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September 19, 2006 Let Workers Take Responsibility For Inventory…Part 2 We left off last week, in Issue 78, by looking at an actual Physical Count Variance Report that compares your computer number to your actual numbers that were counted on your physical count of your inventory. From this report we saw that we have lost $4,876.20!! With these reports now at hand we can now start to create a personalized incentive plan that will get workers to take ownership of the product and get them more motivated, in this example our workers name is Tony.
You can see at the top of the variance report there is a Physical ID. This physical ID can be what ever you want but it is a good idea to make the ID match the name of the person who is counting the product. This is done to create a sense of ownership for the products. If you give an employee the same items every time you count and establish a connection between those items and that name a sense of owner ship is created. In Issue 52, we shortly talked about connecting an ABC codes next different products depending on how fast they turnover. Why don’t you bring that down a little more, now you can connect those same ABC codes not only to the product but also to a person and that is just one suggestion. Another idea is that you can connect a person with a specific location in your warehouse. The main point is to give your workers a specific area or specific products to count all the time then use variance report to gauge how effect they are working. For example, it looks like from the above report that
our worker Tony had variance % of -3.73%.
As
Issue 76 says, you should try and track an area (or person) for at least
90-180 days. So let’s just assume that you do a cycle count weekly for Tony
and find after 6 months that the average variance is
$130,796(Beginning Inventory) X -3.73%( Posted Variance)=$-4,876.20 $130,796(Beginning Inventory) X -4.00%(Average Variance ) =$-5,231.84 If we assume that all of these numbers are correct you can see that you are losing an average of $5231.84 a month just from Tony!! Now that you have average variance for Tony you can set a bench mark variance for him to try and reach to receive a bonus. How far away from the average you want to set the bench mark is completely up to you, but BEWARE, the harder it is for your workers to reach the benchmark the more you will have to pay out. Another reason to be careful of where the benchmark is set is because if workers are constantly falling short they may become discouraged and at that point your whole incentive plan has come a complete waste. A good idea to think about is to have a plan where the bonus changes at different levels. If we use this logic in the current example our Gain-Share program may look something like this:
This bonus could be quarterly which gives Tony plenty of time to make corrections and makes sure you are paying for long term savings not short term. Although the numbers will be different, you get the basic idea of the program. The goal of any distributor is to have 0% variance every time an order goes out the door but we all know that does not happen as much as we like. We know all too well that people read scales wrong or count boxes wrong, it is a reality in the food business. With an incentive plan in place like Gain-Sharing at least you can know that your workers are taking ownership of your products and are motivated to do a good job. As we said before, motivated workers are efficient workers and efficient workers save you $$$. Employees That Take Ownership Of Products Save You Money To Unsubscribe
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