Managing your workforce for cost savings and an agile shop floor

Toronto—Across Canada, manufacturers are facing some of the most challenging conditions in memory. Costs are increasing and utilization rates are dropping. In the last quarter of 2012, Canadian manufacturing’s operating rate (the industry’s collective capacity) was 80.2 per cent, a decline of 2.1 per cent from the previous quarter.

Add to that the challenges of retaining a skilled workforce, keeping productivity high, strengthening regulatory compliance, and responding to product markets and the investment community, and it’s easy to see why manufacturing leaders are eager to identify and adopt solutions to address these issues.

Perhaps the greatest value, however, can be obtained at a more strategic level: By capturing and leveraging the great pool of latent ideas and innovations that reside in the talents of our workforces.

Whether it’s structured programs or informal peer-to-peer contributions, innovation-centric organizations engage their people and, as a result, develop a greater ability to identify new market opportunities, increase productivity, strengthen safety and compliance, improve product/service quality, and implement better cost controls.

But how can we foster the culture of innovation that creates operational and financial advantages?

It starts with an “actualized workforce.” Under the right conditions, almost any employee can be a vital contributor to an innovative workforce. The trick is aligning each individual’s energies and aptitudes to tap the innovation that lies within. But that can only happen when the employee is secure, productive, and engaged.

Consider the following stages:

• The secure employee. A worker needs a sense of security and safety in the workplace. That means different things to different workers, but at a fundamental level, the worker must understand and be comfortable with the working environment. That might mean, for instance, that employees are paid accurately and properly. They receive regular communication that provides transparency. They understand the rules and are treated fairly and have a safe environment.
• The productive employee. Once the employee is secure, he or she can be a productive contributor. The individual knows how to be effective and can measure individual and collective contributions. The workplace and workflows don’t present obstacles; they’re designed to streamline output.
• The engaged employee. At the highest level, a secure and productive employee becomes engaged. Engaged employees contribute much more value than their paid output, and companies can harness their ideas. At this level, individuals are recognized for their ideas and contributions, and reasonable failure is tolerated and even encouraged.

Creating that secure, productive, and engaged workforce—and paving the way for higher-level innovation—can begin with solutions that automate and streamline workforce management. Ultimately, we can measure the value of these workforce management solutions in three important ways: optimized labor expenses, increased productivity, and reduced compliance exposure.

Optimizing labour
Instead of resorting to simplistic (and often shortsighted) wage-cutting practices that frequently backfire, many companies are streamlining back-office functions that are vital to the manufacturing organization—such as timekeeping and payroll—that are sometimes vulnerable to fraud and abuse (such as “buddy punching,” for example).

Tightening these functions can eliminate manual work and enable you to manage by exception, improve back-office productivity, and lower costs—all without any material impact on the production floor. You shift your focus from tactical to strategic issues.

Many companies, for instance, are equipping department managers and other plant leaders with smartphones or tablets that let them manage the workforce right on the shop floor. They’re “managing in the moment”—when they can be most effective, instead of being chained to a PC that isolates them from employees and diminishes their managerial effectiveness.

From a longer-term perspective, aggregated data can present a clearer picture of trends and opportunities to improve safety and lower costs. For instance, comprehensive reviews of safety incidents, lost time, and workers’ compensation claims can uncover areas meriting further attention and mitigation.

These kinds of insights helped Aker Philadelphia Shipyard, a commercial shipyard located in Philadelphia, Penn., save more than $2 million in medical insurance premiums—without affecting wages.

Increased productivity
Innovation-centric organizations focus on increasing output with the same level (or even lower levels) of input—without affecting quality. Manufacturers create and sustain higher levels of productivity by enhancing worker performance and increasing the use of existing capacity. For instance, disparities in worker output may point to a need for training on tools, machines and processes. Or perhaps materials are inferior.

One of the unspoken truths in manufacturing is the eight-hour workday doesn’t translate into eight actual hours of work. Some studies show as much as 40 per cent to 50 per cent of a worker’s day is devoted to non-production tasks—from machine setup and maintenance to materials delays, repairs and other lost time.

Identifying these subtle trends can improve overall labor effectiveness. Conversely, when you need to strategically reduce capacity, you can do so with surgical precision—not with across-the-board cuts.

Previously, these kinds of insights were locked in vast spreadsheets and printed analyses that provided primitive views at the end of a week or month. But many workforce management solutions can provide insights in real time—on the manager’s mobile device.

You can see the status of your shop floor and know who needs help and who’s available. The ability to shift workers on the fly, throughout the day, lets you take corrective action while it still matters. Experts believe this dynamic reallocation of the labour force can improve utilization as much as seven per cent.

Reduced compliance exposure
The experience and knowledge of your workforce can help you conform to the growing range of industry-centric and government-driven regulatory frameworks that have a broad impact on almost every aspect of your operations.

Success starts with ensuring compensation is accurate and leave-benefits are calculated and delivered properly. It’s not uncommon for a major manufacturer to have numerous separate labor agreements and union contracts to comply with—creating a significant administrative burden that lends itself to structured automation.

For example, there can be dozens of different ways to calculate overtime pay. Different supervisors might use their own interpretations, which leaves the company vulnerable to expensive fines, sanctions and make-good payments.

Workforce automation eliminates that unwanted variability and enables plant executives to ensure a consistent and accurate payment process. When new contracts, rules and policies emerge, they are encoded in the software itself—so there’s no need to retrain supervisors on changing policies.

Across the manufacturing organization, a secure, productive and engaged workforce can help companies achieve breakthrough innovation. And workforce management solutions are an important strategy in helping manufacturers create an “actualized workforce” that is positioned to unleash its talents, creativity and experience.

Workforce management is already delivering substantial, measurable value that is enduring and meaningful to manufacturers, which is why it has moved to the very top of the agenda in boardrooms across Canada.

Gregg Gordon is a mechanical engineer by training, and senior director, manufacturing practice, with Kronos Inc., a leading provider of workforce management solutions. To learn more about innovation on the shop floor, visit http://www.kronos.ca, call (905) 568-0101 or get in touch via email.

This article is part of the Productivity Success Centre, focused on boosting shop floor performance and cost efficiencies.