differences between the operation before
and after the new technology or equipment
has been implemented. There are various
methods of collecting the times required to
carry out each element, including stopwatch studies and predetermined time-and-motion studies. Companies can use
information from their existing engineered
labor standards to help them quantify the
current environment, as long as the current
standards are accurate and have been
updated within the last 18 to 24 months.
Those that do not have engineered standards in place can still follow this approach,
but it requires a bit more data gathering
beforehand.
It is important to understand how a new
technology will affect the structure of engineered standards or incentive programs
that are in place to manage the workforce.
A company that does not intend to adjust
its engineered labor standards or incentives
to reflect the impact of a new technology is
not likely to get a true picture of the expected savings, nor is it likely to achieve the
benefits it expects.
With baseline information about the
current state of operations in hand, the
buyer can then project how each element
would be affected after the new technology
has been implemented. Under ideal circumstances, a potential buyer would introduce the equipment or technology into a
facility, train individuals in how to employ
it, and then study how it performs and
what impact it has in the environment in
which it would actually be used. Testing
the equipment or technology at a facility
can reveal unforeseen pitfalls and shortcomings as well as provide fact-based
information for subsequent discussions
with the vendor.
Because many equipment and technology capital investments are large and
complex, it may not be possible to “test
drive” them at a working facility. In such
cases, simulation models can be valuable.
When using simulation models, however,
it is imperative to document all assumptions used, as they should form the
framework for any conclusions drawn
from the data.
After assessments of both the current-and future-state values of the affected
areas have been completed, the next step is
to calculate the differences, and
then apply them to the labor model
and affected processes in order to
determine the new equipment or
technology’s cost and productivity
implications. (See the sidebar for a
sample calculation.) Companies
that have a labor management system with simulation capabilities
can send actual work assignments
through the future-state model and
feel confident that they are accurately applying the frequencies of
their key labor drivers, such as
cases per location, cases per assignment, pallets per assignment, and
percentage of walk travel versus
ride travel. For those that do not
have this capability, it is essential to
look at as large a data sample as
possible in order to be confident
that the labor-driver assumptions
reflect the long-term operational
environment.
Once buyers have quantified the
impacts of the new technology or
equipment, it can be easy to “fall in
love with the number.” Since so
much effort has been put into cal-
culating an accurate savings projec-
tion, many executives want to
immediately plug that number into
a return on investment (ROI)
model and begin translating the
savings into dollars. But it is very
important to consider factors that
cannot be quantified in the model
just described. Examples of ques-
tions to be asked include:
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