Core Practice Announces Overtime Strategy For Shift Work Schedules

Online, April 4, 2011 (Newswire.com) - Food Manufacturing Magazine has published a new article from Core Practice, LLC and it educates operations management teams on the realities of overtime cost. The key lessons uncovered in this article should change the way management teams create shift work schedules and handle general workforce management. John Frehse from Core Practice lectures on this topic and spent significant time and effort putting this article together. According to Frehse, "The fear of overtime has created an unhealthy mandate from corporate operations to minimize overtime below 5%. Considering agressive inventory targets, most companies are forced to overstaff at a great expense to hit these other targets. The result is large increases in labor costs. The solution is to implement flexible shift schedules and use overtime strategically." To download the article at no cost please go to www.corepractice.com. Below is an excerpt:

Recently, I stood before a plant management team sharing labor strategies that could help resolve some serious cost problems associated with inefficient shift schedules. The plant manager talked about some of their greatest achievements. Number one was keeping their overtime below 5 percent. Corporate listed low overtime as a key performance indicator, and minimizing it was critical to plant bonuses.
In environments where demand is flat, overtime is rarely used, typically only to fill vacancies. However, seasonal and variable-demand profiles present a very different problem. Customers want their product or service on demand. However, the fear of excess overtime has led management teams to overlook this mighty tool and make less-strategic decisions. In today's world, cost competitiveness has magnified the impact of these shortsighted tactical decisions as more management teams are forced to reduce every unnecessary cost. The three most common errors are:
1. Peak demand staffing: Plant management teams can staff for peak demand and always have enough labor to get the job done on short notice. Additional full-time employees are expensive with all the fixed costs associated with health benefits, vacations and holidays, and taxes. A common practice in today's environment is management teams carrying additional headcount to avoid what they assume are the high costs of overtime.
2. Disregarding customer service as a priority: This is not really an option because it results in lost opportunity and lost customers. Management teams can produce at a steady pace and sell out of items if production volumes cannot meet customer demand. This option is an automatic failure in today's on-demand world, because customers do not tolerate shortages.
3. Overstocking, high inventory levels: Overproducing to have a "cushion" of extra product in the warehouse to handle volume fluctuations is another option. But this has a variety of problems. Companies may meet customer demand but at a very high cost. The carrying cost of inventory can force charging higher prices and mean losing the competitive edge. Also, obsolescence costs become a reality in a world where tastes change quickly and product expiration is always a concern.