Effective workforce staffing practices can have a long-term impact on a company’s competitiveness and sustainability, especially in today’s market where labor shortage is more the norm than the exception. The issue is that planning usually is done by intra-day or weekly planning models. While very important to execution, to manage to staff optimally, you need a longer-term view of your needs to provide your leadership with time to enact mitigation strategies when things aren’t trending in the right direction.
Capacity planning is one tool that can help. It allows your organization to model if your distribution center (DC) can complete the work required to meet the dynamic fulfillment demands in the coming quarter. This longer-term view gives time to plan strategies that impact your bottom-line metrics.
How does it do this?
Using the known production constraints of execution performance, time usage percentages, and other workforce factors offer a more realistic picture of your demand and your capacity. In its simplest form, capacity planning lets you know if supply, the available labor resource hours, can meet the demand or the number of hours required to fill the order or produce goods. Unfortunately, far too often, today’s DC managers cannot harness and crunch this type of data – data that accounts for the dynamic or unpredictable nature of labor resources such as illness, attrition rates, and overtime considerations. Many of the factors listed above reduce the available labor hours, or increase the time it takes to ship or produce, so without those factors is just an educated guess.
As a result, decisions, without the right factors, often miss the mark.
But what if you could accurately plan for the labor issues that await you in three weeks from now? Or three months from now? The good news is – you can! Recent advances in Labor Management System Systems offer data that gives direct input to your capacity planning capability. DC managers can now use capacity planning to oversee day-to-day operations, create more accurate resource planning models, and take control over labor costs.
In this post, we have reviewed capacity planning and how it enables visibility to future resourcing scenarios and creates cost savings for your operation.
What is capacity planning?
Capacity planning is a process to enable organizations to see how much work they can complete given their total number of employees and upcoming time constraints. More specifically, “capacity” is the total amount of work available in a given period. Capacity measures the hours obtainable to be worked by employees. And in this context, “planning” is the act of scheduling employee hours against a fixed or expected amount of work. Labor capacity planning lets you know if your supply (available employee hours) can meet your demand (the number of hours it will take to fill orders).
What are the benefits of capacity planning?
You will get an optimized sense of how your organization operates daily. You’ll also be able to create better long-term strategies. A few specific gains you can expect from capacity planning include the ability to:
• Make data-informed decisions about staffing needs
• Hire more intelligently
• Understand your staff’s skillset
• Make time for training and upskilling
• Eliminate burnout
Why do I need capacity planning?
There are two key reasons you shouldn’t forgo capacity planning.
#1 Labor is expensive
Research shows that labor accounts for 50–60% of all distribution center costs.
#2 Labor is becoming increasingly difficult to come by
From one end of the supply chain to the other, every node is experiencing a labor shortage. Job openings totaled nearly 11 million in December 2021, more than 4.6 million above the total unemployment level.
If I have a Labor Management System System, do I need capacity planning?
A Labor Management System System and Capacity Planning work in sync; a labor-management system enables you to extract the data you need for accurate planning; capacity planning uses the data to create dynamic labor plans.
On its own, a Labor Management System System delivers
• Visibility into labor performance metrics including cost, performance, and time usage at all levels of the network
• Intra-day performance management tools providing metric visibility, intra-day planning, and execution monitoring for your direct labor resources
Capacity Planning delivers
• Insight into site leaders’ labor plans and potential capacity gaps or unfavorable trends that need addressing
• Tools that simplify the labor planning process to allow consistent, accurate, and adaptive labor plans
A Labor Management System System + Capacity Planning delivers
• Integrated planning and execution visibility of direct labor resources providing visibility to actionable KPIs
• Integrated labor planning and execution visibility that allows the facility to execute the capacity plan to its goals
What savings can I expect?
Effective labor capacity planning can save 10-20% of facility labor expense.
What does that mean to my organization?
If you have a labor force of 100 people, the proper labor capacity planning process can save up to $750K, annually.
The value of Capacity Planning lies in the ability to understand if your supply (available employee hours) can meet your demand (the number of hours it will take to fill orders). Accurate planning depends on considering the dynamic or unpredictable nature of labor resources. They factor in illness, attrition rates, and overtime considerations, as well as performance, time utilization, and resource constraints. Labor Management System Systems provides the factors needed to make this level of capacity planning possible. If you’d like to see how accurate forecasting of staffing needs can add value to your business, contact us to learn more about TZA’s ProTrack Labor Management System System.
TZAs Cost Savings Calculator will give you an estimate of cost savings and additional ROI achievable with ProTrack B.I. and TZAs Dynamic Labor Engineering Standards.
Call TZA and speak to our Labor Management System team to discuss your challenges. (800) 229-3450.