Manufacturing Industry - The Perfect Schedule!

Most companies in the service industry have schedules based upon tradition or employee preferences, or they simply adhere to a nine to five, Monday through Friday mindset. They are missing a multi-million dollar opportunity to expand their businesses and increase profitability. But to save millions of dollars while expanding your markets, you need to change your thinking. To get startedthrow out traditional scheduling hours!

You have the perfect schedule and did not even know it. Employees are working eight-hour shifts Monday through Friday with 24-hours of coverage each day. The plant shuts down for weekends. You staff separate crews on days, afternoons and nights. You have a sanitation crew that works on night shift, and you keep overtime to a minimum. The maintenance department has a weekend coverage rotation they created themselves to work on preventive maintenance. The plant receiving group copied the same 12-hour shifts as a different plant on the other side of the town, and the employees like it.

Ah yes, the perfect schedule! Unfortunately your perfect schedule is only perfect for that pineapple plant in Hawaii on the north side of the Big Island. As much as youve dreamed about working there, your facility is not filled with the smell of pineapple, and there are no tiny umbrellas in your office. You may be operating with the same schedules, first implemented decades ago, while your business needs continue to change every day. As corporate pushes to reduce costs, allowable inventory levels must also decrease, safety standards are increasing, customer demand for product causes wide swings in labor requirements, and competition is growing. Even worse than running the same inefficient schedules from years ago, you, like many companies, may have copied generic schedules from other businesses. Without first understanding your specific business needs, a proper schedule cannot be created.

A perfect schedule should not be based on tradition or contract negotiations by attorneys far removed from the facility. The perfect schedule ensures you have the right people, at the right place, at the right time, and at the right cost with the right equipment. If you are like most manufacturers you can probably make several changes to your schedule that will impact your bottom line in a big way. Unlike adding employees, equipment or capital, schedule changes can improve margins with little extra investment. If you do it right, it is likely your employees will actually like their new schedules better a win-win situation. Having the best cost schedule can save millions per year. Having the wrong schedule will continue to cost you money month after month. For example, at a manufacturing plant on the East Coast of the United States, demonstrated savings from better scheduling saved more than $4 million per year (improved maintenance effectiveness $1.4 million; optimizing full time employees with a high benefit load $1.1 million, matching the workforce to the workload $1.6 million).

Management and employees can become experts at making the old generic schedule work, even though it is often not the right one for a particular location. Typically, the junior employee who possesses many different skills suffers by working doubles, triples, weekends, and rotations from day shift to night shift, back to days, then afternoons and finishing up on nights again. Management suffers as well by spending endless hours away from the plant floor trying to patch current schedule holes. They also spend time with employees explaining why they were required to work unplanned overtime again. For many managers, this is simply the way scheduling works and they may be thinking there is not even a problem, but a fact of life. However, the high costs of operating the wrong schedule can be significant. Figure 1 shows sixteen problems that can be transformed into cost savings and profit making opportunities.

Figure 1:

Calculate the achievable cost savings on each item. Most are measurable hard savings and profit opportunities. Other softer measures contain potential benefits. If the cost-saving and profit-making opportunities are minimal, dont change schedules. Stick with what you have. If savings are significant, consider implementing a program to accrue these savings in the next quarter and maintain them year after year.

Many managers confuse a best cost schedule with a shift length or day-off pattern - a multi-million dollar mistake. For example, some manufacturers operate Monday through Friday with two eight-hour shifts. With this system, multi-million dollar plants run approximately 35 per cent of the year. One manufacturer actually needs 65 hours of coverage but uses two 40-hour shifts, which costs $3.7 million per year in excess labour. Most supervisors pride themselves on how well they are able to find work for employees to do while equipment is down. They are lulled into a sense that keeping the employees busy means good productivity, but filling idle time with busy work is still idle time. Discretionary workload seems to grow from idle time, rather than from carefully planning discretionary workload requirements.

Schedules should include business needs, employee preferences and health and safety requirements, which should reflect the most cost effective way to deploy capital and personnel. They should always include employee buy-in and specific work, pay, and coverage policies. A good schedule for the business will convert problems into savings opportunities that impact the bottom line. Several scheduling variables are listed on Figure 2.

Figure 2:

However, you cannot focus on business needs alone. Schedules that do not meet health and safety standards can lead to accidents and can damage the environment which can cost millions of dollars. Employees can make or break a company and implementing schedules that shift workers dont like can make your business unproductive. Only when you carefully and deliberately blend all three key considerations can you arrive at the best cost schedule that will lower your cost per unit. (See Figure 3)

Figure 3:

The best deployment of capital and personnel will not work unless you have employee buy-in. Employees need to understand the business reason behind a particular schedule, for example to improve delivery, to be more competitive, or to reduce costs. Employees are much more willing to buy in to a change in their schedule when they are informed of the business reasons. Employees tend not to resist change as much as they resist being changed. Often schedule changes can go beyond buy-in to a schedule that employees love. The results can be surprising. A three-shift, five-day per week manufacturing plant in Ohio needed approximately forty volunteers to operate a department that would now cover seven days a week. Surprisingly, over eighty employees volunteered for forty positions because the new schedule was predictable, had reasonable, regular, built-in overtime and featured an eight-day break every five weeks. There is no way to make shift work perfect, but the majority of employees should enjoy their schedule.

Good health, safety and alertness go hand-in-hand with shift schedules. Studies conducted at the Stanford Medical School Sleep Center and other research facilities indicate that cumulative sleep deprivation and circadian rhythms are key determinants of alertness on a given schedule. A recent study shows that more than 68 per cent of all accidents happen within the first four hours of an employees shift start time. Longer shifts that are scheduled regularly with several days off do not increase the accident rate. Other studies point to a one and one-half to twofold increase in accident risks for work performed during overtime hours compared to work done during normally scheduled, straight time hours. Regular and planned time off is the key to maintaining health and safety in shift work schedules.

After you analyze your business needs, determine how many operating hours you need. There are 8,760 hours in the year. If you are running 24 hours a day five days per week, your maximum capital utilization is only 71 per cent. Assuming your equipment is only up 80 per cent of the time, your true usage is closer to 57 per cent. That means that almost half of the year your capital is idle. Manufacturing plants typically run with a Monday through Friday shift mentality. It is not unusual for a large corporation to have multiple plants (or lines) running five days a week, each underutilized. If your operating schedule is exactly 120 hours, consider whether this is really what your business requires, or is it just a convenient fit with the 40-hour week? Extending or shrinking your operating hours to fit the business needs does not mean your individual employees work schedules will be extended or will shrink. They can still work 40 hours, but your business may need to operate 70 hours, 110 hours, or 152 hours a week. Your most productive equipment may need to run 168 hours a week while your older, less productive equipment runs only 96 hours a week. Maybe 102.4 hours per week is the best match for customer shipments during part of the year, but not during others. Maintenance schedules may require limited coverage during the week to support production lines, and heavier coverage when the equipment is down for preventive maintenance. Typically, maintenance schedules are Monday though Friday with people coming in on the weekends at premium pay. This results in little time off for employees and unnecessarily expensive schedules. Develop a master schedule that builds in appropriate maintenance time during the week or on the weekends with maintenance schedules that match.

There are two basic implementation approaches, consultation and negotiation. In a non-union environment, the consulting approach is clearly the appropriate way to go. But the consulting approach works best in a union environment as well.

The consulting approach is based on consensus building with buy-in from all levels of managers and shift workers. Everyone helps build the solution, especially the employees who must work the schedule. The specific work, pay and coverage rules based on a schedule that has employee and management buy-in can be negotiated later.

Below are a few key implementation reminders:

* Do not underestimate the power of changing shift schedules and their impact on employees. It is a hot issue! If you are not going to receive a significant financial benefit, it is probably best not even to tackle shift scheduling.

* Do not expect a schedule from another plant to fit your operation.

* Include every shift worker in the change process, not just a select few. Let shift workers help build the solution from schedule models that meet the business needs. Do not jam in a pre-picked solution that managers, supervisors or a 9-person shift worker committee decided would work for them.

* Constant education, communication, and rumor busting is vital if you want to overcome the vocal opponents who will try to block the change process.

* A neutral third party can be valuable in providing a solution that balances all three schedule design concepts.

Ten years from today it is unlikely that a traditional schedule will still be used. Pressure to reduce costs will continue because of shorter product turnaround times, lower inventory levels and competitive pricing. Best cost schedules provide improved shift work for everyone involved managers, shift workers and their families, and the shareholders who invest in the corporation.

Core Practice is a team of professionals with backgrounds in operations research, consulting and management of 24 hour operations, based in New York and Chicago. We analyze and deliver cost savings by redeploying capital and personnel.