Need more productivity? Try utilization cubed

This post is focused on the second of three themes on how companies can successfully thrive through a digital transformation.

It’s what I call Utilization3   (utilization cubed). The successful companies I study have extended beyond traditional means of driving productivity through high utilization of resources. They are innovating and successfully executing new methods with the effect of yielding high levels of productivity for themselves, their partners and their customers.

The first dimension of utilization is the traditional method. It’s basically Lean methodology. Cut wasted efforts out of your processes and your resources will become more productive. Mark Graban writes extensively about this for healthcare and does a great job explaining it in very simple terms. John Frehse specializes in labor strategies at Ankura and I wrote a book on this subject several years ago, called Lean Labor.

The second method of improving utilization is to take full advantage of not only the physical attributes of your workforce but also the skills they bring or have developed on the job. In healthcare, Mark Graban talks about working to full licensure. This idea has been around a long time but not as many company takes advantage of it for two reasons. The first is that often companies simply think of their most expensive resource (usually equipment) as the highest priority to utilize. But this can lead to a sub-optimal customer experience because the overall process is not optimized. Secondly, it’s relatively easy to optimize one resource. Optimizing a process including labor skills means thinking through the entire process, redefining jobs and potentially targeting different segments of a market. This is not easy, but those that get it right wield significant advantage.

Manufacturers have done this historically by training their line operators to perform simple tasks such a adjusting machine parameters such as tooling alignment, temperature, speeds and feeds to keep the line running rather than the traditional method of calling a more expensive maintenance mechanic for every adjustment. The benefit is this frees up the mechanic to spend more time on preventative maintenance.

As I write about in my latest book, Walk-in medical clinics in Pharmacies have redefined a healthcare service by focusing on non-acute patients and hiring nurse practitioners versus trying to create a more efficient primary physician service delivery model.

Southwest Airlines has a fleet of approximately 550 planes in its system. It’s the Boeing 737 with a couple of variations. Is the plane optimal for every route? No, but Southwest has designed its business model and target markets for where it is efficient. And guess what, it’s significantly easier to train mechanics, and move crews throughout their system when everyone can perform their role efficiently on every plane in the fleet.

The last method is the hardest to achieve but is turning industries upside down. This method is crowd-sourcing. Simply put it’s leveraging a network of “part-time resources” in a more efficient way than if a company simply owned/managed the resources full-time. The trick in this technique is at the heart of digital transformation. Companies must first attract and then efficiently co-ordinate those resources to deliver an even better customer experience than if resources were dedicated to that particular task for a single company. This is well explained in the book The Digital Matrix by Professor N. Venkat Venkatraman

The most well-known examples are Uber with cars and drivers and Airbnb with short term housing and hosts. If you are not familiar with how they work (and the controversies they are causing) simply type their names into your browser.

I’m continuing to see interesting examples along these lines with more traditional companies. Walmart has woken up since hiring Marc Lore through its acquisition of Jet.com and is now innovating like never before. Last June, it announced a method and experiment to improve customer experience and reduce delivery costs by paying their own employees to drop off packages on their way home from the store.

It turns out customers don’t really love assembling their own furniture…but were willing to put up with Ikea’s business model because they loved the furniture and prices…until customers began to find people willing to assemble the furniture for them on Task Rabbit. In order to scale this, Ikea purchased Task Rabbit and can now has more control over the total customer experience.

Airbnb continues to evolve this crowd-sourcing model to extend what it can offer to its customers beyond housing/hosting to include Experiences. It has developed a platform that allows small businesses and individuals to offer a local experience to its customers. This solves two problems…Airbnb’s customers now have more transparency in what activities and tours are available locally as well as reviews. Secondly, local providers have an inexpensive way to market their services to a global, highly targeted audience.

It’s an exciting new world out there and as these companies have demonstrated, it is not simply building robots and developing artificial intelligence. Managing traditional resources, including people, remain squarely in the center of these successful companies’ strategies.

 

Visualizing Schedule “Tradesies”

We recently met with an operations executive that was confronting one of the more vexing issues a manager faces. An employee told her there is a rumor going around that employees are swapping shifts with each other to increase their pay. In this organization, anyone who is not scheduled to work but then works is entitled to premium pay.

One of the well known ways to exploit this type of policy (I explained this as “tradesies” in my book Lean Labor) is to find a couple of buddies and regularly swap shifts with each other. It may not be every shift, but you have to trust your partner enough to know that you can be up or down a shift and when the time comes, they will agree to swap out a shift with you.

This of course drives up costs without increasing output. Not a good outcome for any organization. The executive was pondering what to do. The challenge is that there are many legitimate reasons to swap shifts and the policy is intended to provide flexibility for the workforce but ensure coverage for the workload. A premium may be paid to encourage employees to work hours that they might not otherwise want, thereby providing liquidity to the system.

Addressing this would be tough because it’s difficult to discriminate between legitimate shift swaps and ones that were done purely to increase pay. But the rumor was expanding and if this practice spread it could ultimately lead to lower profits, poor morale and even layoffs of uninvolved people.

Before she acted, she asked my team to take a look at her organization’s scheduling data and see what we could find. This is a fairly challenging exercise because first you have to figure out who actually swapped shifts with who. There is no “marker” other than a premium paycode for one person. After that was resolved, we had a long list of shift swaps. Next we had to figure out a way to visualize that list to help interpret the data.

After a couple of different approaches, the team was excited as they realized this would call for a different type of visual approach. The reason they were excited is that the vast majority of visualizations required are bar, line and scatter charts. These charts do a great job, but we all like some variety!

In this case the team realized they were looking at a networking relationship between the people swapping shifts.

Using a networking diagram, they plotted the employees and who they swapped a shift with. What we wanted to know though was not only who, but how many times shifts were swapped since gaming typically occurs between a small group of people. For that we colored the arrow differently based on the number of swaps made over the time period analyzed.

schedule swap diagram

Below is the result of the effort. As you can see, the majority of the swaps are occasional and with a variety of people. Good news! Most people are swapping shifts as the organization intended. But after applying a filter to remove the occasional swaps there are two clusters of three people that are swapping significantly more times and with the same people. This doesn’t necessarily mean they are gaming the system. It’s possible that they have very specific skills and there is a limited pool of people they can swap with.

This information was illuminating for the executive. Out of thousands of people, she could now focus on six and get to the bottom of it quickly. She could also respond to the rumor with hard facts. Finally, it was peace of mind for her to know that the vast majority of her employees were using the policy as it was intended.

Optimized Labor Scheduling for Quality Control Labs

Brazil is no doubt the best place to enjoy the World Cup this year, but Belgium is definitely celebrating the event with colors, team gear and soccer centric activity everywhere. I had the opportunity to be in Antwerp the night Belgium beat Algeria last week and spirits were running high.

World Cup Enthusiasts in Antwerp

But of course that was not the main reason for my visit last week. Among other things I was there to spend time with a very smart group of folks at BlueGrass Consulting. BlueGrass has a strong legacy in supply chain consulting focused often on inventory, processes and logistics. Over the last couple of years, it has recognized the opportunities for improving the effectiveness of the workforce. I haven’t seen the BlueGrass team in almost a year and they were excited to share with me their work on process improvement within the Quality Control labs at several pharmaceutical companies. These labs face a couple of workforce related challenges. First is that they have several streams of work that flow through their labs. Checking the quality of products throughout the production process, mixing reagents in order to support the testing procedures and running experiments on new products are some of the major ones. Some of these streams are dependent on each other. For example, running more production tests requires more reagents. The second challenge is that they can’t predict with certainty when work will come into the lab. They can generally narrow it down to a thirty day window, but for many types of work that’s about as precise as they can get. Also challenging is that there are certain competencies required to perform certain tasks. So if a critical person is missing or already busy, production is delayed. Additionally, competencies of the employees are constantly changing as people leave the organization and as others complete training.

There are some opportunities to improve throughput as well; Often the same kind of testing will come through in multiples during the same time period. When this happens, the work can be grouped, reducing the number of set-ups required.

The flow of work can be predicted from demand drivers such as the production schedule created in ERP, which has a rough cut version planned out over the next year.

Through their software application BINOCS (Binoculars) BlueGrass has linked the production schedule to the employee schedule and through a heuristic process, optimized the employee schedule around production. This schedule ensures that the work can be processed without delay. As the production schedule is refined, the application can be re-run to ensure the appropriate people with the right skills continue to be available.

Geert VanHove, a principal at BlueGrass, was understandably very happy during my visit when he received the first employee schedule that their customer had created on their own through BINOCS.

Branded pharmaceutical manufacturers continue to become more demand driven and shrink finish good inventories. The ability to remove one more potential production bottleneck without creating excess capacity is obviously extremely valuable. Goooal!

 

Adding more labor can be beneficial to your bottom line

It’s been about eight years since I stepped into the manufacturing vertical in Kronos and I’m excited to announce that Kronos has asked me to take what I’ve learned here and apply it to a new initiative. This is a project to demonstrate that labor is not just a cost and compliance burden, but rather a strategic resource that is responsible for differentiating a company.

For those of you who have had a chance to read my book, Lean Labor, you know that I have espoused this proposition for many years. The challenge when I wrote that book is for many companies it is easy to measure the cost and compliance risk of an employee. What’s more challenging is to equate an individual’s effort to more positive outcomes such as higher quality, increased revenue or improved conformance to policies and procedures. The reason is that measuring cost can be recorded easily and accurately down to the minute. Labor’s impact to other factors can often take days or months. Additionally a single or group of employee’s impact is often mingled in with other factors such as weather, sales promotions or the performance of other downstream operations.

As any Lean follower knows, this is very similar to the Lean philosophy and I’m looking forward to sharing what I discover in the future here as well.

This initiative goes outside of Manufacturing. Healthcare organizations are evolving from measuring by activity to improving outcomes. Retailers are working to differentiate by providing the right types and levels of service to their customers just when they need it.

This is potentially valuable work for a company because when the only data driven linkage to labor is around cost, compliance and immediate output, the so called “war on labor” will continue. Once we can link the more positive outcomes experienced by a company to labor, companies will have another option to use in achieving their strategic goals. I would predict that this increases their use of labor because executives will have the metric and proof they need to feel confident in the outcomes.

Why do I have confidence in saying that? Today the only role whose performance is easily measured to a strategic goal, in this case revenue, is sales. Broadly speaking sales is always the role that is first to be grown and last to be cut. They are often the highest paid as well.

Fortunately, I’m not alone in this effort. There are examples already occurring in the market and academics who have already been proposing these ideas. A recent article in the New York Times Thinking Outside the (Big) Box provides some more specifics around the idea.

I look forward to communicating our findings and what others are doing in this area in the near future.