The Canadian transportation and logistics industry is facing a “new normal” economy characterized by uncertainty, slow growth and rapid change. While growth has been picking up, experts caution that overall growth will remain slow until 2020 due to high unemployment in the U.S., sputtering growth in other countries, and low business confidence that is holding companies back from investing in their North American operations. At the same time, customers are more demanding. Customers are looking for “the perfect order” with minimal errors while demanding faster delivery and shorter lead times.
As transportation and logistics companies attempt to meet customer demands in the new normal economy, they must contend with capacity constraints and rising costs that strain profitability. Analysts predict that the Canadian trucking industry could be short by 33,000 drivers by 2020 as participation by young people in the labour force plummets. Increasing competition for talent is boosting labour costs as carriers work harder to recruit and retain drivers; a whopping 80 percent of carriers say that they are paying 2-5 percent in wage increases for drivers compared to 66 percent last year, according to a recent Ontario Trucking Association survey. Non-labour expenses such as fuel also continue to rise, increasing the total cost of ground transportation for Canadian companies.
As transportation and logistics companies attempt to eke out profitability under these challenging conditions, one thing becomes clear: these organizations must optimize their efficiency to get the most out of their existing resources. With labour being most organizations’ largest controllable expense, improving workforce management is a critical place to start for faster payback.
However, as in all businesses, you can’t control what you can’t see. The key to increasing efficiency is having real time visibility into what’s happening on the warehouse floor. A workforce management solution identifies exactly what tasks and subtasks people and equipment are conducting in real time so that managers can easily identify unproductive time and put underutilized labour to good use. By gaining visibility into every labour activity, an organization can improve efficiency of its workforce utilization in order to improve productivity, be more responsive and adaptable, and meet service level agreements while maintaining profitability.
Operate More Productively
Efficiency is all about making the most of existing resources to improve productivity and reduce costs. Workforce management solutions improve productivity by allowing organizations to establish, track, and enforce performance standards at the task, individual and enterprise level; they can also create incentives programs to further boost productivity.
Using workforce management technology to automate critical processes, organizations can establish uniform performance standards for tasks and subtasks in terms of productivity and throughput. Advanced analytics dashboards then enable managers to monitor actual transaction data at the employee and activity level in real time to identify which transactions are failing or about to fail these performance standards. Because they have this information right away, not hours later, they use this information to take the necessary corrective actions instantly.
Organizations can use incentive pay to further encourage productive behavior and reward workers for performance. Managers can also use analytics to look at cost and performance data at the organizational level to identify trends and patterns on the warehouse floor, determine likely root causes, and even take corrective steps to improve labour performance enterprise-wide while controlling payroll expense.
The bottom line: 77 percent of logistics operations using workforce management software have realized a 10 percent boost in productivity and more than one-third have gained a 26 percent increase in labour output, according to Aberdeen Group’s “On Time and Under Budget: Maximizing Profits with Efficient Warehouse Management”.
Be Responsive and Adaptable
As the economy recovers, volumes are increasing and variability of demand requires transportation and logistics organizations to adapt quickly. Distribution networks must adapt to near shoring and the increasingly on-demand marketplace. Customers want more variety, better visibility, next day and same day shipping options, and the ability to purchase seamlessly through omnichannel distribution networks. While many organizations have responded by reconfiguring distribution networks, they also need the right people in the right place at the right time to meet demand.
Automated workforce management solutions provide the visibility managers need to respond effectively to unexpected situations such as sudden spikes in demand, unanticipated orders, labour fluctuations or customer requests for additional services such as rush orders.
Managers can see in an instant who’s working, who isn’t, where they have additional labour capacity and where resources are strained. Managers can use these solutions to create schedules that meet demand without creating excessive idle time or cost. They can also reallocate labour on the fly, redistributing workers from overstaffed orders to understaffed orders and minimizing idle time in the process. Using workforce management technology, distributors have seen a 31 percent lower average backlog and order turnaround time that’s one day quicker, said Mercer’s 2010 Total Cost of Absences report.
Meet Service Level Agreements
Labour clearly is critical to delivering on promised service levels. Employee absenteeism directly impacts quality of service and if it goes unmanaged it can have a serious impact on service levels and profit margins. A replacement worker operates 29 percent less effectively on average than an employee; for example, instead of packing 50 cases, the replacement packs only 35 percent. Workforce management technology lets managers establish policies and consistently enforce them, tracking and managing absences fairly across all employees. Managers can understand where absences are occurring and take action to minimize occurrences to make the most of the labour they have.
Workforce management solutions also help managers identify best cost and best replacements for absences to minimize service impacts and ensure that replacements are eligible/certified to fill the position. In addition, by giving managers visibility into the impact of labour on orders and how well workers are executing on service level goals, managers are able to identify issues before they become problems and negatively impact service levels.
Today’s transportation and logistics organizations must address demanding customers in the face of slow growth while constrained by labour shortages and rising costs. Operating profitably under these conditions means using of all existing resources with maximum efficiency-particularly labour, which is their largest controllable expense. With workforce management technology, these organizations can make the most of their workforce to operate more productively, become more responsive and meet service level agreements.