Understanding Engineered Labor Standards

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Clearly defined expectations are essential to your workforce’s success. Engineered labor standards are the cornerstone of having fair and accurate performance expectations for your team and, when used correctly, help your organization build a culture of high-performance and positive employee morale.

 

Engineered Labor Standards Defined

An engineered labor standard is a form of work measurement. According to the International Labor Office, “Work measurement is the application of techniques designed to establish the time for a qualified worker to carry out a specified job at a defined level of performance.” An engineered labor standard defines the time necessary for a trained worker, working at an acceptable pace, under qualified supervision, and experiencing normal fatigue and delays, to do a defined amount of work at a specified quality when following a prescribed method.
 

Types of Labor Standards

There are generally two types of Labor Standards. Both can work but come with their own strengths and weaknesses.
 

Single Determinant Historical Standards/Reasonable Expectancies:

As the name implies, single determinant standards are based on just one variable, such as lines, cases, or units per hour. These standards are generally derived from analyzing historical performance data and picking the minimum performance level that represents the average performance of the team or at a slightly higher than average level. The advantage of single determinant standards is that they are inexpensive to develop and easily calculated for reporting purposes.

However, there are drawbacks to operating with a single determinant standard.  Mainly, as work content becomes more variable and complex, the accuracy of single determinant standards is less than ideal on an hourly or even a daily basis.  Single determinant standards typically require a longer performance evaluation period for an operator’s work content or mix to align closely with the average order size and mix upon which the standard was developed. Additionally, one determinant standard should be reviewed at least quarterly to represent the work content/mix of work.  This process adds significant maintenance time to the support of single determinant standards.

Single determinant standards are typical in most operations but result in the lowest level of minimum performance expectation within an area and are generally considered to be 15-25 percent lower than a multi-determinant engineered standard.
 

Dynamic Multi-determinant Engineered Standards:

Multi-determinant standards use more than one variable to calculate a performance expectation. For example, a standard for picking may use the following:

  • Number of lines
  • Number of cases
  • Number of eaches/inner packs
  • Total cube
  • Total weight
  • Dynamic travel calculation based on specific pick location

 

In all but the simplest distribution environments (and there are very few simple distribution operations these days), multi-determinant standards are crucial to setting fair and accurate performance targets and getting associates to buy-in to those standards. While they may be more costly to develop, organizations will typically see an improvement of 15 to 25% more than using single determinant standards.  The return on investment can be significant with multi-determinant standards.  Additionally, the accuracy of engineered standards results in higher employee morale, improved labor planning and is the most effective way to support an incentive program.

 

Developing Engineered Labor Standards

Before establishing labor standards, organizations need to develop a Standard Operating Procedure (SOP) for each activity in the building. These SOPs require first and foremost that each activity is reviewed thoroughly to eliminate any “waste” found in the current process. Following the development of SOPs, the following work measurement techniques are typically used to develop engineered standards:

  1. Time Study (or Time and Motion Study)

With this technique, an industrial engineer breaks an activity down into elements of time and carefully times each element with a time measurement device. Adjustments are made for any observed pace and skill variance against what would be considered normal. Personal, fatigue, and delay allowances are added to the final standard.

 

  1. Predetermined Motion Time System (PMTS)

With this approach, time is obtained from published standards, such as MTM, MSD, or MOST® for basic body motions, such as reach, move, turn, grasp, position, and release. An engineer will determine specific frequencies for each work element and consider personal, fatigue, and delay allowances to accurately develop a standard.

 

Putting Labor Standards into Action

Once engineered labor standards have been developed, you will need a Labor Management System (LMS) to effectively calculate performance expectations and support your Labor Management Program. Today’s LMS’ will not only accurately calculate your engineered standard, including dynamic travel by using a map of your operation, but also provide your team with the management tools needed to effectively transition your operation into a high-performance culture.

 

Why Implementing Engineered Labor Standards Makes Sense

Engineered labor standards are not about getting your employees to work faster; they are about enabling your entire operation to work smarter. The scientific nature of engineered labor standards means that your expectations of employees are reasonable and attainable. This can significantly increase performance and reduces labor costs.

 

Our experience is that engineered labor standards typically boost productivity by 15 to 35 percent and enable clients to:

  • Reduce overtime
  • Increase employee retention
  • Improve employee morale
  • Reduce labor cost

 
See how engineered labor standards helped Four Seasons, a division of Standard Motor Products, increase productivity between 25 to 30 percent. 

 

Getting Started with Engineered Labor Standards

Because of the skills and tools required to develop accurate engineered labor standards, many companies choose to outsource this project. When evaluating potential resources, be sure to look for a provider with experience developing standards using both traditional time and motion studies and predetermined approaches. 

Also be sure to look for labor management software (LMS) that has the ability to capture and calculate a dynamic standard, so you can ensure that each standard represents the work content appropriately. An LMS will support dynamic standards that flex up or down automatically as work content changes, so they require little to no maintenance.

An organization that provides both a tier one LMS and has the experience in developing engineered standards is ideal. This combination will deliver a seamless process of bringing both the technology and engineering together to result in the most effective solution.

 

Want to learn more about labor standards?

To learn more about how engineered labor standards are calculated and how they can be used to benefit your organization, download our white paper on Engineered Labor Standards.

 

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