Company Background
A company involved in the distribution of Italian frozen foods had recently faced a number of issues. The company was founded in 1960 and inherited archaic practices of conducting a business. As a result, the company started to lose its competitive advantage in the contemporary market conditions. The current report addresses the issues that were raised in the company.
Problem Statement
Presently, the personnel of the company consist of 300 hourly workers and 10 supervisors. The rate of hourly turnover is high because the employees are unhappy to work for the company. One case of injury is recorded each month. The company does not pay enough attention to safety. Also, the transactions are recorded manually. The distribution process is not automatized causing errors in picking and counting inventory. Besides, all picking is done by hand. The company owns three shipping bays, but only one of them can be used at a time due to clutter and staging. The current paper aims to resolve these issues and develop the recommendations related the improvement of the situation.
Proposed Solutions
Personnel
According to the research conducted by Workforce Institute (n.d.), an average turnover rate of hourly workers is four times higher than that of those workers getting salaries. In order to retain hourly employees, a retention strategy consistent with the overall strategy of the company should be developed. Firstly, hourly employees should be classified according to their level of skills, type of employment (full or part-time), periodicity of working (seasonal or year round), and working place (front or back office). Further, the current retention patterns should be identified including hiring, training, compensation, and supervisory practices based on the reports of the supervisors. Also, the cost associated with the turnover should be counted. Based on this analysis, the desired retention rate should be identified and the retention strategy should be developed. An appropriate retention strategy should be developed based on the results of analysis of the current state. The process of the development of retention strategy is shown in Appendix A.
Safety
The company faced with relatively high injury rate at the working place. It could be a reason of high employees’ turnover rate. According to United States Department of Labor (2012), successful injury prevention programs include a set of elements focused on finding all possible hazards in the workplace, developing an injury preventing plan, and control of hazards. Worker participation and management leadership are needed to ensure that hazards are identified and addressed. Also, an appropriate training program should be developed to identify whether improvements of hazard identification should be made. Besides, safety culture should be adopted in the company to prevent injuries. Injury prevention programs are based on managerial concepts that proved to be effective. Therefore, the improvements in quality, health performance, safety, and environment could help reduce the injury rate as well. The injury prevention programs must not be costly or resource-intensive so that could be adopted at the company (United States Department of Labor, 2012). The injury prevention plan is included in Appendix B.
Picking, Automation, Shipping, Inventory Management within Lean Distribution Framework
According to Fortna, Inc. (2010), mass implementation of lean manufacturing principles across distribution centers was successful in 2007. As the nature of work of the distribution centers is similar to that of the company distributing frozen Italian food, these principles could be applied at the company inherited from uncle Luigi. Typically, the companies implementing lean manufacturing in the distribution centers could help increase productivity by 10-20%. Improvements of labor productivity of 30-50% can be attained by using comprehensive labor management, management software, and incentives within framework of lean manufacturing. One of the problems in the company is that picking is done by hand causing high error rate. Lean distribution could help better organize effective lean picking process. Also, automation of the picking process can help save time on simple procedures thus raising income of the company.
Lean manufacturing helps increase productivity without increasing costs on improvement by reorganizing operational processes. Developing an effective lean distribution system consists of four steps: process analysis, engineering labor standards, performance measurement, and incentives (Appendix C).
On the stage of process analysis and lean reengineering the goals of lean distribution must be defined. For example, shipping process is not organized in an efficient way because only one shipping bay instead of three available bays is used. Therefore, the shipping process must be fully reorganized. Firstly, the overall project should be designed and a change management plan should be made. Further, an assessment of individual processes should be conducted. The individual processes should be broken down to the element level intending eliminate waste of time and streamline the process (Fortna, Inc., 2010).
On the second stage, existing work flows should be observed and understood. Further, processes should be mapped and broken down to the following components: procedures and methods. Procedures include best practices and methods help enhance productivity and performance. For example, a job of an order picker is to go to a location, pick three units and put them in a carton box. In this case, the procedure for the order picker is to pick three pieces. The order picker can either grab three pieces at a time or put his hand in the bin three times and pick one piece at a time. If the worker can grab three items at a time, he is more efficient because he made less physical effort by picking three items at a time rather than picking them one by one. Interestingly, these small method efficiencies significantly add up to productivity (Fortna, Inc., 2010).
The main goal of the workflow analysis is to identify and eliminate waste. The company should baseline its operations by measuring current output using key metrics. The objective of baseline is to provide a benchmark for comparison the current and post-implementation improvements. An objective of the workflow analysis is an understanding of process. The main problem of many distribution centers is that supervisors lack understanding his process. Therefore, all 10 supervisors should understand the finite level required to reach success with lean distribution. In the most cases, supervisors focus on managing the workload and fail to fully assess the reasons of low productivity.
The participation of hourly workers in the assessment process is crucially important. Conducting brainstorming with them could help understand how to improve the picking process. Giving workers a sense of ownership of the outcomes could help significantly improve this process. After analysis and leaning out the picking process, it should be documented and charted. An appropriate documentation of the process provides the foundation for engineering labor. The processes are memorized through documenting that helps organize training. On this stage, there should be two standard operating processes designed – one process for supervisors that includes a detailed description, and another one for the employees that is simplified to use in the training process. The process design is used to train the employees how to do picking job effectively using new procedures (Fortna, Inc., 2010).
The third stage involves conducting engineered studies of how the lean tasks are performed by the employees. After analysis of the operations, labor productivity standards must be developed. However, the productivity standards should not be based on inefficient processes. For example, the order picker can perform either 120% of the standard or 80% during different days. It may seem that the worker poorly performs his task, but, in fact, the poor design of the process is to blame. The productivity standards should be developed according to the employees’ level of effort, regardless of operations or processes. Simultaneously with the development of labor standards, the training of supervisors in feedback techniques and effective coaching should be conducted. It is important to teach the supervisors to perform observations, educate the employees how to perform standard, and how to organize additional training for those who are willing to meet standard (Fortna, Inc., 2010).
Also, it is very important to implement the revised operational processes and labor standards together with the warehouse management system and labor management solution. It could help eliminate paper transaction and reduce picking errors as all processes will be automatized and computerized. The processes of picking and shipping in the company should be tight to the software it uses to run warehouse. Implementing new software will help streamline operational processes, eliminate clutter, and make staging more organized (Fortna, Inc., 2010).
The fourth step of implementation lean distribution that could help maximize its benefits is adding incentives to the reward mix for employees associated with high level of performance. Incentive programs should be based on accountability and willingness to hit the labor standard. The incentive will be proposed for the employees who exceeded labor standard. The incentive program should include both material and nonmaterial rewards. For example, together with pay-for-performance programs, non-monetary rewards, recognition programs, and additional time off could be proposed. Also, the programs could offer incentives to departments, team, and individuals (Fortna, Inc., 2010).
In general, lean distribution can help improve both internal operations of the company, save costs, and improve service quality. Additionally, implementing lean distribution principles contributes to flexibility of delivery services and balance lead times as well. Thus, lean distribution as part of supply chain strategy should be considered by the senior management of the company.
Conclusion
In conclusion, many problems the company currently has can be resolved with the help of implementing lean distribution. At the present time, the major problems of the company are connected with high employees’ turnover rate and ineffective operations. Personnel issues can be resolved with the help of the new incentive program within the framework of lean distribution. The problems related picking errors, inaccuracy in inventory accounting, and shipping can be also resolved with the help of lean distribution. The company should by new warehousing software and allocate funds for employees’ education. It can help both reduce the employees’ turnover rate and make the operations of the company more effective.
Appendices
Appendix A Retention Strategy
Appendix B Injury Prevention Plan (Department of Industrial Relations, 2014)
Appendix C Components of Lean Distribution System
References
Fortna, Inc. (2010). The secrets of applying lean to distribution operations. Retrieved from
https://www.Fortna.com
United States Department of Labor. (2012). Injury and illness prevention programs. Retrieved
Workforce Institute. (n.d). Retaining your best hourly workers. Retrieved
