How to Get a Fast ROI from your Labor Management Investment

Posted on: October 9, 2017

“One million dollars and a year of hell” is what we commonly hear from our customers regarding their apprehension with traditional enterprise Labor Management Systems. It does not have to be this way. Believe it or not, you can start getting a strong ROI in as little 30 days and a full ROI within 5-8 months. Our clients consistently get 5-10x on their investment each year. How you might ask? It just requires a shift in paradigm and focusing on the 80-20 rule. The steps are as follows:

  1. Avoid implementation fatigue and get up and running ASAP with broader measurements.
  2. Avoid getting lost in the weeds and focus on the 80-20 rule. 20% of the issues creates 80%+ of the value.
  3. Proactive change management is key.

Avoiding Implementation Fatigue

Traditional enterprise LMS spend many months getting everything perfect before turning the system on and enabling users to get value out of it. Again, a million dollars and a year of hell.

Our approach is to get a client up and running as soon as possible and the data flowing. As long as we can get the data from the customer’s WMS and Time clock systems, we typically are able to get a client live reports well within a week. Are the labor standards set and accurate? No. But the customer has full visibility into their direct labor %, indirect labor %, overtime cost and what we call missing time. Missing time is the different between what they employee is paid on the time clock and what the time the employee has tracked in the WMS and job coding systems.

This information is enough to begin dropping your labor costs by 5-10% and can be proactively managed to as soon as the first report is printed. Seeing ROI quickly minimizes the pain of implementation pain.

Avoiding the Weeds and the 80/20 rule

We used to follow the industry enterprise approach and try to get everything perfect. Problem with this is you can get stuck in the weeds for weeks or months of data system redesign to try to get everything just perfect. The reality is we are dealing with human generated data and it is just never perfect, which creates all sorts of fun implementing an LMS. Humans are just not robots…..yet.

We follow what we call the 30-60-90 day Tempo. The first 30 days, we have the customer focus on Missing Time. We have found that the average operation that does not track this has between 1-2 hours of missing time per day per employee. Those are big numbers and a big cost. Half of it is just improperly tracked time on job codes, ie they are not tracking safety meeting, cleanup, battery changes, etc. But the other half is true missing time. These are those small increments that add up quickly. The 5 minutes extra it takes to get back from lunch or break or the 5 minutes an employee stops to chat with a buddy. It always amazes our customers how much missing time there actually is. So we have them focus the first 30 days on driving this out of the system. For supervisors, this is relatively easy to do. They get a report every day of each employees missing time and they can easily see who is following process and who is not. It doesn’t require much investigation and makes it easy to call out employees abusing the system. By just cutting true missing time by 15 minutes a day per person, an operation with 100 employees will save close to $100,000 a year. Our top quartile of customers have under 4% missing time and usually start with close to 20% so their savings are a 16% reduction in labor, not 3%.

The next 30 days, we have them focus on indirect time. Now that their missing time is under control and employee time is properly allocated to direct processes and indirect processes, the management team focuses on getting indirect labor reduced and into a normal range for that type of operation. Most customers are able to reduce their total indirect time percentage between 3-5% during this period. So another savings of $100,000-$140,000 per year.

The final 30 days of the 30-60-90 Tempo plan is spent now focusing on productivity. As the customer is cleaning up their data the first 60 days and getting all time properly accounted for on process, we are able to create all the labor standards during the period. Easy Metrics uses a Big Data driven approach to develop standards. We are also able to incorporate engineered standards as well, but from our experience, we see the Big Data approach to be as or more accurate and far faster. Our data model tells you how to weight each metric to create the tightest standard as well as what metrics really have no correlation to the labor standard. Quick and easy!

Change Management

Change management is incorporated into the entire 30-60-90 Tempo plan. Change takes a lot of work and is often intimidating, especially if you try to eat the entire LMS elephant in one bite. By taking an incremental approach and focusing on the easy things first like missing time and indirect time, change starts happening immediately. Once change begins, it is much easier to keep changing.
The entire Easy Metrics approach is built around incremental change and improvement. We have designed our data model and integration layer to adapt to today’s rapidly changing environment. A customer recently requested 26 process changes and reconfigurations. It took us less than 2 hours to make the changes for them and they were live with the new validated data. Traditional enterprise vendors will take months and charge you huge consulting fees for such work.
The key to change is to start simple and get success quickly. Then build on that. With this approach, you can completely transform your organization in 5-8 months and get the 5-10x ROI we like our customers to achieve!

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