The company imports and wholesales wine to restaurants, supermarkets, country clubs and liquor stores in the New York City Metro Area.
The project had three primary objectives:
- Improve the on-time loading of delivery trucks to meet distribution deadlines and mandated customer delivery times
- Reduce warehouse operating expenses
- Support the delivery operation in achieving their productivity goals thereby giving drivers the opportunity to earn incentive compensation.
- The low productivity of the warehouse staff in picking and loading of product is negatively impacting the delivery operation by delaying scheduled departure times. These delays are resulting in missed customer deadlines, increased delivery costs and loss of driver incentive pay.
- Significant amounts of downtime are reducing warehouse employee productivity and increasing labor costs.
- The ability to improve warehouse productivity was hindered by the absence of productivity metrics to measure, manage and improve performance.
- The absence of teamwork among warehouse employees and between the day and night shifts is reducing warehouse productivity and increasing operating expenses.
- The current process of delegating work assignments required that the warehouse staff report to the office for their next assignment. This process is resulting in downtime both in travel to and from the office and in distractions on the way.
A key element in achieving project objectives was increasing the productivity and teamwork of the warehouse staff. The first step in increasing productivity was to develop productivity metrics to measure the current performance of the warehouse staff. An analysis of warehouse operations determined that twenty one functions accounted for 93% of the total labor hours expanded on an annual basis. The next step was to begin time studies of these twenty one functions to develop productivity metrics. The selection of those individuals to be time studied was based on two criteria: a history of high productivity and excellent quality. This approach was chosen to insure that the productivity metrics developed were achievable with a high degree of quality. During these time studies, a performance management system was developed to track and report the productivity of each individual on a weekly basis.
As a means to motivate the warehouse staff in achieving project objectives, an incentive compensation plan was developed based on productivity and quality. To encourage teamwork among employees on each shift and between the day and night shift, the payment of incentive was based on both individual and group performance. The incentive plan was designed to pay 50% of the bonus based on individual performance and 50% based on group performance.
To support the success of the incentive plan, management began measuring productivity eight weeks prior to its implementation. This eight week period was chosen to provide the warehouse staff with an opportunity to improve their productivity and work processes before implementation of the plan. During these eight weeks, feedback on productivity performance was provided to each individual on a weekly basis. As a means of increasing productivity, the reasons for low performance were identified and a plan of action developed on an individual employee basis. This included training, cross training, process improvement and coaching and counseling.
The final focus of the project concentrated on process improvements. Two major process enhancements were implemented to increase productivity and reduce operating expenses. The first process improvement was to provide each employee with several work assignments at regular intervals during the shift. The intent was to reduce the current down time between work assignments. To supplement this, the shift supervisor assigned work to maximize staff utilization. The second process improvement was to schedule work on the first shift which would support the efficient operation of the second shift. This focused primarily on insuring the timely loading of the delivery fleet to meet their departure deadlines. This level of cooperation between the two shifts had been attempted in the past without success. This success was attributed to a key design element in the incentive compensation plan. This design element provided that incentive would be paid on the combined performance of both shifts.
The monthly productivity of the warehouse operation prior to the implementation of the incentive plan was 63%. This was based on a first shift productivity level of 67% and a second shift productivity level of 59%.
The productivity level of the warehouse operation by the beginning of the third month of the incentive plan had increased from 63% to 87%.