(similar to the approach engineers use when creating
engineered labor standards) and pinpointing the specific
elements that will be affected by introducing a new technology. The degree to which each element will be affected
can then be assessed using common work-study techniques and/or realistic estimates made by subject-matter
experts.
In short, an engineered approach to evaluating new technology or equipment predicts the outcome that a future
labor standard will require, which correlates directly to the
labor savings one could expect from the technology. This
approach develops a savings estimate that reflects the reality of a particular facility and operation—thereby improving a company’s insight into the bottom-line impacts of
The vendor allowed Company A to test one of the automated pallet jacks at its facility to help in the decision-mak-ing process and hopefully, close the sale. Company A
invested several weeks in training an individual on the
equipment so that the pallet jack would be operated as the
vendor intended. An engineer then studied the equipment
under normal operating conditions, focusing on generating values for the affected elements of the picking process.
In studying the new equipment, the engineer discovered
an additional factor to consider: a system-response delay
before the equipment moves forward. Exhibit 1 shows a
summary of the values the engineer collected.
The element values indicate that potential savings exist,
but the overall savings cannot be determined until the
appropriate frequency of occurrence of each element is
applied to each value. In the absence of simulation capabilities in a labor management system, the frequencies
can be calculated using the following:
▪ Total cases selected
▪ Total locations visited
▪ Percentage of cases selected after short travel (from 9
feet to 40 feet between selection bays; manual travel will
still be used for longer distances)
Frequency 1 Data
Locations
Locations
Cases
Cases
Locations
Locations
Locations
Locations
Frequency 2
0.30
0.30
0.35
0.35
0.30
0.30
0.30
0.30
▪ Percentage of locations visited after short travel (from
9 feet to 40 feet between selection bays)
Once the company calculated those frequencies and
ascertained the elemental times, it simply had to “do the
math.” Exhibit 2 provides a summary of those calculations.
Several factors were not considered in this calculation,
including, but not limited to, maintenance-support hours
and the impact on congestion delays. With these factors
excluded, the values shown represent a “best case” scenario. Based on the cost of the additional investment in
this technology, the study would have to show projected
savings of at least 10 percent in order to justify serious
consideration of such an investment.
After calculating a solid value of the projected labor
gains from the new technology, the management team
decided not to purchase the equipment unless the vendor
was able to significantly reduce the price or further
enhance the equipment to provide additional gains at the
same price. As it turns out, the vendor’s projected gains of
30 percent were actually closer to 20 percent, but new
pallet jacks would only affect 25 percent of the total labor
component of order picking, thus bringing down the
overall savings into the neighborhood of 5 percent.
Frequency 2 Data
locations after short travel
locations after short travel
cases after short travel
cases after short travel
locations after short travel
locations after short travel
locations after short travel
locations after short travel
Labor hours reduction
Current labor hours
NEW labor hours
impact
Labor Savings (Hours)
- 28. 68
580.00
551.32
