Date post: | 10-Jun-2015 |
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How Gilt Implemented a
Successful Labor Management System
STEVE JOHNSON Principal
CHRISTOPHER HALKYARD Chief Supply Chain Officer
2
How Gilt Implemented a
Successful Labor Management System
AGENDA
• GILT – Who & Where?
• KEYS for a Successful Labor Management System
• Why Implement a Labor Management System
• Louisville Distribution Center (LDC):
Case Study Results
3
How Gilt Implemented a
Successful Labor Management System
• Born in 2007 - “Taking the New York invitation only sample sale to the internet superhighway”
• Invitation Only Shopping – Highly Coveted, Luxury Products & Experiences @ Insider Prices
• Advance Previews – Brands, Designers
• Pioneer of internet “Flash Sale” Concept - Most sales start at noon ET and last only 36 hours, making Gilt.com an exclusive shopping destination for luxury at up to 70% off.
• Apparel, Accessories (Women’s, Men’s, Children’s), Home Décor, Lifestyle items, Local Experiences & Luxury Travel packages
National Fulfillment & Distribution Center Louisville, KY New Distribution Center Opened 2010-11
Labor Management System implemented 2012
Bonus incentive system being implemented 2013
5
How Gilt Implemented a
Successful Labor Management System
KEYS to a Successful Labor Management System (LMS)
Determine whether & how an LMS will benefit your operation
Understand that change management is the first step
What is the best way to achieve associate & Mgt. buy-in early?
How do I select an LMS software system?
How should I communicate productivity feedback?
What results can I expect? What has Gilt achieved thus far?
6
How Gilt Implemented a
Successful Labor Management System
Why Implement a Labor Management System
Timely performance feedback and gratification for employees
Improved productivity & Reduced cost per unit
Higher associate compensation with the addition of Bonus Incentive Plan
Improved service level/throughput cycle time & accuracy/quality
Friendly competition among employees
Consistent Preferred Methods
Additional tools for budgeting and planning
Increased job satisfaction among employees
More knowledgeable management team
Improved communication and levels of trust
Reduced Turnover
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How Gilt Implemented a
Successful Labor Management System
Why Implement a Labor Management System
50%
63%72%
80%
91%
110%
0%
20%
40%
60%
80%
100%
120%
Ave
rag
e
Pe
rfo
rma
nce
Unmeasured Continuous
Improvement
Peer Comparison Benchmark
Standards
Engineered
Standards
REWARD$
Compensation
Method of Measurement / Recognition
LABOR MANAGEMENT
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How Gilt Implemented a
Successful Labor Management System
-10%
10%
30%
50%
70%
90%
110%
130%
150%
Performance Before & After Improvement Shift
Performance Before Improvement Performance After Improvement
Why Implement a Labor Management System
9
How Gilt Implemented a
Successful Labor Management System
Why Implement a Labor Management System
SUCCEEDsm
Labor Management System - Gilt Groupe Louisville DC Year "0" Year 1 Year 2 Year 3 Year 4 Year 5
Johnson Stephens Consulting Fees ($290,000)
Johnson Stephens Consulting Est. Travel & Reimbursible Expenses ($159,000)
NextView Implementation Cost & Travel Expenses ($95,000)
NextView Annual Subscription Fee (min 250 users @ $3,250 per mo.) ($39,000) ($39,000) ($39,000) ($39,000) ($39,000)
SUCCEED Scoreboards ($90,000)
Annual Depreciation - Fees, Expenses, Hardware (5 years) ($126,800) ($126,800) ($126,800) ($126,800) ($126,800)
Projected Annual Payroll Savings $980,520 $1,180,326 $1,362,414 $1,433,131 $1,504,788
Annual JSC Standards Maintenance & Audit Fees ($30,000) ($30,000) ($30,000) ($30,000)
Annual JSC Standards Maintenance & Audit Travel Expenses ($9,000) ($9,000) ($9,000) ($9,000)
Net Annual Savings (Pre-Tax) $814,720 $975,526 $1,157,614 $1,228,331 $1,299,988Memo: Cumulative Net Program Savings $814,720 $1,790,246 $2,947,860 $4,176,192 $5,476,180
Tax (40%) X ($325,888) ($390,210) ($463,046) ($491,333) ($519,995)
After Tax Gain/Savings = $488,832 $585,316 $694,568 $736,999 $779,993
Depreciation Add-Back + $126,800 $126,800 $126,800 $126,800 $126,800
Net Annual Savings (After-Tax) = $615,632 $712,116 $821,368 $863,799 $906,793
Internal Rate of Return = 99.7%
Return on Investment (ROI) = 91.5%
Project Payback (months) = 13 Months
Key = Rapid ROI through Productivity Improvement
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How Gilt Implemented a
Successful Labor Management System
Prepare Change Management Management Training Lean Distribution Standard Operating Procedures
SUCCEED sm LMS Stage 1
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How Gilt Implemented a
Successful Labor Management System
KEY = CHANGE MANAGEMENT = Associate/Mgt. Buy-In
Item
Suggested
By Operation Area
Time
Frame
Target
Date
Implemented
Date
Point of
Contact Classification Lean Opportunity Description Comments
70 JSC Sell 1st Packing Intermediate Steve / Nate CapEx
Poor lighting over sell first packing stations
Must-Intermediate (Next time electrician is in
building issue will be addressed) Pending
Capex Approval
71 JSC Sell 1st Packing Short 06/01/12 Additional USPS processing machine at Sell 1st
station
USPS is going away Target June 1st UPS to take
over and more will be know in coming weeks
76 JSC Sell 1st Packing Intermediate Steve Eddy WMS Change
Look into new shipping software to provide
greater ability to ship multiple packages onto
a single tracking number reducing manual
entry time
Investigate changes on Quiet side follow up
2 JSC / Rick Returns Returns Intermediate Rick Spears Internal
Return stations need to be uniform and have
same supplies for each associate (Ex. Box
cutter Vs. Safety knife) and station layout /
setup need to be identical
Rick Spears point
7 JSC / Rick Returns Returns Intermediate John Kondor CapEx
Add conveyor to feed stations with return
items (Work) in a tote with paperwork instead
of having individual Gaylords at each work
station to help with overall work flow
Follow up with John
53 JSC Returns Returns Short Rick Spears Internal
Items are being processed incorrectly due to
missing RMA forms or labels might not be
attached to correct unit
Rick Spears point in process
Gilt Groupe Louisville DC Lean Opportunities
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How Gilt Implemented a
Successful Labor Management System
KEY = CHANGE MANAGEMENT = Associate/Mgt. Buy-In This is more than engineering. Red denotes Change Management which requires
active Management participation
1. Determine Key Volume Indicators (KVIs)
2. Establish & utilize the preferred method – Lean Distribution
3. List the steps required to complete the KVIs
4. Gain approval of step descriptions
5. Observe and repeatedly time each step
6. Rate the productivity of each performance sample
7. Review the required sample size for each step
8. Determine the rate of occurrence of each step
9. Calculate time required for each step
10. Summarize the time value of each KVI
11. Apply the appropriate engineered allowances
12. Review result with managers and gain consensus
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How Gilt Implemented a
Successful Labor Management System
Develop Metrics Engineered Standards
SUCCEED sm LMS Stage 2
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How Gilt Implemented a
Successful Labor Management System
Time Time
Steps (sec) (min)
5 Obtain Tote and Scan 4 .059 1 : 1 0.059
10 Remove and Verify Product 4 .071 1 : 1 0.071
15 Inspect VIP Order 6 .099 1 : 22.0 0.005
20 Stack Empty Tote 3 .055 1 : 1 0.055
25 Scan SO Label 4 .062 1 : 1 0.062
30 Select and Build Carton 14 .229 1 : 1 0.229
35 Apply SO Label 3 .049 1 : 1 0.049
40 Insert Promotional Mailer 6 .100 1 : 6.5 0.015
45 Add Tissue Paper 9 .152 1 : 3.1 0.049
50 Add Dunnage 7 .124 1 : 1.3 0.093
55 Place Units - Accessories 4 .074 1 : 3.77 0.020
60 Place Units - Flat Packs 3 .057 1 : 10.39 0.005
65 Place Units - GOH 6 .103 1 : 3.23 0.032
70 Place Units - Home 7 .124 1 : 6.17 0.020
75 Place Units - Shoes 6 .096 1 : 6.00 0.016
80 Insert Pack List 4 .073 1 : 1 0.073
85 Seal Carton 6 .097 1 : 1 0.097
90 Place Carton on Conveyor 3 .052 1 : 1 0.052
95 Place Tote on Monorail 2 .032 1 : 2.5 0.013
100 Process "Push" Tote 12 .194 1 : 10.9 0.018
Total Element Time 0.145 0.169 0.719
Personal Allowance 2.0% 0.020 0.020 0.020
Unavoidable Delay 2.0% 0.020 0.020 0.020
Fatigue 5.0% 0.050 0.050 0.050
Breaks 6.3% 0.063 0.063 0.063
Total Allowances 15.3% 1.153 1.153 1.153
TOTAL EARNED TIME 0.167 0.195 0.829
Packing - CartonsEngineered Standard
Rate ofTotes Units Cartons
Occurrence
Key = Discrete
Measurement = Engineered
Standards
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How Gilt Implemented a
Successful Labor Management System
Feedback LMS Software Coaching Daily and/or Real Time Feedback
SUCCEED sm LMS Stage 3
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How Gilt Implemented a
Successful Labor Management System
KEY = LMS Software Selection: Criteria
Able to handle discrete, multi-variable engineered standards?
Automatic Data Collection (ADC) vs. Manual methods (logs)?
Minimized manual reporting has come to fruition – sometimes only non-standard time logs needed
RF, Light Directed, Voice Directed, Kiosks are sources of ADC
Real Time vs. Batch, Daily Feedback – What’s important to you?
Flexible reports to tailor to your operation
Software as a Service (SaaS) model vs. on-site hosted, server?
SaaS for LMS extremely viable & robust software systems available now
Interface to ERP/WMS: Does your WMS have an LMS and is it robust and do you like it? Operations & I. T. coordination is critical!
Easy interface to existing WMS, automated timekeeping systems, etc.
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How Gilt Implemented a
Successful Labor Management System
KEY = Feedback– , Digital Scoreboards: Real Time vs.
Daily or both?
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How Gilt Implemented a
Successful Labor Management System
KEY = Feedback – Daily Reports,
Gilt = Real Time Feedback
% Performance increase 15 % points in three month period
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How Gilt Implemented a
Successful Labor Management System
Case Study:
Schedule
LMS Engineering & Development = March 2012 through Dec 2012
Live Reporting (1st area) = August 2012
Digital Scoreboards = October 2012
Bonus Incentives “pilot” = March-April 2013
Bonus Incentive Plan implementation = Summer 2013
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How Gilt Implemented a
Successful Labor Management System Case Study:
Results – % Performance
Area Fall 2012 April 2013
Receiving 75% 92%
Putaway 68% 94%
Picking 84% 105%
Packing 73% 103%
Shipping/Manifest 88% 112%
Returns 69% 92%
Actual Savings on target with original proposal savings/ROI
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How Gilt Implemented a
Successful Labor Management System
Additional likely items for implementation
1. Bonus Incentive Plan – Summer 2013
2. Implement reflective incentives for those work functions not measurable using individual or team standards
3. Managers & Supervisors Bonus Incentive Plan
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How Gilt Implemented a
Successful Labor Management System
Questions?
Thank You!!