Category Archives: Cost

nGroup Q & A: Break Out 2

Why do you think you can do it better than we can do it?
Outsourcing is not a zero sum game.  Many organizations fail to understand that the sum of the parts actually exceed the whole. 

By adding nGROUP, you are bringing additional resources to your operation to enhance your overall performance.  nGROUP has experience working with market leaders across the nation where we have had the privilege to develop, learn, and utilize world class best practices.  In addition nGROUP is dedicated to the improvement of our client’s operations.  All of our resources are utilized and trained to optimize our clients operation.  The nGROUP team is continually updated on the latest improvements from across our partner base.  We also invest in continued education for our team, develop and continue to invest in technology, tools, and solutions to improve our service offering.  By working together, we create synergies and benefits that were not possible previously.

Why outsource your operation?
nGROUP focuses on operational processes within your facilities to reduce cost, while improving productivity, quality, service levels, and reducing liabilities.  We allow your current management team to focus on strategic issues rather than the day to day burden of production and labor challenges.  Our world class team and processes along with our partners ultimate insight ensures you maintain control and receive the service and results you desire.

nGroup Q & A: Break Out 1

How can I be sure we will receive savings with nGROUP and the pricing is firm?
Our approach allows us to be aggressive with our pricing structure and helps build our partnership on a strong foundation.  To start, during our assessment process, the nGROUP team will work directly with the major shareholders within the facility to understand the cost structures within the operation and ensure we understand the process flow.  We also complete engineering analysis through time studies, work observation and historical data collection.  Our engineers and analysts compare our findings and confirm our conclusions with you.    Our benefits case will be developed using the verified results.  

How does nGROUP help in the areas of compliance, regulations, and legal?
nGROUP’s program mitigates co-employment issues for our partners.  Because we hire, manage, and discipline our employees, we keep you protected.  By maintaining the operation on your premises, you do not lose control of your data and information.  Your IT infrastructure is utilized and you can make certain data is always secure.  nGROUP maintains strict documentation and confidentiality policy as an addition safeguard.  In addition to these compliance items, our safety coordinators work with your team to enhance OSHA compliance and develop comprehensive safety programs.  The largest impact is the control over co-employment issues.  Because nGROUP hires, manages, disciplines, determine work tasks and hours, we are the legal employer, removing our clients from the ever rising tide of employee litigation.

The 2014 Economy

By David Hair

As executives and operations managers head into 4th quarter, they traditionally rely on economic indicators to predict sales, costs and decide whether or not to hire or layoff workers.  Things are a bit more complicated as we look ahead to 2014.

As reported by Jeff Stibel, CEO of Dun & Bradstreet Credibility Corp, “the only thing that can be said with certainty is that we are in a period of extreme uncertainty. Consumer confidence hit a 30-year low as consumer spending hit a record high for the year.   Wall Street is announcing record corporate profits while Main Street is suffering.”

With such uncertainty, how do you plan to respond to unpredictable shifts in consumer demand and the effect these shifts have on your workforce?

The 2014 Solution
An emerging labor solution pioneered by nGROUP performance partners, known as Third Party Human Logistics (3PHL) is a proven model that works seamlessly WITHIN production, distribution and warehouse facilities.

Like staffing agencies, nGROUP provides a flexible workforce.  The 3PHL model also provides engineering process and labor performance management, guarantees a reduction in labor costs, mitigates co-employment issues, and solves ObamaCare and other workforce compliance issues.

To determine if the 3PHL model is the flexible solution you need in today’s uncertain economy, complete this online diagnostic.  There is no charge, no obligation – just insight.

Baseball and Business

By Jim Zimmerman

If you are a baseball fan chances are you’ve seen the 2011 movie Moneyball, starring Brad Pitt.  The movie focuses on the rise of advanced statistical analysis in Major League Baseball and is based on the Oakland’s A’s 2002 season when they won 103 games.

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As a baseball fan and an operations officer, one line from the movie struck me.  “It’s about using stats to reread them [players].  We’ll find the value of players that nobody else can see. People are over looked for a variety of biased reasons and perceived flaws . . .  Mathematics cuts straight through that.”

The movie went on to show how the most minute statistics determine the best probability to win a game, a matchup, and an at bat.  Stats indicate how batters match up versus a specific pitcher, in a specific park, or in a very specific situation.

In business we can learn from baseball.  Too often companies let “meaningless” information slip through their fingertips.  As Carly Fiorina (former President of Hewlett-Packard Co) once said, “The goal is to transform data into information, and information into insight.”

Just like pitchers, fielders, and batters, a company’s workforce is positioned to succeed or not each day.  If aligned differently, could we better react to that influx of orders, or improve productivity, or reduce overtime, or hit a game winning grand slam?

If we don’t capture the data and evaluate the results against previous situations, we will never know or understand the cause and effect of big changes, much less the small tweaks and minor alignment variations. So how do we collect and apply the infinite volume of information we have around us? A system.

The system is a process that takes inputs and generates outputs, takes actions and ends with results.  As you change the actions, you get differing results.  Pinch-hitting a batter during a preferred scenario gives a team a higher probability of the desired outcome.  Changing our workforce configuration, placing various individuals in certain positions, or insinuating different behaviors can create entirely unique conclusions.

Play ball!

The Unique Conditions of 2013 Will Affect Your Company’s 2023 Prosperity

By David Hair

In 2012, an Aberdeen Group study1 surveyed 156 multi-national enterprises with 91 headquartered in the US and 65 headquartered internationally.  The purpose of the study was to identify best practices in labor management, warehouse, and store operations.  Below is a graph that summarizes the top pressures facing such companies.

It’s no surprise that the top pressures are the executive directives to decrease operating expenses and reduce staff, while also increasing service levels.

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Adding to this top pressure, U.S. corporations and individuals are facing 13 tax increases in 2013.  While the 2% increase in the Social Security tax has gained the most attention in recent months, there are additional taxes on business investment and the elimination of corporate tax deductions – most of which are associated with the passage of the Affordable Care Act.  Regardless of whether you personally or politically agree with such increases, the fact remains. When the cost of business increases, measures must be taken to off-set the rising costs.  The question becomes, what are you going to do about it?

To neutralize the tax impact, relook at innovative and proven labor strategies. As reported in the same Aberdeen Study, best-in-class companies have already universally incorporated strategic actions to increase labor efficiency and better manage workforce productivity. Such strategies include:

  1. Streamlining Processes and Systems
  2. Increasing Automation
  3. Bolstering Labor Productivity

No one wants to pay higher taxes or lose valuable investment deductions, but when you are faced with circumstances beyond your control, the logical rebuttal is to incorporate an aggressive approach to cost reduction while improving quality and reducing risk. While the economic landscape in the U.S. has become challenging to say the least, we at nGROUP know that our innovative performance model delivers immediate and long-lasting results.

It solves both the cost improvement and increased service level issues.  It closes the gap between your corporate initiatives and what actually happens on the production floor.  This new performance partnership model keeps production in your facility for local quality control, but without new investment in additional automation.  As a result, this model immediately reduces cost and risk, while increasing throughput.  Average savings on labor costs range from 10-40% within the first year. Perhaps the most significant benefit is it also provides a double-layer of protection from labor risk, as in this business model, the 3-party provides the labor.

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1 “Analyst Insight: Best Practices in Labor Management for Manufacturing, Warehouse and Store Operations: US and International Trends,” The Aberdeen Group,

Affordable Care Act: The Best Offense is a Timely Defense

By Ryan Cates

Corporations and small business owners are facing a great deal of uncertainty regarding the Affordable Care Act (ACA).  While many of the more significant requirements of the ACA go into effect in 2014, many executives and human resource directors are scrambling to adopt and implement policies that ensure labor compliance and maintain a profitable pathway.

So, what are the new laws set forth in the ACA?  What accountability and oversight regulations do we face?  And lastly, but perhaps most importantly, what can a company do NOW to prevent costly compliance and penalty issues down the road? As someone who consults with operational executives throughout the country, I set out to get answers.

I reached a few conclusions that provide a defensive strategy for companies concerned with the potential costs associated with the ACA and the growing number of regulations facing employers throughout the U.S.  Here’s what I found…

“Affordable” Health Care Defined
One of the most controversial regulations of the ACA is the mandate that companies with more than 50 full-time employees shall provide “qualified” health coverage for all their full-time employees, or pay an annual penalty of $2,000 per full-time employee.  If a company does provide such coverage but it’s not “affordable,” the penalty is $3,000 per employee.  Affordable is defined as less than 9.5% of the employee’s family income.  In a recent Forbes article, “Why Obamacare Incentivizes Part-Time Jobs,” Robert Book explores how the penalties associated with this mandate will reduce profit margins and drive higher prices.  To read his article in full, click here.

Government Oversight and Enforcement
So how is government going to oversee and enforce the regulations and penalties associated with the ACA?  That is a question that is open to interpretation and it will be nearly impossible to know.

However, President Obama’s own administration cites that the new tax rules and regulations will create Internal Revenue Service compliance burdens that will add nearly 80 million man-hours each year to individuals and businesses.  Critics point out that the IRS compliance burden is the tip of the iceberg.  With agencies such as Health and Human Services and the Department of Labor, the fear is that additional and duplicate oversight and regulations will continue to add unparallel compliance burdens on corporations, small businesses, and individuals.

A Moving Target
What can we expect in 2013?  To date, there are over 2000 proposed amendments to the ACA, accompanied by numerous advocacy groups lobbying for changes and exemptions.  Other groups and states are outright challenging the ACA in court.

To add to the notion that everything is far from settled, The Obama Administration recently announced a compromise to its requirement that employers cover contraception in their health insurance plans.  The updated policy, as described in the Wall Street Journal, basically spells out a way for employers with religious objections to avoid funding the mandate.  Instead insurance companies handling the policies would be responsible for informing employees and covering contraception with no out-of-pocket expenses.  The revised policy does not provide relief for non-religious affiliated companies whose principles object to contraception coverage.

Protecting Your Company
As is the case in sports and in business, the best offense often involves an aggressive and timely defensive move.  In the case of the ACA, it becomes a question of whether you can afford to “wait and see” before you take action.  And considering the cloak of uncertainty surrounding labor laws, what actions can you take at this point?

Shifting the risks associated with the ACA to an on-site outsourcing partner is a solution that is gaining momentum in labor intensive operations – especially those needing a flexible workforce to meet peak season demands.  Outsourcing a significant portion of your hourly workers has many benefits, including eliminating ACA penalty risks and the administrative burden of compliance.

Beyond considering outsourcing, every company should take the time to do some homework regarding the implications of the ACA.  Good resources include:

  1. The Society for Human Resource Management (SHRM)
  2. America’s Health Insurance Plans (AHIP)
  3. Your local or state Chambers of Commerce
  4. Government Websites: www.healthcare.gov and www.irs.gov/uac/affordable-care-act-tax-provisions.

In short, the ACA is hard to understand, lacks imperative regulatory details, and is likely to undergo radical changes before the majority of its regulations can go into effect in 2014.  The question becomes, are you going to take action NOW to avoid negative consequences down the road?

Ryan Cates is Vice President of National Sales and the SE Region. Ryan joined nGROUP in 2006 to facilitate the company’s growth in the Southeast. Since then he has grown from regional business development into a national sales role, with regional operational responsibilities.

Before & After : 3.5 Million Dollars

Provided By Diron Raines, nGroup Executive Vice President

The chart below indicates the actual results that nGROUP produced for a leading electronics manufacturer.  To read the details of these breakthrough results, click here.

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Diron Raines is an Executive Vice President with nGROUP perfromance partners.  Diron’s focused is implementing, maintaining, and growing nGROUP operational installations on the West coast and outlying markets.

Why “Pay for Performance” Incentive Programs Don’t Work

We’ve been thought that workers will be more motivated if a financial carrot is dangled.  The increase in productivity will fund the incentives and boost morale.  But most of the time, this doesn’t work.  The individual and corporate goals don’t match up and companies cannot measure true individual performance.

 “By working on the production floor with workers for decades we have come to better understand what motivates. Most workers are motivated by the opportunity to make more money and we all believe that incentive programs should work,” says Jim Zimmerman, nGroup COO. “Yet most are actually demotivating– and CFOs and Productions Managers often ask us, ‘why don’t they work’?” 

nGROUP performance partners has announced that they will release a new Labor Management Software solution in Q1 2013 that will revolutionize the employee and employer relationship within the manufacturing and distribution industry.  nGROUP created the new software because traditional workforce optimization and labor management systems did not provide the information needed to take workers and their companies to higher levels of performance.

From a decade of study, nGROUP performance partners found that workers increase productivity when they:

  • Receive specific training on how to do a task in the most effective manner possible
  • Know what is expected of them
  • Receive immediate recognition for meeting or exceeding standards
  • Have the opportunity to earn more based on their performance
  • Believe the performance tracking methods are objective and fair

According to Zimmerman, traditional labor management systems are built around the units of measure common to executive reports.  This is a disconnect for the workers on the job.  nGROUP found that using units of measure that workers relate to (such as their individual production data) improves their trust in the numbers and motivates them to achieve more.

Zimmerman adds that customizing the software to capture individual productivity is crucial in understanding if quality and production standards are being met or improved.  It also must identify the precise point in the production process where opportunity exists.  “Our business is to create the highest possible performance within an operation, and that means we must know what each individual is doing,” Zimmerman says. Unlike other systems, the new nGROUP software is built around the employee and measures efficiency by employee, by date range.  All paid time is accounted to a task.  When individual performance is tracked accurately the reports have meaning.

When nGROUP performance coaches give employees their results in the form of data reports, employees are motivated to improve and become open to coaching on technique and process.  With this data structure in place, incentive pay programs are highly effective and can quickly increase employee morale creating a positive, high-energy environment.

The results are hard to argue.   nGROUP consistently achieves 20 – 100% increases in productivity.  With their new web-based software, nGROUP is now able to seamlessly capture and report not only the big “P&L Picture” but also gain snapshots along the way of the individual efforts and procedures that make or break a company’s bottom line.

“Respecting how we as human beings work is the key to increasing productivity,” says Zimmerman.  “Now we finally have a sophisticated labor management software that understands the power of the individual.”

US Companies Breaking World Records

Breaking world records isn’t just for olympic athletes. U.S. executives want to look towards 2013 with hope of achieving reaching new levels of success in revenues, profits and customer loyalty.

With the current global economy, U.S. executives must continually evaluate their results against international standards.   Just as Olympians knew their goals of time, heights, and scores, companies need a reference point in order to reduce costs and improve productivity.  A recent Aberdeen Study* provides crucial benchmark data for manufacturing and distribution by looking at what internationally Best-in-Class companies are accomplishing when it comes to labor costs and quality improvements.

While the metrics below provide a glimpse of what it takes to become one of the “best” in the world, the column to the far right provides the record breaking results that U.S companies are achieving by implementing today’s best-in-class methods, such as an nGROUP’s performance partnership.  Take a look:

Key Metrics Defining Labor Excellence by Class

Type   of Metric

Best-in-Class

Average

Laggard

Achievement with nGROUP

Actual labor cost performance against plan or budget

2.4%
reduction

2.8%
increase

6.9%
increase

5%-50%
reduction*

Actual labor cost as a percent of revenue

4.1%

6.9%

9.1%

Improves to “Best-in-Class” for   specific industry

 

Record Breaking Case Studies
To be considered “Best-in-Class,” a company needs to reduce their labor cost annually by 2.4%.  Imagine the world records that can be broken in 2013 if companies reduce their labor cost by more than double the best-in-class average.

*Below are actual results of leading U.S. manufacturing and distribution companies utilizing the nGROUP performance strategy.

Business   Category

Actual   Results with nGROUP

International Fresh Fruit Processor

5%   Labor cost reduction -Area   1

50% Labor cost reduction -Area 2

Global Consumer Electronics Facility

30% Labor cost reduction year 1

Garment Processing Facility

21% Labor cost reduction year 1

Major 3PL Facility

14% Labor cost reduction year 1

 

CFO’s, Industrial Engineers and HR executives are often the most skeptical and the most surprised,” says Hair, nGROUP President and CEO.  “They have done all the right productivity studies, implemented labor management technologies and HR training and incentive programs, and think they are doing great until they see what they can achieve with nGROUP…

Partnership is the key to achieving breakthroughs.  Trust and shared goals allow us to achieve new levels of efficiency, performance and cost reduction for our clients.

To learn more about nGROUP’s record setting results, visit www.ngroup.biz .  For a brief 3-minute overview of how nGROUP achieves these results watch www.ngroup.biz/movie.

*To read the entire Aberdeen Study,  “Best Practices in Labor Management for Manufacturing, Warehouse and Store Operations:  US and International Trends” click here.

 

7 Benefits of Working With WPO

1. Greater Flexibility
WPO provides greater flexibility in meeting demand.  Companies are no longer paying for labor that is idle or underutilized when production demands wane.  It is the WPO provider’s responsibility to manage headcount both up and down.  Most managers are reluctant to reduce headcount when demand wanes.  Even when temporary labor is utilized, many managers will tend to keep more people than is needed.  A WPO has the capability to ramp headcount up and down much more effectively.

2. Fixed Labor Costs
A WPO typically bills at a transactional rate.  It could be by the piece, truck, pound, cubic meter or whatever makes sense.  This is a great budgeting tool and labor can be forecasted according to production schedules.  Many WPOs will work with the sales team to build a costing model they can use to price new business.  Most of the time the labor component is an unknown variable that makes it difficult to forecast margins.  The WPO will give you a fixed unit cost that helps you lock in your margins and better forecast profitability.

3. Decrease In Employeer Liability
The WPO provides another layer of protection against employer liability.  The 3PL provides the strongest protection from co-employment since the work is being completed at the 3PLs site and there is limited interaction between the 3PL’s employees and your management.  But there is more risk and less control when the work leaves your building as previously explained.

Temporary staffing provides the least protection and the client is often included in any litigation between a temporary employee and the staffing company.  Companies must also construct and abide by very stringent guidelines regarding staffers and fulltime employees.

The WPO model allows the client to maintain the work in their facility but restrict any interaction with WPO employees.  The WPO provides the floor supervision to direct the work and also the HR support positions for all employee issues.  This arrangement establishes a safety harbor.

4. Simplicity
There is no moving of inventory or equipment off site as with a 3PL.  Changes to work can be initiated instantly and any inventory or material variances can be adjusted at the site.  It is much simpler than managing  temps which requires ordering, training, and supervising, as well as managing their hours.  The invoice itself is an administrative nightmare whereas the WPO is just a couple of line items which can be easily validated.

5. Improved Quality
The outsourcing of any function generally results in higher quality.  If for no other reason, the business will be much more stringent toward the outsourcer to adhere to quality guidelines than they are towards themselves.  If the work is out of spec you have recourse from the WPO and there is no cost to you.  When the work is done internally and it falls out of spec, the business must assume the cost.  It may be tempting to pass it through rather than eat the cost.

6. Reduced Risk
 The use of a WPO is much less risky than outsourcing to a 3PL.  The WPO eliminates most of the risk of any work interruption inherent with the 3PL.  There are many nightmare stories whereas the 3PL either goes out of business or decides not to honor the contract.  No one wants to receive a phone call at 5 p.m. on a Friday, letting you know you can come get your assets including any equipment as well as inventory.  Simply changing 3PL providers is a major headache.  With a WPO the termination of services can be very seamless.  There is no transportation or moving issues and the workers will generally transition to the new WPO provider.  Service interruptions are kept to a minimum.

7. Additional Resources
WPOs bring experienced management and engineering resources to the table along with technology as part of their service.  These resources free up existing staff to focus on more strategic measures and provide valuable input.  The net result is operational improvements that often reach beyond the work cells where the WPO is present.