According to AMR Research, the most advanced demand-driven organisations will hold 15 per cent less inventory, have a 17 per cent better perfect order performance, and achieve a 35 per cent shorter cash-to cash cycle time. Overall, say AMR, this equates to a 10 per cent improvement in revenue and a five to seven percent improvement in profitability. For a sector such as manufacturing, these are returns worth a closer inspection.
Demand-driven means market-driven
Demand-driven companies understand their customers and their markets. They build their processes based on a clear view of the customer and what is important to the customer. They understand that to be demand-driven is to be market-driven rather than marketing-driven.
Demand Driven Workforce Management is a new concept for business optimisation, focusing on the workforce as a source of savings and efficiencies. However, just because it's new, doesn't mean that it is merely the latest management fad. It's emphasis is on the workforce - something that none of us could be in business without.
Manufacturers have been generating computer-based forecasts for years of course, but putting forecasting techniques in place is only part of what becoming demand-driven involves. To compete, organisations must continue to find ways to be agile and responsive while cutting costs and boosting revenues.
During the 1980's and 90's, companies invested heavily in ERP, CRM and supply chain management (SCM) systems because of benefits such as broad and deep visibility, the ability to anticipate customer needs, and the ability to manage disparate resources. These capabilities are now been applied to manufacturers most valuable asset: their workforce.
Controling the most valuable asset
Demand-Driven Workforce Management (DDWM) can help a manufacturer gain competitive advantage. As the name indicates, DDWM embodies a proactive mentality, where demand for product and services drives the workforce planning process. With this approach, companies can maximise revenue opportunities by anticipating and preparing for surges in business volume - staffing levels are optimised to meet changing work requirements. And by helping to minimise overstaffing, payroll errors, and the costly premiums associated with overtime, temporary staff and agency workers, DDWM will ensure that companies gain control over their labour costs.
According to Proudfoots' 2005 survey, on average 37% of working time is unproductive, which equates to some £90,000,000,000 per annum in the UK (7.5% of UK GDP). It's very obvious that never before has effective deployment of staff been so important.
The DDWM difference
DDWM is an end-to-end solution focused on labour. Systems such as ERP and SCM lack the features needed to manage people as anything but inventory. Yet people are different: unlike units in a warehouse, employees get sick, possess a range of skills, and are more or less productive depending on how they're deployed.
DDWM accounts for the human element in a company's planning processes - helping to balance employee satisfaction, constraints from legislation, absences and employement practices with the demands of the business. Human resource management systems (HRMS) solutions are useful but limited, leaving organisations with two options: cobble together point solutions with existing systems, or seek out a comprehensive Demand-Driven Workforce Management solution.
Why demand is key
Demand-Driven Workforce Management embraces the principles of solutions such as ERP and SCM, but applies them specifically to the workforce, helping managers to align labour requirements with demand. Product and service delivery patterns in most organisations are highly complex and ever-changing because customers insist on more choices, faster response times, and more flexibility from suppliers. So, once the volume, mix and timing of the work required can be forecasted, labour can be deployed and monitored with a strong degree of accuracy and therefore workloads and operational plans can be more effectively managed.
Demand for products is typically dynamic, with peaks and troughs influenced by customers along with a range of factors outside our control, including seasonality, competition, economic changes and end customer behaviour. Given these triggers, managers need to be able to swiftly modify their staffing plans in order to meet demand fluctuations.
The key is to be able to react appropriately in real-time, as well as plan for these fluctuations well in advance, so that the most appropriate resources (in terms of staffing levels and skill mix) are ready to be deployed to meet - rather than beat back the demand or overstaff and maintain a "just in case" Workforce.
This is essential in order to control costs and deliver high-quality products and services in a timely, efficient manner. To do this effectively requires giving managers the information, controls and decision-making tools they need to act strategically in the face of fluctuation demand. To enable an organisation to behave in a demand-driven fashion, such information must include demand forecasts based on past performance statistics, as well as complete employee data.
Plan, allocate, execute and analyse
Demand-driven workforce management is an ongoing cycle of processes that allow companies to efficiently and cost-effectively deliver products and services through a superior utilisation of their labour resources. These processes allow an organisation to plan the work, allocate resources, execute the plan and analyse the results.
Planning in manufacturing
In manufacturing, forecasting orders and business volume can be challenging, especially in larger organisations where there is a greater mix of goods and type of work. So it's important to align production facility staffing with the sales and order pipeline. In most cases, managers will want to look at CRM or customer supply chain data and ERP to help create demand forecasts. Product lifecycles and major contracts can also influence production cycles. From this demand labours hours are typically forecast and the next step in DDWM takes place:
Allocating the workforce to meet demand
In the long term, the planning process drives workforce design and availability; in the short term, it drives the allocation of people. When allocating people, managers may assign employees to specific jobs, ensuring that skills and qualifications are taken into consideration and used appropriately, and where possible managers should schedule according to employees preferences to minimise the cost of overtime or calling in contract workers.
In manufacturing, the staffing levels, skills and qualifications, and pools of available workers must all be managed closely to ensure that staffing levels are optimised. Too few staff can lower plant capacity which in turn lowers revenue opportunities. Staffing with unqualified workers threatens quality, productivity and deadlines. At the same time, machines and production lines are very expensive; if too few workers are scheduled to run them, it can cost hundreds of thousands of pound for each idle hour. Once the allocation is finalised the next step in DDWM takes place:
Executing the plan
Execution is the real-time monitoring of the workforce and the workload; identifying and resolving schedule gaps as they occur. While the planning phase involved projected demand, on a day-to-day basis an organisation needs to closely monitor actual business volume, which drives the real-time adjustments needed to minimise under or over staffing. Executing the plan begins when an employee arrives at work and registers his arrival time. Absent staff can be quickly replaced to ensure that production schedules are met. Gaps are identified quickly and managers are able to replace or redeploy staff based on costs, skills, compliance, current demand or other factors. Finally once the plan has been executed the final phase of DDWM takes place:
Analysing employee data
Analysing employee data in a demand-driven scheme not only benefits workforce management but also the management and planning of other resources. For example, if SCM data indicates that a shipment of supplies will be late, the manager needs to reassess and reallocate people and equipment accordingly. The relationship between labour and other resources in manufacturing operations means that workforce data is just one piece - though a very important one - of the overall picture.
It's time for manufacturers to start managing the workforce as an asset rather than an overhead and those that fully embrace the principles of demand-driven workforce management will, as a result, become leaner, more efficient and more competitive organisations.
