How corporate strategy is holding hostage millions of dollars in profit
Recently, I stood before a plant management team sharing labor strategies that could help resolve some serious cost problems associated with inefficient shift schedules. The plant manager talked about some of their greatest achievements. Number one was keeping their overtime below 5 percent. Corporate listed low overtime as a key performance indicator, and minimizing it was critical to plant bonuses.
In environments where demand is flat, overtime is rarely used, typically only to fill vacancies. However, seasonal and variable- demand profiles present a very different problem. Customers want their product or service on demand. However, the fear of excess overtime has led management teams to overlook this mighty tool and make less-strategic decisions. In today’s world, cost competitiveness has magnified the impact of these shortsighted tactical decisions as more management teams are forced to reduce every unnecessary cost. The three most common errors are:
