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Cliff Holste

Supply Chain Digest
Material Handling Editor

Logistics News

Cliff Holste is Supply Chain Digest's Material Handling Editor. With more than 30 years experience in designing and implementing material handling and order picking systems in distribution, Holste has worked with dozens of large and smaller companies to improve distribution performance.

October 5, 2016

Logistics News : Public Relations Verses Process Improvement


An Approach that Portends to Protect a Selected few may Unintentionally Expose many Others to Higher Risk

 

For businesses, who are concerned about public relations, the subject of headcount reductions from either process improvement or automation presents many difficult challenges. In these businesses it may actually be easier for management to shutdown an entire department, putting everyone employed in that department out of a job than it is to admit that they are implementing automation and will therefore need fewer employees.

Retaining displaced employees can make getting an ROI from deploying more productive processes a lot more difficult. While on one hand we can applaud a business’s employee-centric approach, on the other hand we wonder if in the effort to protect a few displaced employees, they are unintentionally elevating risk on many others.


Holste Says...

Will avoiding labor reduction projects over time cause the operation to becoming noncompetitive forcing the adoption of an outsourcing model?

What do you say?

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That got me thinking about a large on-line retailer I worked with a few years ago who wanted to automate their returns department. Their average rate for returns was about 35%, which could go higher during peak periods. This level of returns was in part due to their liberal no-cost-no-questions-asked returns policy, and the practice of accepting apparel orders in an array of colors and sizes, knowing several of the items would be returned.

As a result, every day the company received a mountain of returns packages that had to opened, inspected, sorted, credited, repackaged for re-stocking, or disposed of - a very labor-intensive process. Even though warehousing and distribution operations had been continuously upgraded to near state-of-the-art levels of automation, the returns operations had been left behind and remained a mostly manual process.

After several weeks of study and analysis, we developed an automated solution for receiving the packages and systematically distributing them to hundreds of inspection stations for customer crediting, item evaluation, minor repairs, cleaning, repackaging, and restocking or disposal.

This automation project dramatically increased returns processing capacity and reduce labor. However, based on the company’s PR policy, before the project could be accepted, the HR Department had to approve new labor standards for workers in that area, and more importantly find positions elsewhere in the company for every full-time position that would be eliminated by the implementation of the automation project.

Fortunately for all concerned, the company was enjoying double digit annual growth. Therefore, satisfying their PR policy requirements turned out not to be that big of a challenge and the project was approved. The projected ROI was based on future labor avoidance, not immediate cost savings.

Final Thoughts

This employee-centric approach gives rise to a number of interesting questions:

  • Is reducing labor through the adoption of automation becoming a political problem for companies?
  • If the PR policy is to just move the people around, will the company really get the ROI?
  • What if a company is not fast growing – do they wind up passing on improvement projects that reduce headcount?

Perhaps the most important issue here is: will avoiding labor reduction projects over time cause the operation to becoming noncompetitive forcing the adoption of an outsourcing model?

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