribution has evolved from simple engineered expectancies to complex discrete time calculations based on variables that model the difficulty of a work assignment. The goal in designing what are commonly referred to as labor measurement systems is to be able to model the work assignments as accurately as possible to reproduce the actual work process with a high degree of fidelity. Let’s examine the alternatives to measure an associate’s performance while understanding the pros, cons and appropriateness of each.

  • Key value indicators systems:Key value indicators (KVI) systems became the natural evolution from the engineered expectancies approach. A time is calculated for the major elements (e.g., case time, location time, aisle time, pallet time); the major elements are referred to as KVI. At an assignment level, the system tracks the proper frequencies to apply to each KVI. For example, if the picking assignment contains 52 cases picked from 40 different locations, the case time KVI would be multiplied by 52 and the location time KVI would be multiplied by 40.
  • Discrete systems:Discrete systems gained popularity in the late 1980s by addressing many of the shortcomings of KVI systems. Some of the major providers of warehouse management systems incorporated a module for discrete labor measurement systems. By doing so they garnered market share in the food distribution industry. Improving the ability to model an assignment, combined with algorithms that determine travel paths and travel distances, elevated the accuracy of the overall standard time calculations.

Discrete systems are the most popular systems used in food distribution, but care must be taken when evaluating options, as some systems are more exact than others. Given this variability, care must be taken in evaluating and selecting the system that will yield the best results for your specific operation.

  • Real-time discrete systems:Currently, very few labor measurement systems can truly be referred to as real-time discrete systems.

Some labor measurement systems are incorporating more real-time feedback loops that enable recalculation of the original standard time to account for some changes that occurred during the execution of the assignment. For example, the system can recalculate the time of an assignment if a case that was meant to be picked was not available. Real-time discrete systems typically offer a superior approach at modeling work assignments, which makes them more flexible.


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