Performance measurement and setting labour standards in logistics

Eva Šlaichová*
ABSTRAKT Článek sleduje možnosti širšího využití metod pro stanovení norem počtu pracovníků, konkrétně teorie hromadné obsluhy, pro měření pracovního výkonu v logistice. Dílčím cílem řízení personálních zdrojů v podniku je zajištění efektivního vynakládání s lidskými zdroji v režijních činnostech při současném zabezpečení plynulého výrobního procesu. Účinným nástrojem manažerského rozhodování jsou právě metody měření práce používané v rámci standardizace pracovních procesů. V uvedené případové studii byla teorie hromadné obsluhy aplikována na konkrétní pracovní postupy z provozní logistiky plastikářského závodu. Na základě takto provedené časové analýzy vytížení jednotlivých pracovníků pak mohou být v podniku realizována efektivní rozhodnutí o redukci nebo navýšení počtu pracovníků. Klíčová slova: Efektivita práce; Metody měření práce; Personální náklady; Režijní práce; Štíhlá výroba; Teorie hromadné obsluhy. ABSTRACT The article deals with the possibility of broader utilization of methods for setting indirect labour workers numbers, specifically queueing theory, for performance measurement in logistics. The partial objective of the human resources management in the enterprise is to ensure the effective human labour expenditure with the simultaneously providing for the continuous production process. Just the methods for work measurement used in the frame of overhead work standardization are the effective tool for the managerial decision-making in the enterprise. In the mentioned case study queueing theory was applied to the data of particular plastic-processing enterprise. On the basis of the particular employee workload analysis it is possible to implement the decisions on the reduction or increase of the number of employees. Key words: Lean Manufacturing; Methods time measurement; Overhead work; Personal costs; Queueing theory; Work efficiency. JEL classification: M10

What is considered to be the biggest challenge for the logistics of near future? The strong opportunity can be seen in application of lean manufacturing principles into setting standards of logistic staff that includes monitoring of logistic costs and setting standards of logistic operations. These principles have already been known in the proffesional literature for a long time. However, their implementation deserves considerable effort in the Czech enterprises. Working standards for the manual laborers have already been composed really properly in the enterprises. According output standards is being determined piece wage, this is significant motivation for management of the plants to concern with this topic. However laborers that

Ing. Eva Šlaichová, Ph.D. - research asistent, Technical University of Liberec, Faculty of Economics *

The methodology for setting of these standards unfortunately usually does not exist. doing work that is not requested. It concerns mainly workers in maintenance. they are set according to estimation and experience in the particular working area. in setting standards of overhead work. that pay significant attention to the continuous improvement of development (Legát. elimination of the waste in the logistic operation can bring significant savings to the enterprises (Halasová. defect. FIFO) are nowadays inseparable part of process management. Working operations can be divided into two categories. Lean Manufacturing principles (like time consumption in auxilliary and service processes (overhead work) are also neccesary part of the production system. In case there are any. 1999). There are many random phenomenon that influence overhead work and this causes many complications by setting calculation of their standards. particular of queueing theory. standardization of the workplace. Lean Management Approach In Logistics Lean Management principles are closely related to the quality management systems. data errors. One of the basic principles of lean thinking is to recognise that only a small fraction of the total time and effort in any organisation actually adds value for the end customer. so as appropriate and current proffesional literature. Activities that add value for the final product and end customer and operations that not. It means that also logistic operations should be involved in to the process of continuous improvement. 2007). visualization. missing information and unnecessary process steps. The way how to do business and make production effective was defined by Taichi Ohno (1988) by identifying and eliminating of seven wastes (in connection with costs) that are being caused by service and auxilliary work in the enterprise. What is the cause for the long-term lack of interest for setting standard of overhead work? The biggest complication of this task is caused mainly by problematic description of the service process. setters or handlers. The methods for time consumption measurement and Value Stream Mapping can be used within the effort to recognise which small fraction of the total time actually adds value. . unnecessary approval cycles. The aim of this article is to point at possiblity of application of exact methods. It is neccessary to find all these activities in all departments including logistic department. pull systems. Keeping with these principles is one of the conditions of good working supply chain management of the manufacturing plants. Waiting times can be definitely classified as waste because it cause “delay of the product on the way to the customer within material handling” (Mašín. overproduction. Nowadays there is a big emphasis on increase of productivity of labour and setting of standards for auxilliary and service work can be objective resource for possible savings of overhead costs. Setting standards of this auxilliary and service work is on the other hand area nobody pays much attention to in the enterpises. In view of the fact that auxiliary and service work includes considerable cost volume in almost all business areas. The list below identifies common wastes in logistics: excess materials in the stock. As an example can be presented ISO 9001 standards together with Model Excellence EFQM. 2005). 5S. On the basis of these facts lean manufacturing principles should be applied also to auxiliary and service working operations. unneeded reports.

waiting in the queue (essentially a storage process). weight. the expected number waiting or receiving service and the probability of encountering the system in certain states. 1999). visibility and accessibility of them. industry. Lack of information and communication unability to work in the team. duplicate work are to blame. volume. There is also another possibility for the enterprises. The question is why is waste still part of auxiliary and service work like logistics? The workers (handlers and others) are not aware that they are responsible for lost cost. Applications are . public service and engineering. (Lhotský. Investments in modern logistics technologies do not have to neccesarily cause higher costs. commerce. focus on use of modern logistic technologies. The acceptable level of knowledge of current trends. assembling parts) should be placed according their importance and frequency of use to be easily available.How can be lean manufacturing (lean thinking) principles applied on working operations in logistics? Just as it was written in the paragraph above. quickly and easy handling. having an available server or having to wait a certain time to be served. reduction of stock. Such as training is really long-term task. the pressure on continuous improvement. The theory permits the derivation and calculation of several performance measures including the average waiting time in the queue or the system. healthcare. such as empty. „Lean“ logistical workplace enables to achieve higher performance and quality of output with the same level of operation costs. It is applicable in a wide variety of situations that may be encountered in business. The aim is to find an effective way how to maintain standardization of the workplace and prevent from the deviations. 2005) It is important to consider ergonomics. avoidance of overprocessing. The theory enables mathematical analysis of several related processes. required resources and subjects (tools. Application of queueing theory in setting labour standards Queueing theory is the mathematical study of waiting lines (or queues). elimination of waiting times. All the activities should be coordinated in order to avoid unnecessary accumulation of tools and products and assure that all tools were after use returned to their stand. search for causes and consequences of bottlenecks help to increase performance. safety. 2007): finding possibly shortest routes for all transportation. The solution for this could be training of the workers in the skills of continuous improvement and immediate elimination of the defects. Queueing theory is generally considered as a branch of operations research because the results are often used when making business decisions about the resources needed to provide service. quality of the product and all at once significant cost savings. every single fraction of working operation should be analysed and the discovered waste should eliminated. In case of considering effective warehousing system. full. including arriving at the (back of the) queue. and being served by the server(s) at the front of the queue. theories and technologies leads to deeper understanding of the process control problems of the particular enterprise and helps to strenghten its competitiveness (Hűttlová. but the benefits of it are really worthy (considering economic but even safety aspect of work). process flow. Following steps should eliminate all these wastes (Mašín. Conversely. frequency of use.

The main difficulty during setting of standards for overhead work is according to professional literature mainly caused by laboriousness of calculation. logistics. Methodology of the Proposed Capacity Planning System The main objective of the article was to analyse various methods for standardization of overhead work and formulation of methodology for their use in the plastic-processing industry. There are two basic types of queueing theory models: open systems (with unlimited resource of requests and closed systems (with limited resource of requests). high and low forklifts) typical for description of work in logistics. b) assignment of operation to the profession that performs it. Methods were firstly applied to a selected group of logistics workers. Methodology of the Proposed Capacity Planning System 1) Creating a database of indirect labour standards (maintenance. the methods listed in the tables 3 and 4 are possible to select depending on specific conditions and on variation and repetition of performed work. .) The database must contain the following data: a) description of operation. System Maxi MOST was selected as the most suitable method. stacker. The great advantage of queueing theory is the fact that it helps to display also economical aspect of the dilemma. Standard of number of service workers. In this case it is neccesary to pay atention to economical aspect. depends on rate between value of the time unit waiting for the manipulator (cost or revenues) and value of time unit of downtime of manipulátor (Kroupa. Setting of output rates is on the hand easy task. instruments and various types of trucks (manual. Žižka. much like other overhead activities. machinery repair. One of the possible methods that helps to set standards of overhead work is queueing theory. d) time standard for executing the operation. is affected by time variability and fluctuation of workload. it concerns several easy mathematical operations.frequently encountered in customer service situations as well as transport and telecommunication (Plevný. 1985). in the fact the optimal number of service workers. c) average hourly rate of the profession. There are two possible situation that can be described in connection with service work: manipulators are fully occupied and requests for service are cumulating. especially cost of waiting of claimant for service in the queue and cost of waiting of manipulators. or there are almost no requests for service and it gets to downtimes. Material handling. the established values were used with the purpose of determining which of these methods are appropriate for determining the optimal number of workers needed for executing a given activity. However the main problem that resists is complicated mathematical formulation of the model.g. etc. Secondly. This system offers a wider scope of predetermined times for the use of tools. which were recommended for the description of these activities in the plastic-processing industry. It can be now eliminated with the help of the appropriate software. setters. As a result from this research. It is not possible to determine a universal method for setting labour standards in logistics on the bases of the completed analysis. 2005). Work operations can be grouped individually or into a complex group of operations necessary to carry out a particular work task. One of the biggest disadvantages of this theory is its system complexity. e. Suitable methods were then selected based on the results.

stacker. After compiling normatives in the system Maxi MOST. Use of method suitable under certain conditions. 5) Selection of the most suitable method. (1992). . high and low forklifts) typical for description of work in logistics. The most suitable method for measuring and analysing time usage that were used and applied to logistics work is the Maxi MOST (see chart 2). instruments and various types of trucks (manual. The extended datacard of Maxi MOST offers a wider scope of predetermined times for the use of tools. Use of method for description of given activity unsuitable. c) from which it will calculate the duration of an operation in hours. which subsequently brings the desired simplifications and speeds up the process of creating overhead work standards. In this method. b) from which it will calculate the number of workers upon entering a specific parameter (workplace. The primary objective of the research in the given field was the selection of a suitable method for determining labour input and work structure. this would allow the group of potential ‘evaluators’ to be enlarged by people who have been only briefed about this system. Chart 1: Method Classification Method Classification A-C Category A Category B Category C Conditions for Use of Method for Describing Indirect Labour Method suitable without limitations. production volume required by a customer or any other limit value for execution of work). The results in the charts 2 and 3 clearly show that there is no universal method suitable for standardizing all types of logistics labour. the author of article see an ideal solution in creating a database system which would enable its users to perform measurements and obtain required data without the need for a deeper understanding of the principles of standardization. Source: Author´s own Selection of the methods for setting standards for staff numbers All methods were applied to data from a specific (plastic-processing) company with the view of verifying their applicability in production company conditions. the database system will process: a) the number of man-hours necessary to execute the task. In turn. 3) Setting of criteria for selection of the methods for setting standards for staff numbers 4) Evaluation of the methods Within the process of evaluation according the particular criteria the methods were classified into three main categories (see chart 1).2) After exact specification of a task. Zandin (2003)). the datacard’s range of indexes incorporates a large variance from one production cycle to another. d) average costs of workforce and operation of equipment per given shift. The methods were selected from the professional literature (Niebel.

Source: Author´s own The next step was to select and test a group of methods suitable for determining the number of workers in the logistical department. Unsuitable. Suitable as per methodology. disproportionate labour intensity of data processing. . Partially suitable. for irregular operations. but data unavailable.Chart 2: Overview of the methods for measuring and analysing time usage that were used and applied to logistics work in the plastic-processing industry Method Working Day Snapshot Instant Monitoring Zonal/Multilateral Monitoring Continuous Chronometry Selective Chronometry Instant Measuring MTM Basic MOST Maxi MOST UAS UMS SMA SMB Systems of Normatives Suitability Category of Method YES YES YES YES YES YES NO NO YES YES NO YES YES YES A B A A B B C C A A C B B B Justification of suitability/unsuitability of use Particularly suitable for collection of primary data. does not allow description of necessary operations. Suitable for material supply and warehouse work. Unsuitable. The results in the chart 3 provide reasons and suitability for use of the particular methods in the plastic-processing industry. Unsuitable. Suitable for irregularly repeating operations. Suitable. Suitable. Applicable method. providing that monitored tasks occur in regular sequence. for small production batches. Suitable as per methodology. allows complete description of all operations. using movement cycles. Suitable in uninterrupted flow operations. Suitable. but data unavailable. does not contain description of given activities. but data not updated.

With sufficient volume of data. Source: Author´s own.Chart 3: Selection of method for setting standards for staff numbers in plastic-processing plant logistics Suitability for use in plasticprocessing industry YES Method Standardized Labour Intensity Method Queueing Theory Regressive Analysis Idle Time Method Reason Providing that database of normative is created. There is a request for minimization of costs (personal and transportation costs). x. There are 5 fork lift trucks and 11 machines in the working area of the particular plant. Csv) were given in the task. The fork lift trucks assure transportation of both types of packages. Further it approached to check of current capacity utilization of 5 fork lift trucks according to the costs. starting conditions are following: costs for service of the fork lift truck must be higher than costs for downtime of the fork C lift truck (C > SV ). Optimal solution with lowest costs for the enterprise was found in the minimum of the function (1): Nc(S ) = λ S C Cw arrival rate (C C SV ) C SV S x Cw S (S ) (1) μ service rate number of service channels cost of service capacity (cost per server) waiting cost . YES suitable also for improvements. comparable Partially with actual situation. Description of randomly arising YES requirements. with the rising number of fork lift trucks. Total costs for internal factory transportation were calculated and according to equation (1) was found optimal number of operating staff. Laborious in terms of data collection. the index of lost caused decreases by delay of transportation. full and empty. Cw. Case Study The partial aim of research activity was to find out whether it is possible to set with queueing theory optimal number of fork lift truck drivers for required working area of the specific (plastic-processing) enterprise. Input data (variables λ. the higher costs for service. the higher number of fork lift trucks.

06 2.92. Image No.1).2 tf [claims] 28 4.5 14.6 1. the optimum number of fork lift trucks with the lowest costs for the enterprise is in the alternative S = 6 (see image No. Chart 4: Comparison of alternatives according to the costs Number of trucks 4 5 6 7 ρ nf [claims] ns [claims] 15 3 1.optimal solution with lowest costs Nc(S) 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 3 4 5 6 7 8 9 10 Source: own calculation After comparison of values for Nc(5) a Nc(6) in the chart 4. There is possibility to use Excel/Application for solution.75 0.Csv x downtime cost Nc total costs total number of claims per hour 2 The way how to get to the minimum of the function is in its derivation: Nc ( S )´ C SV C SV C SV Cw Cw Cw 2 S ) 2 2 S (S 2 S ) S (S 2 S ( S2 S)2 Derivation is equal to zero: Nc(S )´ C SV Cw 2 S ( S2 S )2 =0 (2) The solution is not trivial because it is four grade polynomial.2 ts [claims] 30 6 3.62 0. The image 1 shows that minimum of the function is in the point S = 5.25 1.62 .1 1.94 0. The current number of 5 fork lift trucks in the plant is then insufficient and it should be increased to 6.04 0.3 2. 1: Cost Function .5 2.3 Nc [Czech Crowns/hour] 6880 2527 2326 2431 0.

(1985): Racionalizace pomocných a obslužných procesů výroby. Liberec: Institut technologií a managementu. (1992): Motion and Time Study. 2003. [9] Ohno. 2005. M. application of the queueing theory gives not only information about time consumption but also informs about economical demand of the particular operation (in connection with costs). (1999): Organizace práce v podniku. Prague. Plzeň: Západočeská univerzita. ČSJ. 2005. A. T. Liberec: TUL. K. Prague. V. This is one of the most important resources for further decisions of the management. E. B. [8] Niebel. Prague. (2005): Modelování a optimalizace v manažerském rozhodování. New York: McGraw-Hill Higher Education. as ineffective processes can be considered too long material flows. the enterprises are motivated to continuous improvement and innovation of their attitudes. 1988. Zandin. order processing or higher proportion of repeated working operations of the handlers. [2] Hűttlová. 1992. [5] Plevný.. 2005. Prague. SNTL. Aspi. [6] Lhotský. 2007. (1988): Toyota Production System: Beyond Large-Scale Production. Elimination of ineffective processes in the enterprise can lead to significant cost savings. In order to achieve competitive advantage. (2005): Vybrané kapitoly z technické přípravy výroby. (1999): Management jakosti v údržbě. V. I. Productivity Press. . 1985. References [1] Halasová. Vysoká škola ekonomická. MOST Work Measurement System New York: CRC Press. (2007): Zlepšování nevýrobních procesů. Methods of time consumption measurement help to reveal weaknesses in the processes and give an opportunity to strenghten the competiveness of their business plans. Žižka M. [3] Kroupa. [4] Legát. (2005): Organizace a normování práce v podniku. 1999.Source: own calculation ρ nf ns tf ts average intensity of traffic average number of units in the queue average number of units in the system average period of time the unit waits in the queue average period of time the unit waits in the system Conclusion According to the results of the calculation in the case study. Within the logistics processes. 1999. [7] Mašín. O.