Prepare for Tomorrow’s DC Staffing Today
September 30, 2021
Prepare for Tomorrow’s DC Staffing Today
Labor management software (LMS) has already proved its value in meeting many of the challenges associated with labor management. By delivering on-demand data about the performance of your workforce, it provides essential tools for increasing employee productivity, maintaining high customer service levels, and minimizing warehouse labor costs.
And it’s about to get even better.
Our recent On The Move webinar featured a preview of exciting new capacity planning features that will be available in the near future.
Traditional Capacity Planning
Capacity planning is a labor management tool used to determine if a manufacturing or distribution center (DC) operation has the labor capacity to meet ever-changing production or fulfillment demands. It basically lets you know if your supply (available employee hours) can meet your demand (the number of hours it will take to fill orders or produce goods).
More specifically, “capacity” is the maximum amount of work that can be completed in a given period. It is often measured in hours available to be worked by employees. And in this context, “planning” is the act of scheduling employee hours against a fixed or expected amount of work.
When done correctly, capacity planning can uncover potential gaps far enough in advance for you to respond proactively. Say, for example, that a few people called out sick this week. As a result, some of this week’s work is going to flow into next week, requiring you to achieve a higher production level to hit your service level agreements (SLAs). You can then evaluate scenarios like scheduling more overtime to make up the deficit. It’s about understanding your constraints and optimizing costs, production or distribution accordingly.
Traditional warehouse capacity planning methods rely on rudimentary spreadsheets administered by financing or budgeting departments, who typically base their estimates on merchandising or seasonal demand forecasts. Unfortunately, these don’t often account for the dynamic or unpredictable nature of labor resources such as illness, attrition rates or overtime requirements. As a result, decisions frequently are based on educated guesses — and not historical operational data.
But what if you could plan for the labor issues you’ll encounter three weeks — or even three months — from now?
A More Modern Approach to Labor Planning
Recent advances in LMS can help you to use capacity planning to oversee day-to-day operations, consider more factors that impact your actual productivity, make more accurate resource planning models, and take more control over labor costs.
This modern approach takes your demand forecast and calculates your standard productivity based on how your operation really runs. In many cases, you may find that you actually require more resources than traditional capacity planning can predict because those initial predictions are based on your resources performing at 100%.
The next step is to calculate your active headcount in a more sophisticated way than just counting the number of people in your workforce. Factors like attrition and attendance rates — even in specific work areas in your DC — can be layered on to determine how many people will be available with far more accuracy.
Once you know the actual available headcount, you can factor in shift schedules and labor efficiency to get a more precise estimate of the number of production hours you’ll have available. These hours can then be managed during the workday to optimize your labor resources. For example, you can plan schedules to make sure you have the right labor in the right places at the right times. And if better planning ends up putting you ahead of schedule for hitting your SLAs, you can offer voluntary time off to save labor costs.
Modern capacity planning can also give you valuable insights far enough in advance to manage your headcount. For example, there’s not much you can do if you find out tomorrow that your staff will be short 10 people next week. But if you discover the same shortage six weeks in advance, you can start the hiring process and get people trained so that they will have the skills they need in time to prevent you from falling behind.
This kind of visibility also enables labor efficiency management, allowing you to coach individual workers, make sure they’re using the right processes, encourage a culture focused on performance, and ensure that you get the highest productivity you can in each area of your operation.
Where It’s Going
Three major trends in capacity planning are emerging, each building upon one another.
The foundation is an enhanced level of traditional capacity planning that benefits from more standardized levels of quarterly horizon labor planning for manufacturing and distribution. This enables you to create more efficient, template-based labor scenarios and view impacted key performance indicators (KPIs) such as capacity gaps, costs and outliers. Proven algorithms can then be used to optimize these scenarios, streamlining production and creating opportunities for labor savings and efficiency improvements of 10 to 25%.
The more modern solution that we’ve discussed above enables you to add more integrations with other tools to maximize your end-to-end success. This connected planning approach can be driven by dynamic, shift-level labor plans aligned to your financial goals. Automated data integration can be used to establish real-time plan constraints from finance, operations and equipment. And while traditional capacity planning can typically make single-variable changes, modern optimized scenarios can leverage templatized strategies to impact multiple variables.
The next level, which is just on the horizon, is automated planning, in which artificial intelligence (AI)-based optimization will impact every level of execution to deliver dramatic, best-in-class labor savings. In this scenario, intelligent agents will automatically adjust labor plans based on sales inventory and operations planning (SIOP)-level strategies flowed down through the enterprise. Dynamic capacity will be optimized with daily labor planning and execution through internet of things (IoT) integration. This approach will also enable you to visualize adjustments to your operation through real-time modeling in virtual environments.
The Benefits of Capacity Planning
Overall, modern capacity planning enables you to create better long-term strategies for your organization and get a greater sense of how it operates on a daily basis. Here are just a few of the gains you can expect:
- Make data-informed decisions about your staff and projects
- Reduce overtime
- Increase customer service
- Create better budgets
- Eliminate burnout
- Understand your staff’s skill set
- Hire more intelligently
- Make time for training and upskilling
Where to Learn More
If you weren’t able to attend the live presentation of this webinar, or if you’d like to learn more about how your organization can start moving toward stronger capacity planning, you can still catch the recording online. “Prepare for Tomorrow’s DC Staffing Today” is the second of a three-part On The Move webinar series titled Delivering the E-commerce Edge, featuring innovative solutions that industry leaders are already adopting to stay nimble, profitable and competitive. You can read about the first webinar in the series and access the online recording here. Watch for details of the next session in an upcoming blog post.
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