Want to get more out of your distribution center? Try an incentive program for your employees, says Tim Holody, chief operating officer at Boca Raton, FL-based jewelry merchant Seta Corp.
By compensating employees based on their individual performance or the performance of their team, you can track the performance while improving the quality and accuracy of the work. And incentive plans can be implemented in any fulfillment center, regardless of product mix, volume, or size. Here’s how:
Step 1: Pick an area or a department to start. If you already have an area or a department with good historical productivity statistics, that’s a good placelto begin. If you don’t, pick a function in which you will easily be able to track productivity going forward.
Step 2: List all the jobs and functions in the chosen area or department. If you choose packing, for example, you need to list all the functions the packer is responsible for performing. Does the packer get his own supplies, or are the supplies brought to him? Does the packer have to check off each item as he packs? Eliminate any elements of the job that you do not want the packer to continue to perform. Be sure all the elements of the job are written down and agreed upon. This becomes the checklist for that job.
Step 3: Determine the standard for each job. If you have historical production data, you’re well on your way. Add 20% to the average for the past 90-180 days and use that as your beginning standard. If you do not have historical data, then you need to conduct a time study to determine what the standard should be. An industrial engineer can help with this.
Step 4: Begin to track the production of the jobs without announcing the incentive plan to the employees. Review the results after four to eight weeks. This will be your “silent test” of the incentive plan. You will be able to test the validity of your initial production standard and adjust before going “live.” This also gives you the opportunity to be sure the checklist of elements is complete and accurate. If the results look good after four weeks, you can proceed to implementation. If not, adjust and test for another four weeks.
Step 5: Announce the incentive plan to participants. Once you have completed your silent test you can proceed to the first step of implementation. Hold a group meeting to announce the plan—but only to the participants. You should also spend time with the natural leaders in the group and sell them on the merits of the plan. Be prepared to share the results of your silent test. Employees will want to hear details of how the plan works and what’s in it for them.
Step 6: Announce the incentive plan to all employees in the fulfillment center. This is basically a pep rally for the new plan. You will be able to identify any potential people obstacles to the plan by the questions ask or perhaps even by body language.
Step 7: Implement the plan and commit to run it for a four-week period. There will be problems and miscalculations; be prepared for this and make notes on possible adjustments. Do not make any adjustments during this period, however. a
Step 8: Monitor the results of the plan and post results on a daily basis. Daily reporting is crucial to the success of the incentive program. Not everyone will succeed. Celebrate the successes of the top performers..
Step 9: Review the plan after eight weeks. Adjust as needed. You may need to amend the productivity standard, for instance. Be sure the elements of the job are consistent and have not changed during the test period. This must be documented. Adjust as needed.
Step 10: Expand the plan to other areas. If your initial area was packing, then select picking as your next target for an incentive plan. Develop and announce a schedule for implementation in all areas. This will ensure that all employees feel included. out. are good examples. “Incentive plans work, period,” Holody says. As proof, he points to Seta’s picking operation: The average production from 250 units/hour to more than 400 units/hour during the past several years, thanks to the implementation of an incentive plan in which pickers are paid the equivalents of approximately a third of the savings they achieved in cost reduction for all units picked over the standard.