The 6 Must-Haves for Effective Labor Forecasting

Posted on: November 1, 2018

The labor markets are the tightest they have been in 50 years. Wages are going up, and the competition for good employees has never been higher. Distribution labor is especially tight due to booming consumer confidence and the large seasonal ramp up for the holiday season.

Finding and retaining good employees is a challenge, but good labor forecasting can help. With labor forecasting, your goal is to match the work requirements with the correct staffing levels. Having too few employees leads to overtime, and too many employees leads to either cost overruns or needing to send employees home early. The goal in any organization is to match your needs with the correct number of personnel – doing so optimizes your cost structure. Labor forecasting can be instrumental in accomplishing this goal.

Here are the 6 must-haves for effective labor forecasting:

1. Workflow forecast

The first thing you need is an understanding of the amount of work you want get done. This is best handled through an Order Management System, which shows you all work orders queued up. There are a couple ways you can use this information. The simplest is to compare your recent work flow and associated staffing with your forecasted work flow, and adjust your staffing by the percent increase in work flow. This method is not the most accurate, but if you lack a Labor Management System, then this method can be useful. The ideal solution is to integrate the Order Management System with labor forecasting in a labor management system. This gives accurate forecasting based on work flow difficulty and historical performance.

2. Labor Management System (LMS)

An LMS is an incredibly powerful tool to manage your workforce and accurately forecast labor needs. An LMS creates performance standards for all processes in your operation. Certain types of work take much more labor than other types. An LMS gives you visibility into these variances. If you integrate the work flow from your Order Management System into your Labor Management System, you can see the labor allocation by department and/or process, which will take into account the variances between order types.

3. Real time visibility

Intraday analysis can put your labor forecasting on steroids. Comparing real-time production to a forecast enables you to re-allocate labor as the day proceeds. If one area is higher in productivity, employees from that area can be shifted to other areas that are under-producing so that all work objectives are met.

4. Historical Analysis

Looking at past seasonal trends and performance can be very helpful when forecasting your labor. If your business is consistent year after year, you can reference the previous year’s performance during a similar time period and then adjust based on the increase or decrease in forecast work flow.

5. Seasonal Labor

During peak, companies often rely on seasonal labor to help with the extra work requirements. Seasonal labor tends to be less productive than your core employees due to the lack of experience with your specific operation. It is critical to incorporate that lower productivity into your forecast.

6. Feedback reporting

It is also important to be able to review how you performed against your forecast. If you forecasted the need for 10 people in a department, but you consistently had employees working overtime to finish the job, then your forecast model needs to be adjusted. Any good forecasting system should be able to provide this type of reporting.

Easy Metrics has a robust but simple to use forecasting module in its software. We took a different approach in building the tool. It enables companies and supervisors to build a labor forecast in just a few minutes, while also allowing “power” users to build very detailed forecasts if the information is available. Forecasting is becoming a critical must-have in today’s competitive distribution environment. Good luck and good forecasting!

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