You have just been promoted to a position of senior leadership in your company’s logistics organization and have been charged with improving the operation and reducing your operating costs. Where do you begin? How do you drive improvement in distribution center (DC) productivity? Here are four keys:
You might recall Maslow’s Hierarchy principle. This is the idea that people are motivated to take care of the most important needs first before they can give attention to other matters (protection from the elements and from other dangers first, then provision for food and water second, then other things after that).
In a distribution center environment, there is a Maslow’s Hierarchy of priorities too. The first priority is usually “getting orders out the door,” then getting orders out on time, then getting orders out accurately, and then keeping your employees safe while they are doing all of the above. Possibly the fifth highest priority in a DC is running the operation productively. In low-margin operations, this priority might be a little higher on the list.
In order to drive improvement in DC productivity, the leaders (sponsors) of the operation have to demonstrate commitment to the need for improving productivity; otherwise the effort and attention needed to drive improvement will get lost among the other priorities. The sponsors’ commitment can be shown in terms of vocal support for improving productivity and presence at meetings where this topic is discussed. Committed sponsorship also includes holding key management team members accountable for their commitment to the need for improving productivity as well.
2. Common Measures and Reporting
There are three elements of distribution center productivity. The first two are Time Utilization and Performance against a standard or goal. The combined product of these two measures is Efficiency. It is necessary to understand each of these three measures to allow for meaningful discussion about DC productivity.
Time utilization is the measure of the portion of an employee’s or of a department’s working hours that is spent on task (also called on-standard if production standards are used), versus time needed for other activities such as meetings or time spent waiting for work conditions that would allow time to be spent on task. This can be measured as a percent of on-task time divided by the total amount of time worked.
Performance is the measure of how much work has been completed during the time that an employee or a department was on task or on standard. This is also measured as a percentage.
Efficiency is the product of time utilization times performance; for example:
90% of time utilization x 90% performance against standard (while on task) = 81% efficiency.
3. Follow Up on Results
Once these three key terms are understood by the DC management team and the means are in place to report these on a weekly frequency, the next step for driving improvement in DC productivity is for the DC management team to review the daily and weekly results in each part of the operation.
Committed sponsorship of the senior managers will ensure that this exercise is a priority for the entire team and will lead to deeper understanding of the current trends in these measures and the underlying reasons for good or bad results. This leads to finding ways to get improvements.
The fourth key to driving improvement is reinforcement. This should primarily be positive reinforcement, for the managers whose departments are showing improvements in utilization, performance, or efficiency, and also for the individual employees that are showing improvements in these areas. This includes acknowledgement of positive results and can also include other perks or financial considerations.
In some instances, negative reinforcement is also warranted for managers or individuals whose performance is below a threshold level. Negative reinforcement should be approached in a constructive spirit and should usually be limited to the very lowest performers–perhaps only 10% of the team.
Although these examples apply to driving productivity in a distribution center environment, this approach can be effectively used to get results for other initiatives as well. In fact, see how we helped one organization increase productivity by 30% here. To learn more about our Performance Improvement programs, contact us today.