Monthly Archives: April 2018

Seasonal and Unbalanced Scheduling: A case study

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The situation:

  • A distribution center with 350 employees
  • Last year they ran 38 Saturdays
  • Highly seasonal with 3 months having no weekend work
  • Local unemployment is around 3%
  • The workload is dictated by upstream sources outside of the distribution center’s control
  • The lack of predictability coupled with few days off was resulting in high attrition
  • High turnover and high training resulted in a dramatic drop in productivity causing more overtime

What we did:

  • Evaluated the “shape” of the workload; identifying where in time the work took place.
  • Evaluated the cost of labor: straight time, overtime, temporary workers and part time workers
  • Involved the workforce through a series of surveys
  • Educated the workforce about different schedule solutions to their current situation.

What we found:

  • The workload that fell on Saturdays could be split between Saturdays and Sundays without penalty
  • The workforce consisted of:
    1. Those that never wanted to work overtime
    2. Those that loved overtime
    3. Those that wanted a 12-hour schedule for more days off

What we implemented:

  • 30% of the workforce went to a 7-day, 12-hour schedule
  • The 12-hour schedule paid more and had 78 more annual days off
  • The 12-hour schedule workers were guaranteed that their schedule weekends off would be off
  • 70% of the workforce stayed on a 5-day schedule.
  • The combination of schedules coupled with the staffing levels left enough weekend overtime for those that still wanted it while dramatically lowering overtime that was assigned to those that didn’t want it.

In the end, the people that wanted more predictability got it.  Those that wanted more days off, got it.  Those that wanted their weekends off, got it.  Those that wanted a lot of overtime, got it.

The Cost of Time

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Suppose I asked you the following question:  “Will an employee make more or less money when they work overtime?”

You might quickly answer: “Yes.  They make anywhere from 50% to 100% more when they are being paid at the overtime rate.”

And you would be right.

Now, suppose I asked you, “Which costs you, the company, more to pay: overtime or straight time?”

This question is much more complicated and has a surprising answer.

When you take into account the cost of straight time, you must consider the additional cost of medical plans, retirement, vacations, holidays etc.  While overtime and straight time both have payroll taxes, only straight time is burdened with all of these other costs.

The fact is that the cost to your company for an hour of straight time or overtime is probably about the same.  My experience is that they are nearly always within 5-10% of each other; sometimes straight time is more and sometimes overtime is more.

The math says that the higher your hourly rate is, the more likely it is that overtime will be more expensive.  Conversely, the lower your hourly rate, the more likely it is that straight time is more expensive.

This is a rather fortuitous result.  When your wages are low, you can use overtime to enable your employees to enhance their income.  In doing so, you may actually be lowering your hourly labor cost.

If you have any questions regarding this or any other shiftwork issue, please give me a call.

Jim Dillingham, Partner

Shiftwork Solutions LLC

(415) 265-1621

Jim@shift-work.com