How to Manage Variable Workloads

How to maintain the right amount of coverage and minimize the costs

by Dan Capshaw & Bruce Oliver- Shiftwork Solutions LLC

Does the demand for your company’s product(s) follow a seasonal pattern or exhibit other periodic variations? As long as the changes in demand are not “permanent,” there is no reason to hire enough employees to cover the peak workload requirements. If you did, you would have to either lay them off when demand dropped, or retain and pay them during periods when they were not needed. Paying for this “idle” time can be very expensive.

Here are four options frequently used to maintain the right amount of coverage and minimize the costs:

  • Planned overtime
  • Temporary employees
  • Discretionary work management
  • Planned time-off management

Planned Overtime

Planned overtime is the most flexible option of the four. It allows you to vary the coverage from a fixed number of employees. Although the overtime is usually paid at a higher rate, it is not an on-going cost. You pay for it only when the extra capacity is needed. Thus the incremental cost of increasing coverage is relatively small.

When you hire more employees, the added cost includes both wages and benefits, and you pay these “loaded” wages even when the workload drops and the people are no longer needed.

This means you can minimize your costs by covering the majority of the workload variations with overtime.

The major drawback comes from higher levels of overtime over an extended time period. When overtime exceeds 20% of the total hours for a sustained period, it can have adverse effects on morale, safety, and productivity.

Temporary Employees

Fortunately, overtime is not the only mechanism that we can use to match the coverage to varying production demands. Another alternative is to use temporary and contract labor to cover 10% or more of the labor required to run a typical manufacturing organization. While the problems associated with using temporary labor are well documented, the ability to economically flex up and down by 10% without affecting the rest of the workforce should not be ignored.

Discretionary Work Management

Another way to address variable workloads is to use discretionary work (such as training) to fill in for the slow periods. Discretionary work needs to be done at some point during the year, but its timing can be matched to the availability of resources to perform that work.

Suppose you have a significant drop in demand around the holiday period in December and January. These months would be an ideal time to build in some extra training. In fact, this is an ideal time to hold training that is best done when the entire crew needs to be together.

Other discretionary work, such as special maintenance or cleaning activities, can also be scheduled for these slow periods. One of the goals of discretionary work during slow periods is to convert potential idle time into productive time. Using “busy work” to fill idle time will not reduce operational coverage costs unless that work must be done to keep the plant operational.

Depending on how much discretionary work exists, it may be worthwhile to increase staffing slightly to allow more unassigned time to perform the discretionary work. The risk of doing this is that when the discretionary work cannot be matched to the built-in idle time, costs rise.

Planned Time-off Management

Employees take planned time-off for vacations and floating holidays. This time-off typically is more than 5% of an employee’s scheduled work hours over the course of a year. During peak production periods, employees taking time off are usually replaced by other employees working overtime. During non-peak periods, there is no need to use overtime to replace these absences, so idle time is reduced.

The objective of managing this planned time-off is to encourage personnel to take their time-off during slow seasons, and not to take it off during periods of peak production. Three ways to do this are:

  1. Restrict the number of people that can be on vacation at any one time. During peak production demand seasons, time-off controls can be tighter than they are during the non-peak seasons. This effectively shifts planned time off to the non-peak seasons.
  2. Schedule plant shutdowns during the slow months and require unnecessary personnel to take a vacation. This uses up vacation, reduces production hours, and allows for maintenance to be performed.
  3. Schedule personnel to take a vacation even if the plant is operating. In other words, if employees have not chosen a vacation time that meets the business needs, schedule it for them (with their input). This allows management to substitute vacation hours for idle hours.

For all three of these methods, the biggest risk lies in the employees believing that their time-off is restricted for arbitrary reasons. Therefore, when one or more of these methods is used, management needs to carefully explain why the needs of the business require time-off to be managed. Equal application of the planned time-off management techniques will reinforce the message that the rules are established to help manage seasonal workload and other business issues.

Managing planned time-off effectively can allow you to increase staffing so that more work is performed on straight time and less on overtime. Like discretionary work management, if planned time-off is not managed effectively, it can exacerbate the variable workload problem.

Summary

To summarize, the best practices for managing variable workloads are to:

  1. Use overtime to cover the majority of workload variability that exists.
  2. Use a 10% buffer of temporary employees to flex your capacity up and down to match the changing workload (but only if the skill requirements allow it).
  3. Minimize actual idle time by planning discretionary work and training to be performed during the slow periods.
  4. Manage planned time-off so that more time is taken during slow seasons than during peak demand seasons.

Call Us and We Can Help

Call or text us today at (415) 858-8585 to discuss your operations and how we can help you solve your shift work problems. You can also complete our contact form and we will call you.

What does the New Year Bring to a Tight Labor Market?

During our 30+years of cross-industry experience we have found that once unemployment drops below 6%, companies find it hard to staff adequately to meet production demands.  At the current 3.6% unemployment rate [1] a labor shortage is the single biggest production problem many companies are facing. For as many as eleven states, unemployment falls to between 2.3% and 2.9%.[2] What this means, is that almost everyone who wants a job has a job.  No wonder, if you ask any production or human resource manager: “What was the biggest challenge last year?” they will almost certainly give some version of “It’s becoming harder and harder to find employees in this ever-increasingly tight labor market.” They are most likely fighting this battle on two fronts:

(1) Getting quality employees to join their company

(2) Keeping those employees satisfied enough to keep them from leaving.

When it comes to attracting quality employees, the beginning of the year, however, represents an opportunity to jump-start your hiring efforts to hire quality employees ― without “poaching” from the company down the street.  According to the BLS, more than 600,000 temporary jobs were added for the holidays nationwide in 2018.  Most of these new hires were let go by February of 2019.  Given this seasonal pattern for the new year, we can expect that there are going to be a lot of people looking for work this January and February.  Keep this in mind as it may be a good idea to strike while the iron is hot. 

When it comes to keeping quality employees, it is always preferred to keep them rather than trying to constantly replace them.  When you slow down turnover, you immediately take a huge burden off of your recruiting and training efforts.

How to do that? Here are some insights for a shift work environment

  • Why Your 12-hour Schedule is More Attractive than You Think?
  • What is important about work-life balance?
  • What do you need to know about overtime?
  • 12 Unexpected Insights: do you know what you don’t know?
  • Why should you consider changing your shift schedule?

Our experts at Shiftwork Solutions have looked at the reasons why employees leave companies, such as inclusiveness, work-life balance. Their workforce survey is an integral part of their solutions which leads to happier employees who feel valued and are instrumental in delivering on growth targets.

Give us a call at (415) 858-8585 and talk to an expert for free.  We can help you to succeed.

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Footnotes:

[1] Bureau of Labor Statistics (BLS), January 1, 2020

[2] Local Area Unemployment Statistics (LAUS) January 1, 2020

Have you Made Your Business Resolutions Yet?

If you want happier employees this year, you may consider doing some things differently than last year. Otherwise, if you do what you did, you’ll get what you got. Employee engagement, better-work life balance, and improved communication might be at the top of the wish list. But what comes after establishing these resolutions? How to execute on those? You may start collecting a set of SMART goals1 that support the resolutions the best. However, before starting to jot down your goals for the year, let us borrow James Clear’s thoughts on goal setting. Clear, the author of Atomic Habits, claims that “goals are good for planning your progress and systems are good for actually making progress. Goals can provide direction and even push you forward in the short-term, but eventually, a well-designed system will always win. Having a system is what matters. Committing to the process is what makes the difference.” 2  

An example: if you’re a writer, your goal is to write a book by a certain date. Your system is the daily writing schedule you follow. Committing to writing a blog every day is a process that makes a writer confident (s)he is going to get to his/her ultimate goal of publishing the book.

It is also true for a shift work operation. Goals are useful and needed for setting a direction, but you need a system in place to make progress. Deploying a vetted, transformed shift work system is the way to achieve many of the high priority goals.  Changes in the outcome require changes in the process.

If some indicators have revealed that workforce and schedule related changes are needed for your business success, you might be ready to implement some change. A well-designed, transformed shift work system will ensure that the desired changes happen, and your resolutions come true. It will support numerous underlying goals, which include:

  1. Reduce employee turnover
  2. Improve overtime distribution policies
  3. Reduced absenteeism
  4. Increase employee involvement
  5. Improve work-life balance
  6. Eliminate unnecessary labor costs
  7. Improve communication with the workforce
  8. Adjust supervision: optimal direct-reports ratio
  9. Increase time for maintenance
  10. Fully staff all non-day shift positions
  11. Improve shift turnovers
  12. Identify workplace issues that employees find problematic
  13. Solve staffing needs for a seasonal workload
  14. Maximize productive time per line
  15. Maximize employee schedule satisfaction
  16. Build training time into the employee work schedule
  17. Implement interactive electronic employee schedule management system
  18. Increase schedule flexibility
  19. Improve technical support for non-day shift operations
  20. Increase workforce involvement in problem-solving exercises

That is how the right schedule in place can bring about happier employees. Side effects may include improved responsiveness to customer demands, an increase in revenues, a good grip on overtime, product quality improvements, and more effective communication with the workforce and within teams.  

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If you have questions or want to find out more, contact our team.  Call or text us today at (415) 858-8585 to discuss your operations and how we can help you achieve your goals. You can also complete our contact form and we will call you.

Shiftwork Solutions’ Consulting Services creates a shift operation framework that enables business operations leaders to increase production and attract a skilled workforce into a custom-designed schedule. Our experts bring in best practices from wide-ranging industries with complex operations to tailor solutions for specific operational needs. Our data-driven processes, communication centered approach and project execution bring about the changes needed to improve business operations and production output, and reduce per-unit costs, while workers feel empowered to help the organization achieve its goals.

Footnotes:

1. SMART ― specific, measurable, achievable, relevant, and time-based.

2. James Clear on goal setting https://jamesclear.com/goal-setting

How many people does it take to staff your schedule? (Part 1)

As with most shiftwork related issues, the question of “How Many?” has a short and a long answer.
Here is a link to the long answer.

Let’s start with the short answer.

Add up all of the man-hours that need to be covered and divide by 40.  For example, if you need 30 people for 8 hours a day, Monday – Friday and 20 people for 12 hours on Saturday and Sunday, you would do the following math:

(30 people * 8 hours * 5 days) plus (20 people * 12 hours * 2 days) to get 1,680

Now, divide 1,680 by 40 to get 42.

This means you should use 42 people on some type of schedule to provide the coverage.  With that number (42), you should expect to see an overtime rate around 10% once you take into account things like vacation, sickness, extra work and such.

That’s the short answer and as such, it could be perfect or it could be wildly inaccurate based on your operation.

Part 2 of this post gets into the longer answer.

Call Us and We Can Help

Call or text us today at (415) 858-8585 to discuss your operations and how we can help you solve your shift work problems. You can also complete our contact form and we will call you.

Staffing? – Good Question

Considerations for answering – How Many Do I Hire?

I’m a shiftwork expert so my posts are always centered on shiftwork operations.  That doesn’t mean that there isn’t something that a non-shiftwork operation might find helpful.  My hope is that every reader of every post is able to find value.

Most of my work, about 70%, is with companies that want to expand their operations while minimizing capital investment.  Basically, I help answer the question “How can I get more out of the equipment I already have?”

Once that’s been determined, my bread and butter is “process and implementation”.  I help them find where they want to go.  I valuate that destination and then I help them to get there.

One question is always “How many people do I have to add to get to where we want to go?”

There are short and long answers to this question.

If you are running three shifts, Monday – Friday and want to go to a 24/7 operation, you need to add 33% more operators.  You will also need to add another supervisor.

That was the short answer.

Here is the longer one…

This is really more of a list of considerations rather than The Long Answer.

First, we have to land on an overtime number.  This is more than just creating an arbitrary goal of so many days or hours of work in a row.  Try answering the following questions for a start:

  • How much overtime do you want to have?
  • What does overtime cost (the cost to the company not income to earner) as opposed to fully loaded straight time?
  • What is the workforce’s appetite for overtime?
  • Is the process seasonal in that sometimes you need more people than at other times? What is the level of operator specialization?
  • What is your turnover?
  • What is the lead time between needing a new hire to having a fully trained person?

The overtime issue is a big one since, with a fixed workload, overtime is a function of staffing.  More people = lower overtime.

If production is going to run more days, what does this imply for support operations?  Will quality, maintenance, and sanitation requirements be expanded? Often the answers are something like this:

  • Quality will be affected slightly.  They will need more people but not 33% more.  Maybe something like 10% more.
  • Maintenance will actually become more efficient as you no longer have to be staffed at a level where you can fix everything on a weekend.  When running 24/7, maintenance is often spread out on the more productive weekday shifts.  This may actually lower your maintenance staffing.
  • Sanitation crews sometimes drop to zero staffing.  This is because 24/7 operations no longer sanitize in accordance with a fixed day or time of day schedule.  Instead, they run for as long as they can and then the operators simply become sanitors and clean up their own lines; starting back up as quickly as possible.

​You don’t need 33% more Plant Managers, HR Managers or Engineers.  There is definitely a “cheaper by the dozen” affect when it comes to many of the higher level non-direct labor positions.

Clearly, if production goes to a 24/7 pattern, not everyone at the plant needs to do so as well.  In fact, there is a good chance, depending on your operation, that not all of the production needs to go.  It’s not unusual for some lines to go to 24/7 while others remain on a 5-day schedule.  In some instances, running your high volume equipment more hours will actually take fewer people instead of more if you are able to retire some of you older, more labor-intensive capital.

So there you have it….the longer answer.

The point here is that you need to do your homework.  Look at the fully loaded cost of a single employee.  Hire too many and things start to get expensive in a hurry.  My rule of thumb is to initially staff lean when in doubt.  If you are wrong, you can use overtime until you get the staffing right.  Coming in with too many people to start with will cause “income shock” to those that just lost all of their overtime AND you run the risk of overstaffing which is expensive and only fixable by painful layoffs.
 

Call Us and We Can Help

Call or text us today at (415) 858-8585 to discuss your operations and how we can help you solve your shift work problems. You can also complete our contact form and we will call you.