Enhancing Incentive Programs with Proximal Goals and Immediate Feedback: Engineered Labor Standards and Technology Enhancements In Stocker Replenishment. David T. Goomas Tarrant County College District and Dean Foods & Dr. Timothy D. Ludwig Appalachian State University

(Co-Editor: JOBM and Professor, College of Business Administration, Acknowledgements: - Dr. Tom Mawhinney (Co-Editor: JOBM and Professor, College of Business Administration, Professor of Organizational Behavior and Human Resources Management University of Detroit Mercy, Detroit, MI) Collaborative work: - Dr. Tim Ludwig – Appalachian State University; Distribution Centers throughout Canada and the United States - Accuracy with Voice picking - Performance with Voice picking - Performance with Handhelds

My Background: - M.A. University of Texas – Arlington, Spring 1979 - Psychology- Experimental Psych.and Statistics - Published in Physiological Psychology, AJP early 80’s - Computer programmer (23+ years) - Implementing WMS -warehouse management systems - Project Manager, Business Systems Analyst - Currently work at Dean Foods in dairy systems implementations across the U.S. - Pick to Light - Production Planning - MRP - Demand Planning

Objectives for today’s talk: * Define the Project Agenda: * Analysis – worked with Industrial Engineer * Design – software design * Data Collection – field study * Implementation – software implementation * Feedback – “news from the field” Wrap-up: * Summary, Q&A * Questions will be entertained at any time (within 25 minute time-frame, as there are 2 additional talks).

Who: Director of Engineering and Logistics at leading Who: Director of Engineering and Logistics at leading automotive after-market parts company Project: Measure productivity of stockers Environment: * 5 Distribution Centers ranging from 295,000 sq. ft to 600,000 sq. ft. (22 football fields) * 100,000 locations, Reserve and Select locations * 60,000 stock keeping units Questions: How do we know our work-force is productive? Are the quotas correct?

Warehousing 101- “Life in the day” at the Host Company - Assigned to a Section and job (picking, stocking) - Enter Distribution Center / warehouse - Clock in to WMS (warehouse management system) - Intermec Clock Punches sent to Kronos - Check out and sign for equipment - Shift meeting (5 minutes) - Sign on to equipment * Handheld * Vehicle Mount * Voice headset - Assigned to assignment (picking or stocking) - Follow the instructions on handheld or voice - 30 minute (unpaid) Lunch - 2 15-minute company paid breaks - Continue to end of shift - Turn in equipment - Clock out for day

Logistics 101 - Mezzanine - Pick Modules – hoses, fuses - Bulk Sections – batteries, oil, brakes - Carousels – fast movers and small parts - Pick to light – fast movers - Flow rack – gravity racks - Fork lifts – movement of pallets - Cherry Pickers – movement of cases - Selectors – associates who pick store orders - Pallet jacks – place product on wooden pallet picking for store orders - Case handling / pallet handling - Tires - Carts – placement of tires - Receiving / Shipping Doors

P=Pallet pool R=Reserve S=Selection M=Mezzanine

Stocker Work Flow – Handheld Unit (Intermec CK-30) ----------------------------------------------------------------------- A) The stocker will press ‘enter’ to identify the ‘bundle’. B) The boxes from bundle are placed on a hand-cart (hand truck) C) The associate will transport the hand-cart to the desired location D) He will scan the check-digit of the location to verify the correct location E) Cut open the box/boxes and place the contents into the required Bin (location) F) Press ‘enter’ for next unit of work. If next location in bundle, work-flow returns to Step C. If end of bundle, work-flow returns to Step B – to backfill

AVERAGING solutions UNITS PER HOUR – ignores travel distance and cases handled DOLLARS PER HOUR – ignores size of the order LINES PER HOUR – ignores the number of cases of a product line QUOTAS – 170 units per hour per case selector 23 cases per hour per stocker 150 tires per tire selector

ENGINEERED LABOR STANDARDS Define the unit of work – discrete elements (e.g. travel time, grasp time, handling, cutting) WORK STUDY – The way the work is carried out; reducing wasteful time WORK MEASUREMENT – Establishing a time to carry out the work. Activity sampling, Group sampling, and Time-series studies Kanawaty, G., (1992). Introduction to work study (Fourth edition). Geneva: International Labour Office.

ENGINEERED LABOR STANDARDS Merits of using ELS: * Direct observations * Repeatable * Factual * Defendable (e.g. working with the labor unions; disciplinary issues)

STOCKER REPLENISHMENT Engineered Labor Standard = Travel Time + Cut Time Case Handling Time Fatigue was factored in by taking timings at the beginning, middle, and end of shift.

Pre-existing software solution: No solution Using forklift tables Moving pallets One pallet at a time with a forklift Pick up pallet Reserve location to 1st select location Reserve location to 2nd select location Reserve location to 3rd select location Reserve location to Shipping Door 123

PHASE I New solution: Stocker software solution: Develop stocker solution Handling cases Reserve mezzanine to select mezzanine Pick up bundle Backfill to 1st loc and stock bin 1st loc to 2nd loc and stock bin 2nd loc to 3rd loc and stock bin Using stocker tables Map warehouse points from blueprint

Exercise: Based on the blue print shown for Section 200. What should be the pick path? Starting at Aisle DG Ending at Aisle DM Take note of the coordinates There are entry and exit coordinates for the aisle There are x- and y- coordinates for each location

Take note of the coordinates on the blue print- Entry to DG aisle DG – low to med, then corner DH – med to low, then corner DJ – low to med, then corner DK – med to low, then corner DL – low to med, then corner DM – med to low Exit from DM aisle Stretch wrap pallet Transport to Shipping door, itself having x- and y- coordinates Configure to WMS – new software solution

Alpha Code

R E M O T E M A N A G E M E N T - GENERAL CENTER 02 WAREHOUSE 01 DCOTA PARAMETERS FUNCTION INQUIRY GENERAL STOCKER PARAMETERS-------------CURRENT --- NEW --------------- PERFORMANCE SHOWN TO STOCKER Y STANDARD TIME SHOWN TO STOCKER Y EQUIPMENT ID REQUIRED FOR ASSIGNMENTS N MAX STOCKER SKIPS PER WORK UNIT 2 LOGF OPTION (RLOG OR OUT OF SYSTEM) RLOG STOCKER TRIGGER ALLOWANCE MINUTES 0 BUNDLE ESCAPE PRIORITY (0 = NO ESCAPE) 0 SORT BUNDLE BY LOCATION Y DATE 12/17/04 TIME 11:40 AM BY DGO-02-01- DSC RM08 RM08-1 17 DEC04 12:43:32 PM 96:COMPLETE. ENTER NEXT REQUEST

3-Term Contingency Before the Intervention: SD) quota announced at the beginning of shift R) stocking product SR) feedback and possible monetary bonus delivered the next month. After the Intervention: Distal SD) quota announced at the beginning of shift Proximal SD) GOAL appearing on screen at the beginning of each work unit Proximal SR) PERF% appearing on screen at the end of each work unit Distal (SR) feedback and possible monetary bonus delivered the next month.

GOAL The standard time for the antecedent unit of work. Standard time = Travel time + Box cutting time + Case handling time FEEDBACK The performance percent of the previously completed unit of work Performance % = Standard / Actual

Performance % = Standard / Actual ====================== 10 minutes / 10 minutes = 100% 8 minutes / 10 minutes = 80% 10 minutes / 8 minutes = 125%

PHASE II * Stocker meeting with the Industrial Engineer * Questions and Answers * FAQ which were published and handed out. Here it is:

PHASE III * Stockers meet with Operations Manager * CSS (contingency specifying statements) Key references on CSS follow:

CONTINGENCY SPECIFYING STATEMENTS Huber, V. L. (1986). The interplay of goals and promises of pay-for-performance on individual and group performance: An operant interpretation. Journal of Organizational Behavior Management, 7(3/4), 45-64. Johnson, Mawhinney, & Redmon, 2001 Introduction to Organizational performance: Behavior analysis and management. In C. M. Johnson, W. K. Redmon, & T. C. Mawhinney (Eds.), Handbook of organizational performance: Behavior analysis and management (pp 23-49). New York: The Haworth Press, Inc.

CONTINGENCY SPECIFYING STATEMENTS Who? Operations Manager When? Beginning of shift * “Engineered standards and performance monitoring were now in effect”. * “Each stocker was expected to be at 100% performance.” * There would be a one-week grace period after which time disciplinary measures would be in effect. * Making share was dependent upon achieving the previously established quotas for the team. * Review of quotas and bonus program * Explanation of Engineered Labor Standard

DISCIPLINARY MEASURES * Fails to meet quota for one week Write-up and verbal warning * 2nd occurrence Write-up and 3 month probation * 3rd occurrence Write-up and termination No issue for the Stocking Team.

BONUS PROGRAM Group Incentives vs. Individual Incentives Group Incentives easier to work with FEEDBACK Daily Postings of yesterday’s productivity STOCKER GROUP $200 –> 18 case quota + 5% (18.9 cases) $300 –> 18 case quota + 7% (19.26 cases) Results before the intervention: Last 9 months resulted in 5 bonuses. 4 of the 5 bonuses were at the $200 level; 1 at the $300 level.

REVIEW PHASES What were the phases? What were the mile-stones? What was the deliverable of each phase?

PHASE COMPONENTS ---------------------------------------------------------------------------------------- A (5 weeks) * x- and y- coordinate/ warehouse points added to computer tables * case timings added to computer tables * cut codes added to computer tables * second per feet travel times added to computer tables * daily audits B (2 weeks) * Goal and Performance percent fields added to screens based on the 2 Yes/No switches * task clarification meeting with Industrial Engineer C (10 weeks) * initiated with CSS meeting with operations manager * adaptation of engineered labor standards

EXPERIMENTAL GROUP * Northeast Distribution Center 400,400 sq ft * 23 stockers 21 females & 2 males ages 18-35 average age = 23.6 COMPARISON GROUP * Mid-western Distribution Center 295,000 sq ft * 14 stockers 14 female ages 18-32 average age = 24.9 3 shifts – 5 ½ days a week

Day of CSS Intervention Participant Day before Day of CSS Intervention 1 17.2 22.2 2 20.3 23.2 3 17.8 23.5 4 5 18.9 22.3 6 23.1 24.7 7 22.1 24.4 8 17.7 19.4 9 16.2 10 16.3 25.9 11 20.5 12 13 22.6 14 12.6 23.0 15 19.1 25.8 16 19.5 20.7 17 14.9 20.6 18 21.5 24.2 19 21.7 20 22.8 21 24.3 22 24.1 23 13.7 Avg. 18.43 22.89

By the Numbers: The increase corresponded to an average of 22.89 cases stocked per hour per person, an increase of an additional 4.46 cases per hour per person. A t-test between correlated means was 6.84 (df=22, p<.001). EXP Phase 1 & 2 Average = 82.3% of the ELS Range = 69.3% to 95.2% (SD=8.57) Phase 3 Average = 99.8% of the ELS Range = 92% to 111% (SD=4.09) COMP Average = 80.18% for the full study Range = 62.6% to 93.5% (SD = 6.25)

BONUS PROGRAM Group Incentives vs. Individual Incentives FEEDBACK Daily Postings of last yesterday’s productivity STOCKER GROUP $200 –> 18 case quota + 5% (18.9 cases) $300 –> 18 case quota + 7% (19.26 cases) Results after the intervention: 9 months resulted in 9 bonuses all at the $300 level. The results, to quote a famous game show: “Big money – Big money” for the stocking group Another quote – “It helps keep me focused”

COST AND BENEFITS COSTS $12,000 – 240 hours for IE and OBM salaries Existing hardware representing no new costs $82,800 – annualized bonuses ($300 * 23 employees * 12 months) BENEFITS Operational Benefits – 4.46 cases more per hour per person * 8 hours * 23 employees = 820 additional cases 820 stocker cases / 18 case quota = 45 hours saved per day Annualized savings of $117,000 = 45 hours * $10.00 * * 5 days * 52 weeks Overtime savings Better staffing to other areas of warehouse

What is Productive? 18 cases per hour was not as productive Challenges? Maintaining x-, y-, and z-coordinates Family Groupings Job rotation Employee retention Mawhinney, T. C. (1984). Philosophical and ethical aspects of organizational behavior management: Some evaluative feedback. Journal of Organizational Behavior Management, 6(1), 5-31. Operational “best” practices vs. Engineering bad practices

Role of the OBM professional within Distribution Centers – Design & analyze incentive programs Work with (expensive) technologies Work with complex labor practices Implement effective feedback systems Determine group vs. individual programs Work with Industrial Engineer, DC Manager, Logistics, Operations, MIS Work with employees, particularly new employees Audit the solution / system periodically every quarter / semi-annually for all Distribution Centers Review labor standards and performances with management

Benefits of being an OBM professional within Distribution Centers – (My personal experiences) - The work is exciting – OBM is hot! hot! hot! Work with people - from VP of Logistics to the guy making the coffee Put your degree to work Travel and on-site support (U.S. and Canada) Variety of solutions (replenishment, selection, stocking) Creative solutions Work with new technology (voice) Application to Grocery, Foodservice, Auto-parts, and Dairy

Line of OBM Research within Distribution Centers: Bateman, M. J. & Ludwig, T. D. (2003). Managing distribution quality through an adapted incentive program with tiered goals and feedback. Journal of Organizational Behavior Management, 23, 33-55.

Line of OBM Research within Distribution Centers: Handheld Selection Engineered Labor Standards– Goomas, D.T. and Ludwig, T. D. Proximal Goals and Immediate Feedback: Order selection engineered labor standards in the warehouse (in preparation).

Line of OBM Research within Distribution Centers: Voice Picking Accuracy – Berger, S.M., Ludwig, T.D., Link, D., & Kaade, D. (2006). Voice assisted selecting: Technology designed to reduce employee errors through immediate feedback. Paper presented at the Association of Behavior Analysis Meeting, Atlanta, Georgia. Voice Picking Performance and Accuracy - Ludwig, T.D. and Goomas, D.T. (2006) Wireless technology providing immediate feedback to increase productivity and reduce errors in order selection.

Summary - Wrap up - Questions - Feedback