Two articles in the Wall Street Journal (even though they have some “dust” on them) serve as stark reminders of this reality. The first, “Retailers Reprogram Workers in Efficiency Push” (September 10, 2008) described installations of workforce management software at AnnTaylor Stores Corp. and other retailers. According to the article, workforce management systems are “sweeping the industry as retailers fight to improve productivity and cut payroll costs.” As the Journal noted, some workers aren’t happy about the trend, saying the systems leave them with shorter shifts, make it difficult to schedule their lives, and “unleash Darwinian forces on the sales floor that damage morale.”

The Ann Taylor system keeps track of the usual productivity metrics: average sales per hour, units sold, and dollars per transaction. The system schedules the most productive people during the busiest hours—and, because it awards more-productive salespeople with favorable hours, it gives employees an incentive to persuade shoppers to buy things. And it’s worked, as far as the overall economic goals are concerned; the chain’s director of store operations said it has helped turn more store browsers into buyers. But, as the WSJ story made clear, it also resulted in the loss of some veteran salespeople who had developed long-term relationships with customers. By focusing strictly on the metrics that could be easily measured, the system actually penalized associates whose selling style depended on longer interactions with the customer—even though such relationships often assured continued customer loyalty. Others found their hours cut back to the point where they could no longer afford to make the trip to work. During busy times, the formerly congenial staff began competing for customers, sometimes stealing them away from one another. While productivity was, indeed, increased, perhaps the most surprising unintended result of the system was that this story, with all its unflattering aspects, was splashed across Page A1 of The Wall Street Journal.

Ironically, just a few days before that story appeared, the Journal carried a remembrance of Michael Hammer, often called the “Father of Re-Engineering,” who had passed away at age 60 on September 4th. The Journal story pointed out that Mr. Hammer, author of the 1993 business best seller “Reengineering the Corporation: A Manifesto for Business Revolution,” was a remarkably successful and influential consultant. He revolutionized many businesses. Among his achievements, he had helped Schneider National trucking cut the time it took to complete a job bid from two weeks to two days; and by focusing attention on refinery safety and efficiency, he had allowed Royal Dutch Shell to improve reliability and reduce costs. He was lauded and recognized by Time and Forbes, and commanded huge consulting and lecture fees as a result.

Yet Mr. Hammer also had second thoughts. In a 1996 interview, the Journal recalls, he admitted that he and other re-engineering proponents hadn’t paid enough attention to people. “I wasn’t smart enough about that,” Mr. Hammer said. “I was reflecting my engineering background and was insufficiently appreciative of the human dimension. I’ve learned that’s critical.” It was because of that early omission, the Journal notes, that “re-engineering had a dark side, as the streamlining of processes in supply chain logistics and operations often went hand in hand with reductions in workers. Often the term became jargon for mass layoffs.”

There are lessons we can take away from these two stories, and you should consider them when you’re looking for ways to improve productivity and cut costs in your supply chain logistics:

1. What’s the effect on the customer? Think about the reaction most people will have when reading the Ann Taylor story. Why would anybody want to work in retail? Service is already lacking in most retail stores; is removing its last vestiges really a good thing?
2. Be careful what you ask for. I believe that people will give you what you ask for. If you want lower costs per call and push your people to shorten the call, they’ll deliver. But ask yourself, is that the outcome you really want?
3. Are you measuring the key performance indicators? Many businesses still aren’t benchmarking their supply chain logistics and operations internally. A $75 million personalized business with a complex call center recently had us implement their first cost-per-call, cost-per-order, cost-per-transaction reporting system—and they got some real surprises. Remember: you can’t improve something that you haven’t measured.
4. Direct has a real advantage. The president of a large general merchandise cataloger recently told me he wanted efficiency, but not at the cost of sacrificing customer service. “Many of our customers tell us that the casual, helpful, really interested call center reps are why they deal with our business. Our knowledge of the products and their application is extremely important to making the sale—not a short, brisk conversation.” Direct companies come out on top if they provide a higher level of service.

Failure to fully understand where you’re starting from, what you hope to achieve, and to think re-engineering through to all its possible consequences, can lead to any number of unintended results; winding up on the front page of the Wall Street Journal might be the least of your problems.

If you’re interested in more information on productivity measurements and benchmarking your operations and would like to talk with a consultant, contact Jeff Barry at jbarry@fcbco.com, or call (804) 740-8743. F. Curtis Barry & Co. is a national consulting firm that works with eCommerce, catalog, retail, manufacturing and wholesale distributors on projects focusing on supply chain strategies, order management systems, warehouse management systems, inventory management, third party logistics, and to reduce freight costs.

Dear Curt -

We met briefly at the NCOF conference in Vegas, and I wanted to reach out  to you regarding performance errors.  I was hoping you could provide  me with some insight into how other 3 PL fulfillment companies manage employee errors.  Currently, we don’t have a strong policy in place to  deal with these issues.

Some questions that arise in my mind are:

1.  How many mistakes is too many?

2.  Should the consequence be different in receiving than picking or packing?

3.  If there is a larger mistake that causes our company should there be a more severe consequence?

I understand that everyone makes mistakes and I would like to allow  for learning and coaching, but I also want to make sure that our  employees have a formalized consequence to ongoing errors, and they  know what to expect.  If you have any feedback on this I would really  appreciate it.  Or, if you know any warehouse managers I could speak with to get ideas on what they do that would be great!

Thank you so much for your time!

Sharon, VP of Client Services, 3PL Company

Dear Sharon -

In my opinion, there are a couple levels of issues:

1. Weekly productivity reporting by person through out the call center and fulfillment.  Our clients display these by department and person on white boards, reports and monitors throughout the facilities.
2. Contact center monitoring should be in place.  There should be a form for evaluating the calls and a weighting system for the responses.  What are your standards for monitoring experienced core employees versus new hires?  Companies have developed coaching approaches to improve employees, get them to accept responsibility for improvement or a basis for asking them to leave the company.
3. Personnel policy that deals with severe HR issues.  These include theft, embezzlement, sexual harassment, etc.  These should have clear documented policies which employees understand.

In terms of error rates, we would expect that controllable error rates would be only 0.5%. Meaning, 99.5% of all major transactions are error free.  In bar coded systems it will be much higher.

In a speech a number of years ago when I made the statement about error rates of 0.5%, a national FedEx manager pointed out that meant 73,000 of their customers would not get their package on time in any given day. What is your management’s attitude about errors?  And you are in a 3 PL service so what guarantees are you making to clients?  Hope this helps.  Call me if I can further explain.

Curt Barry

Hey, blog readers, what’s your company’s approach?