How many people does it take to staff your schedule? (Part 2)
September 23, 2014
There is a short answer and a long answer to this question. Here is a link to the short answer.
Now for the long answer:
Take a look at the "short answer" in the previous blog post. That is a good place to start.
The following should be considered to refine the number you get using the "short answer":
The cost of full time labor matters. How much does it cost you to pay someone for an hour of straight time? How much does it cost you to pay for an hour of overtime? I am not talking about "how much an employee receives." I'm talking about cost-to-the-company. If you do the analysis correctly, you should find that the two costs (overtime and straight time) are within 10% of each other. This is important because the amount of overtime you use will play a big factor in staffing levels. For a fixed workload, the higher the overtime, the lower the staffing level you need.
How much training does it take to qualify an employee for a position. It is likely that there is a wide variance on this with regards to different positions. Do Not use and "average". If you need an astrophysicist and a box stacker, an average will give you a bad number (4 years of post-graduate study for the physicist and 5 minutes for the stacker = about 2 years, on average, to train an employee). Long training times lead to an increased use of overtime and less reliance on other labor options such as temporary help. If your workforce is staffed with highly skilled people, whose skills are easily transferable to another nearby company, then you will have to bend a more towards compensation scheduling and employee preferences for overtime so as to not lose these people.
How variable is your workload? If your workload level is flat, you will still have some fluctuations in staffing as people are on vacation or FMLA etc. When staffing fluctuates, you have have extra staffing available or you can use overtime or you can reduce production. Cost, degree of variability, employee preference and the nature of your operations will all play a role in determining how you staff for variability. Its worth noting here that the most expensive option is to over-staff or staff for peak production as this leads to frequent over-staffing which is costly. A highly variable workload tends to mean lower staffing and higher overtime.
How available are alternative sources of labor? It your workforce pro-overtime or overtime-adverse? Is temporary or part time labor available? If you are in Memphis and need temporary, highly skill forklift drivers, there are temp. agencies that can give you all this type of labor that you want. However, if you need those same temporary skill in San Francisco, you may need to "grow your own." Can you scale back with seasonality by using shorter work weeks or voluntary layoffs? Note: If the answer is no, the staff to the lower end and use overtime when things get busy.
What about support activities? Things like maintenance, engineering, quality shipping/receiving and administration all need to be staffed appropriately as you grow (or shrink). There is no simple formula for how to staff these as there is often not a "straight line" relationship between staffing numbers in operations and staffing numbers for support areas. For example, a 30% increase in operation staffing does not mean you need 30% more CFO's. In some areas, you may actually find that you need fewer support staff. For example, maintenance struggles to fix everything on the weekend but if you go to a 24/7 schedule, maintenance can now take place any time in the week; including weekdays where it can be performed more efficiently.
Are you LEAN? It's "old school" to think you should stockpile between cells in a value stream ensure you never run out of product either upstream or downstream. Instead, just-in-time is what modern operations strive for. Many companies can maximize or throttle production using staffing alone. This may mean you staff an area below its maximum capacity to enure it does not outrun its value stream neighbors.
What is the opportunity cost of lost time? This must be a consideration if you are going to staff with as few people as possible. You may save a lot of money by having fewer maintenance specialists but then you might lose even more money if you suffer downtime because you are understaffed.
Staffing is at least as important as that next piece of equipment you are considering. The right number of the right people will impact your cost structure at several different levels. It will impact labor costs. It will impact quality. It will impact volume. It will impact turnover and absenteeism. It will impact your ability to respond quickly to your customers.
If you have any questions, please give me a call.
Jim Dillingham, Partner
(415) 265-1621 or Jim@shift-work.com