Improve Profit Margins

As competition increases and profit margins decrease, streamlining procedures to improve production costs becomes crucial. Engineered Labor Standards (ELS) is one way an organization can identify production improvement opportunities. ELS allows management to track individual performance, enterprise productivity and through-put. To aid in understanding where to begin, Promontory Point Partners developed a roadmap on how to successfully implement this management tool.

The following seven steps outline the development and implementation of Engineered Labor Standards within an organization:

PHASE I – PLAN

1. Identify goals and objectives
2. Discuss ELS with staff

PHASE II – EXECUTE

3. Document labor tasks
4. Understand exceptions
5. Conduct time study
6. Validate the standards

PHASE III – MONITOR & CONTROL

7. Maintain standards

  1. Identify goals and objectives. Understanding the reason for implementing engineered labor standards is the first step in the planning phase. Questions to consider include: Is the organization trying to develop competitive quotes? Are workcenter rates accurately reflected? Is scheduling an issue or is the organization implementing an employee incentive program? Identifying the goals and objectives clarifies how the data will be used once ELS has been implemented. 
  2. Discussing engineered labor standards with staff. This will help the change management process and get employees involved from the ground level. Making sure employees know why ELS is being implemented and understand the ultimate goal, is essential. 
  3. Document labor tasks so management and employees recognize what the optimum steps are in order to complete individual tasks. While documenting the steps, management will be able to uncover inefficiencies. Reviewing the documented process throughout the lifecycle of ELS will give the organization an edge on the competition through continuous process improvements. In addition to documenting the individual steps, it is also important to identify how the task is measured i.e. cartons per minute. Promontory Point Partners refers to this as the ‘driver’. 
  4. Understand exceptions ensure ELS results are not over or understated. Exceptions include: number of employees required per task, delivery of outside services, machine constraints i.e. infinite vs. finite. Identifying the exceptions allow management to determine whether they should be included or excluded from the standard. 
  5. Conduct time studies by using a stopwatch and measuring the documented tasks. Repetition is important since the standard will be based on the average time it takes to complete the task. Conducting 25 to 50 time studies per task will give the ELS team a good sample of how long an individual task takes. 
  6. Validate the standards. After completing documenting the tasks, understanding the exceptions and conducting time studies the ELS team must validate the final results. This involves rolling out a pilot program to test the engineered labor standards. This will ensure documented steps were not missed and standard are realistic. Pilot programs can take between 1 to 3 weeks to complete. 
  7. Maintaining standards are essential after ELS has been implemented. Management should review ELS results daily through an automated ELS dashboard and take action on both positive and negative outliers. As new technology is introduced or processes modified, it is important ELS is up to date.

Identifying and communicating realistic labor standards throughout the organization is a great way to improve profit margins. Promontory Point Partners has increased organization’s completive edge by implementing ELS. For more information contact Promontory Point Partners to learn about developing and implementing engineered labor standards.