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‘Forecast of volume to improve warehouse Unit per Man Hour (UPMH)” By: Anantha Rajoo s/o Arlapan Certificate in Logistic & Supply Chain Operations Chartered institute of logistics & transport, Malaysia April 2012 Table of content Introduction 1 Scope of study 1 Objective of study 1 Significance of study 2 Statement of the problem 2 Purpose of study 2 Related work 2 Journal & Article related 3-4 Background Organization History of the problem Extent of a problem Recommendation Solution Evaluation of solution Conclusion References Appendix 1. Introduction Unit per man hour (UPMH) is mainly about the total units or cases picked by a labor in warehouse to achieve higher productivity and Key Performance Indicator (KPI). Productivity is a measure of the efficiency of production. Productivity is a ratio of production output to what is required to produce it (inputs). The measure of productivity is defined as a total output per one unit of total input .The benefits of high productivity is manifold. Productivity growth raises warehouse ability to serve its outlets and because more real income improves people's ability to purchase goods and services, enjoy leisure, improve housing and education and contribute to social and environmental programs. Productivity growth is important to the firm because it means that the firm can meet its (perhaps growing) obligations to customers, suppliers, workers, shareholders, and governments (taxes and regulation), and still remain competitive or even improve its competitiveness in the market place. 1.1 Scope of Study This research paper will look into how to anticipate volume growth and improving overall Unit per man hour (UPMH) and productivity at Tesco Fresh Food Distribution Centre, Simpang Pulai. This study focuses on better forecasting of Distribution Center inbound volume that resulting to changes in Unit per man hour(UPMH) and warehouse productivity. 1.2 Objective of study The overall study objective is to formulate a better volume forecast to improve staff UPMH and anticipate the volume growth. The aim of this study is to:- • Establish the overall KPI for past 2 months and increase staff productivity • Improvement on new plan for volume forecasting • Review department UPMH and maintain warehouse KPI • Proper manpower planning versus forecasted volume 1.3 Significance of study This research is to reduce warehouse operation cost. It also will increase staff moral value and create better working environment. The study also focuses on overall improvement on UPMH and full utilization of the available resources. 1.4 Statement of the problem “Past 2 months after the Chinese New Year uncertainty of volumes at Tesco Fresh Food Distribution Centre, Simpang Pulai resulting to drop in overall UPMH. The overall staff productivity decline and lead to poor performance. Volume discrepancies effecting manpower planning, 10% increase in warehouse operation cost and resulting dilemma on managers to anticipate incoming inbound versus manpower planning” 1.5 Purpose of Study The purpose of the research is to examine how to anticipate volume growth with better forecasting and recommend solution to improve overall warehouse UPMH. 2. Related work This section will examine with what others have research on the topic of anticipating volume growth and improving staff productivity (UPMH). 2.1 Journal or Article related to volume growth and staff productivity The real process generates the real output and the real income of production. Volume growth means the same as the growth of real output. The real process can be described by means of the production function. The production function is a graphical or mathematical expression showing the relationship between the inputs used in production and the output achieved. Both graphical and mathematical expressions are presented and demonstrated. Volume growth is defined as any production increase of a business or nation (whatever you are measuring). It is usually expressed as an annual growth percentage depicting growth of the company output (per entity) or the national product (per nation). Real volume growth consists of two components. These components are an increase in production input and an increase in productivity. The output measured at time 2 is greater than the output measured at time one for both of the components of growth: an increase of inputs and an increase of productivity. The portion of growth caused by the increase in inputs is shown on line 1 and does not change the relation between inputs and outputs. The portion of growth caused by an increase in productivity is shown on line 2 with a steeper slope. So increased productivity represents greater output per unit of input. (Refer to Figure 1) Table 1: Volume growth and increase on productivity 2.2 Journal or Article related to volume growth and staff productivity Labor productivity is a revealing indicator of several economic indicators as it offers a dynamic measure of volume growth, competitiveness, and living standards within an economy. It is the measure of labor productivity (and all that this measure takes into account) which helps explain the principal economic foundations that are necessary for both economic growth and social development. (Freeman 2008,5) Although the ratio used to calculate labor productivity provides a measure of the efficiency with which inputs are used in an economy to produce goods and services, it can be measured in various ways. Labor productivity is equal to the ratio between a volume measure of output (gross domestic product or gross value added) and a measure or input use (the total number of hours worked or total employment). (Ibid.) • labor productivity = volume measure of output / measure of input use The measure of input use reflects the time, effort and skills of the workforce. Denominator of the ratio of labor productivity, the input measure is the most important factor that influences the measure of labor productivity. Labor input is measured either by the total number of hours worked of all persons employed or total employment (head count). (Ibid.) There are both advantages and disadvantages associated with the different input measures that are used in the calculation of labor productivity. It is generally accepted that the total number of hours worked is the most appropriate measure of labor input because a simple headcount of employed persons can hide changes in average hours worked, caused by the evolution of part-time work or the effect of variations in overtime, absence from work or shifts in normal hours. However, the quality of hours-worked estimates is not always clear.(Ibid.) 3. Background of organization 3.1 Tesco Fresh Food Distribution Centre in Simpang Pulai, which started operations on June 18, has the capacity to handle 70,000 cases of products a day if necessary. Suppliers only have to bring their products to one location where the items are then consolidated and organized before being shipped back out to the stores. All this takes place in a completely chilled environment so the freshness of the products is maintained. The 130,000 sq. ft. facility is equipped with close to 50 docking bays which can be elevated for easy access by any kind of vehicle for loading and unloading purposes. The Centre also operates on a triple temperature chamber system, which enables products to be stored at the distribution Centre at three different temperature zones: +26°C; 1°C; and 12°C for other fresh produce. A new fleet of forty-foot trailers, also equipped with triple temperature compartments, will ensure that the products remain in their suited temperature zones while on the way to the Tesco stores scattered across the country. The triple temperature trailers, which are capable of delivering up to 20 pallets of products each time, also helps reduce the number of Lorries on the road destined for Tesco outlets. Fresh food suppliers now will deliver to one reception point rather than make stops at each of the stores. 3.2 History of the problem Past 2 months there is uncertainty on volume whereby it’s affecting overall Distribution Centre UPMH. The goal is to examine how to anticipate volume growth and to improve staff productivity. 3.3 Extent of a problem Volume discrepancies resulting drop in overall UPMH. Productivity of manpower reduces. Bad forecasting result to bad manpower planning. PBL SUN (04-03) MON (27-02) TUE (28-02) WED (29-02) THU (01-03) FRI (02-03) SAT (03-03) WTD FORECAST VOLUME 23,248 26,797 26,422 38,769 42,880 42,218 34,853 235,187 VOLUME ACTUAL 20,455 28,356 26,382 33,874 38,056 40,482 32,712 220,317 FORECAST ACCURACY 88% 106% 100% 87% 89% 96% 94% 94% AM PICK PLAN 9,299 10,719 10,569 15,508 17,152 16,887 13,941 94,075 AM ADJUSTED PLAN AM ACTUAL PICK 8,182 11,342 10,553 13,550 15,222 16,193 13,085 88,127 CARRYOVER @ 1400 PM PICK PLAN 13,949 16,078 15,853 23,261 25,728 25,331 20,912 141,112 PM ADJUSTED PLAN PM ACTUAL PICK 12,273 17,014 15,829 20,324 22,834 24,289 19,627 132,190 Table 2: Forecasted volume vs Actual Volume of Assembly Department Table shows Total forecasted volume and volume received for 1 week starting 27-02-2012 until 04-03-2012. Based on the table it’s clearly shows that the forecasted volume is not matched with the actual volume received at Distribution Centre. There is sometime the forecast volume is higher than actual volume received which managers can anticipate it. However on Monday and Tuesday the forecasted volume is much lower than the actual volume received. The forecast accuracy for this particular week also drop to 94% whereby it will affect the staff productivity and department KPI’s. SUN (04-03) MON (27-2) TUE (28-2) WED (29-2) THU (01-3) FRI (02-3) SAT (03-3) WTD SHIFT AM 96 64 82 81 84 89 108 86 SHIFT PM 108 121 123 129 138 138 109 123 BUDGET SHIFT NIGHT TOTAL HOUR 197 275 240 294 312 326 302 1946 150 cases UPMH 104 103 110 115 122 124 108 113 Table 3: Assembly UPMH & KPI Table shows Assembly UPMH and KPI for 1 week starting from 27-02-2012 until 04-03-2012. Overall we can see that assembly department can’t achieve target set by management. Average UPMH staff for 1 week is 113 cases that are lower compared to the budgeted 150 cases per hour. The factor lead to this poor performance is bad forecasting and manpower planning. The inbound volume is not match with the manpower planned resulting to poor staff productivity and lead to drop in overall department KPI. 3.4 Implication of study Bad volume forecasting and drop in overall UPMH will make:- • Warehouse operation cost increase • Drops in UPMH and department KPI • Dissatisfaction among top management and employees • Increase in operation issues • Tarnish company image 3.5 Recommendation 3.5.1 Solution a) Better analysis of forecasted volume Distribution Centre must work close with supply chain team to get reliable volume forecast with cooperation from commercial team and ordering team. There must be standard agreed whereby there is no bias on forecasting volume for distribution Centre. The forecast volume must be available by weekly so that managers can plan their manpower according to the volume and increase UPMH. b) Follow up Employers often set targets and feel their job is done. Every target or milestone set needs to be followed up as well, to see if the progress is sufficient and if not, whether any interim measures can be taken before it is too late to salvage a situation. It also keeps the employee on track, ensuring there is consistent effort throughout the lifetime of the project c) Proper manpower planning vs Forecasted volume Once managers receive the forecasted volume for one week they must plan their manpower match with appointed volume. Managers must ensure correct no of staff working and ensure productivity is achieved. Managers must emphasize great skill and knowledge to anticipate the volume. d) Encourage, motivate, reward and recognize The employer must ensure that on his part he always has words of encouragement for his staff. Encouraging those helps them move forward and do even better, and makes the worker feel happy. Innovative ways of motivating them spurs them even more. For example, holidays or conferences paid for by the company have been found to motivate employees immensely. Rewarding the hard work put in by employees makes them continue to work in the same fashion, and if the employee feels that his work is not appreciated in words or in material terms, he may gradually stop doing so, since he may feel that others working less are given the same too, so he need not work more. Rewards, and other ways of keeping employees happy makes them feel that their effort is being recognized and that they are needed by the company. e) Reach out to employees by seeking them out Every employee loves to feel he has the ears of the management who will recognize him and listen to what he says. Display of inter personal skills in which the boss appears humane and one of them, rather than a larger than life, distant figure, helps to have employees warm up to him and feel happy working for him.If this extends beyond the work place it may prove to be even more encouraging to increase employee productivity . f) Demand realistic targets Employers need to set realistic goals that are within the limits of achievement. While an aggressive employer may want his people to outstretch themselves to achieve farfetched goals, it may also burn them out. Top management must review on current UPMH because it’s too high for certain employees achieve it every day. If the volume are low its impossible to employees achieve their target and management must do some research in order to enhance staff productivity. There needs to be some form of regular review and evaluation in order to continue improving employee productivity. These reviews should be completed on a regular basis. Some companies perform them quarterly, bi-annually or annually. As managers, you should compare the employee’s previous productivity reviews with the current one to measure their productivity improvements. This is the time to reward a productive employee for a job well done or discuss with the employee what can be done to improve their productivity. g) Team work Team work always helps in increasing workplace productivity since there is more input in the form of more ideas and minds at work. Working alone is not always the happiest situation either, especially in the field. Successful team building and working together is bound to bring out the best out of the employees who may also then compete with each other ensuring the business is the winner. h) Courses and improvement options Employees are delighted when they can enhance their skills and get additional learning opportunities sponsored by the employer. This helps them learn, feel indebted for the money being spent on them, which also adds to their resume, and are obliged to perform better by applying all the knowledge gained in these courses. i) Spend less time on meetings and more on action The current trend to have more meetings and discussion rather than spending more time working to achieve results, leads to precious productive time loss. Meetings for reviews and sharing of ideas can be limited and kept short. Employees should have more time to show results. 3.5.2 Evaluation of solution Better volume forecasting will resulting in good manpower planning that will increase staff UPMH and department KPI. Management must ensure the staff productivity is monitored always after the implementation of new techniques so to maintain greater UPMH and enhance efficient warehouse operation. 4. Conclusion Improving employee productivity is a great way to build a solid team behind every organization. Based on the findings its Cleary shows that bad forecasting of volume will reduce staff UPMH and department KPI. Managers must able to anticipate the volume growth using new forecasting techniques and ensure warehouse operation running smoothly. By implementing productive improvement program in a way that is non-threatening and rewarding, Tesco will gain employees respect and admiration, causing them to company. Improving employee productivity can be tricky, especially in a larger corporation or in an online environment of telecommuters. However, the key to improving employee productivity does not rest with the masses. References 1. Joshua Riddle , 18th November The Manager’s Guide to Increasing Employee Productivity http://workawesome.com/management/increasing-employee-productivity/ 2. Wikipedia, Productivity and Unit per Man Hour http://en.wikipedia.org/wiki/Productivity 3. Neiljones on October 7th, 2010 , 12 ways to improve productivity at workplace http://tweakyourbiz.com/growth/2010/10/07/12-ways-to-improve-productivity-at-the-workplace/ 4. Anticipate Volume by Drew Davison, August 13, 2009 http://www.projectsatwork.com/content/articles/250812.cfm Appendix Tables Table 1: Volume growth and increase on productivity PBL SUN (04-03) MON (27-02) TUE (28-02) WED (29-02) THU (01-03) FRI (02-03) SAT (03-03) WTD FORECAST VOLUME 23,248 26,797 26,422 38,769 42,880 42,218 34,853 235,187 VOLUME ACTUAL 20,455 28,356 26,382 33,874 38,056 40,482 32,712 220,317 FORECAST ACCURACY 88% 106% 100% 87% 89% 96% 94% 94% AM PICK PLAN 9,299 10,719 10,569 15,508 17,152 16,887 13,941 94,075 AM ADJUSTED PLAN AM ACTUAL PICK 8,182 11,342 10,553 13,550 15,222 16,193 13,085 88,127 CARRYOVER @ 1400 PM PICK PLAN 13,949 16,078 15,853 23,261 25,728 25,331 20,912 141,112 PM ADJUSTED PLAN PM ACTUAL PICK 12,273 17,014 15,829 20,324 22,834 24,289 19,627 132,190 Table 2: Forecasted volume vs Actual Volume of Assembly Department SUN (04-03) MON (27-2) TUE (28-2) WED (29-2) THU (01-3) FRI (02-3) SAT (03-3) WTD SHIFT AM 96 64 82 81 84 89 108 86 SHIFT PM 108 121 123 129 138 138 109 123 BUDGET SHIFT NIGHT TOTAL HOUR 197 275 240 294 312 326 302 1946 150 cases UPMH 104 103 110 115 122 124 108 113 Table 3: Assembly UPMH & KPI