ROFDA 2009 Spring - Effective Bench Marking Study Presentation
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Transcript of ROFDA 2009 Spring - Effective Bench Marking Study Presentation
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ROFDA Benchmarking Results - How do u rate?
Common factors that effect DC performance
Spring, 2009
Presented by
Keith Swiednicki
Senior Partner
KOM International
www.komintl.com
IQ-The Cognitive Reflection Test (CRT)
90 second test was developed by Shane Frederick, an assistant professor at MIT to predict whether a person would be good at managing money.
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90 Second Quiz to Managing Money
(1) A bat and a ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much does the ball cost? _____ cents
(2) If it takes 5 machines 5 minutes to make 5 widgets, how long would it take 100 machines to make 100 widgets? _____ minutes
(3) In a lake, there is a patch of lily pads. Every day, the patch doubles in size.If it takes 48 days for the patch to cover the entire lake, how long would it take for the patch to cover half of the lake? _____ days
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Answers Correct Answers
(1) 5 cents (2) 5 Minutes (3) 47 Days
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So – How do you do managing risk and money?
Cognitive Results
The CRT was administered to 3,428 respondents in 35 separate studies over a 26-month period. Respondents' ages range from 15-63 with the mean age of 24.
Overall mean CRT score = 1.24 Low (0 correct) = 33% (1 correct) = 28% (2 correct) = 23% High (3 correct) = 17%
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Agenda Objective - ROFDA Ops Committee Summary of DC Productivity Survey Results– List of Participants– Profile of Participants– ROFDA Comparisons – ‘08 vs’09– Best of Breed Results (Top 3 Wholesalers) The Productivity “Drivers” Opportunities to Lower Operating Costs Bottom Line Potential DoMoreWithLess Case Study – Automating Slow Movers Questions?
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Objective
Measure and report productivity facts.
Provide accurate benchmarks for participating ROFDA members to use when analyzing company DC operations.
Offer suggestions of how to improve operations through development of best practices.
Offer explanations for opportunities and issues challenging the industry and members.
Provide executive management with a summary of the most important points.
Identify and quantify the key costs of operating a food DC.
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List of Participants – 11 Companies
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1. Affiliated Foods Inc.
2. Associated Grocers of the South
3. Associated Grocers Inc.
4. Associated Wholesalers Inc.
5. Associated Food Stores
6. Associated Grocers of New England
7. Associated Grocers of Maine
8. White Rose Foods
9. Olean Wholesale Grocers
10. Merchants Distributors Inc.
11. URM Stores
“10 ROFDA Members included in this report”
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Participant Profile
Characteristics Yes No
Union 73% 27%
Engineered Standards 0% 100%
Incentives 45% 55%
Computer Directed Putaway w/wo RF 91% 9%
Voice Technology 82% 18%
Characteristics Discreet Zone
Order Relationship 55% 45%
Characteristics Z Pick Street Add.
Selection Method 82% 18%
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Participant Profile
Characteristic Average
Average Fill Rate 97%
Average Warehouse Scratches 2%
Average Labor issues 19%
Average Volume with Lumping services 74%
Average Typical Order Turnaround Time: 1.1
No Touch ReceivingYes No
9% 91%
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Departmental Comparison
Participant Profile Cont’d
Department Averages 2008 2009
Dry
Cases Shipped 319,323 332,453Total Throughput 44 49Selection (Cases/Hour) 135 138Order Size 165 201Item Variety 9,305 9,971
Freezer
Cases Shipped 104,787 122,031Total Throughput 50 59Selection (Cases/Hour) 130 140Order Size 73 92Item Variety 3,535 2,550
Perishables
Cases Shipped 199,370 242,677Total Throughput 56 60Selection (Cases/Hour) 141 150Order Size 145 92Item Variety 3,521 3,244
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ROFDA Dry ComparisonDry Grocery Cases/Man-Hour
Function2008 ROFDA Average 2009 ROFDA Average
Top 3 Average (Total Throughput)
Volume Volume Volume
Receiving 389,206 366,513 549,407Shipping 375,491 332,453 497,641
Total 764,696 698,966 1,047,048
Direct Labour Paid Hours Cases / Hour Paid Hours Cases / Hour Paid Hours Cases / Hour
Receiving 689 565 628 583 976 563Moving Stock 1,367 559 1,078 648 1,377 761Selection 2,893 130 2,403 138 3,081 162Loading 1,146 328 656 506 861 578Shipping 4,039 93 3,059 109 3,942 126Other 17 22,473 N/A N/A
Subtotal Direct 6,112 61 4,766 70 6,295 79
Indirect Labour Paid Hours Cases / Hour Paid Hours Cases / Hour Paid Hours Cases / Hour
Managers 510 1,499 406 819 408 1,219Clerks 289 2,648 229 1,450 320 1,555Inbound Checking 358 2,137 256 1,297 178 2,794Inventory Control 311 2,462 177 1,877 191 2,606Outbound Checking 115 6,642 49 6,812 47 10,687Housekeeping 1,026 746 439 757 432 1,152Maintenance 187 4,099 219 1,519 206 2,413Other 203 3,759 281 1,185 563 883
Subtotal Indirect 2,998 125 2,056 162 2,345 212GRAND TOTAL 9,110 41 6,822 49 8,640 58
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ROFDA Freezer Comparison
Freezer Cases/Man-Hour
Function2008 ROFDA Average 2009 ROFDA Average
Top 3 Average (Total Throughput)
Volume Volume Volume
Receiving 129,458 178,129
Shipping 122,031 176,935
Total 251,489 355,064
Direct Labour Paid Hours Cases / Hour Paid Hours Cases / Hour Paid Hours Cases / Hour
Receiving 142 910 220 809 Moving Stock 345 728 360 986 Selection 875 140 1,009 175 Loading 150 813 217 817 Shipping 1,025 119 1,225 144 Other
Subtotal Direct 1,512 81 1,806 98
Indirect Labour Paid Hours Cases / Hour Paid Hours Cases / Hour Paid Hours Cases / Hour
Managers 125 975 116 1,530 Clerks 87 1,409 91 1,936 Inbound Checking 44 2,801 62 2,848 Inventory Control 57 2,156 82 2,154 Outbound Checking 24 5,001 38 4,674 Housekeeping 99 1,230 122 1,453 Maintenance 81 1,511 74 2,401 Other 31 3,929 80 2,212
Subtotal Indirect 547 223 665 266 GRAND TOTAL 2,060 59 2,470 72
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ROFDA Perishables Comparison
Perishables Cases/Man-Hour
Function2008 ROFDA Average 2009 ROFDA Average
Top 3 Average (Total Throughput)
Volume Volume Volume
Receiving 237,814 184,131
Shipping 242,677 186,963
Total 480,491 371,094
Direct Labour Paid Hours Cases / Hour Paid Hours Cases / Hour Paid Hours Cases / Hour
Receiving 407 584 269 684 Moving Stock 603 796 387 958 Selection 1,623 150 885 211 Loading 242 1,005 88 2,124 Shipping 1,864 130 973 192 Other
Subtotal Direct 2,875 84 1,629 115
Indirect Labour Paid Hours Cases / Hour Paid Hours Cases / Hour Paid Hours Cases / Hour
Managers 223 1,089 185 1,011 Clerks 138 1,756 89 2,091 Inbound Checking 116 2,086 50 3,705 Inventory Control 120 2,018 99 1,893 Outbound Checking 35 7,032 10 18,696 Housekeeping 236 1,026 202 925 Maintenance 115 2,105 49 3,828 Other 112 2,174 0 -
Subtotal Indirect 1,095 222 685 273 GRAND TOTAL 3,970 61 2,314 81
Warehouse Labor – ROFDA Members
Warehouse Labor Expense Pie Chart
Indirect Labor, 11.1%
Receiving, 2.9%
Putaway, 8.3%
Stocking, 14.6%
Picking, 42.1%
Replenishment, 10.7%
Packing/Checking, 6.2%
Loading, 3.9%
Order picking is costly and accounts for 40-60% of warehouse labor expense
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ROFDA Results
Total Direct Paid Hours – represents 70% of labor expense
“Focus on Selection travel and walk time”
Average
Order picking is costly and accounts for large % of warehouse labor expense
Design Considerations: Travel
Pick Line Length vs. Variety
Mom and Apple Pie
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ROFDA Results
Total Indirect Paid Hours - represents 30% of total
“ A Clean Warehouse is a Productive Warehouse”
Average
Top 3 spend more time on Inventory control & clerical and less time on maintenance and inbound checking than the ROFDA average
Question For You Opportunity
Our facility appears dirty, we have allot of product damage, housecleaning is not our strong card.
Clean facilities
have higher morale and
better productivity
Our facility is reasonably clean but it is by no means spotless.
We are proud to take people on tours of our facility because it is immaculate. Our associates take pride in the cleanliness of the building.
The Basics – Facility cleanliness
September 24, 2004
“A clean facility is a productive
facility.”“A dirty facility is one of the most telling signs of
weak operations management.”
Facility Cleanliness
Question Opportunity
Our associates pick products that are heavier than 30 lbs from locations above ground-level.
Good ergonomics will reduce
worker injuries in the back,
neck, shoulder,
elbow, wrists, knees and
ankles
Our heaviest products > 30 lbs are always positioned at ground-level.
We have ergonomic pick locations to facilitate the way in which associates lift heavy products.
The Basics - Ergonomics
The Basics – Facility Lighting
“The dock is where the success or failure of distribution operations will be
determined”“Proper lighting technology will reduce energy
costs, and improve labor productivity,
accuracy and morale. ”
September 24, 2004
Ergonomics
“Reduce worker picking injuries by keeping heavy products at ground-level, or by
bringing the picker to the product.”
Productivity Drivers – effect on performance
Top Common Factors:
1. Volume2. Order size 3. Pick Line length 4. Hit Rate/Density
Opportunities to lower costs:
Engineered Standards Incentives Computer Directed Putaway Voice Technology Order Turnaround Order Relationship Selection Method Selection Accuracy Fill Rate Scratches Labor Turnover Lumping % No Touch Receiving
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What is the Impact of Average Movement Weekly Cases Shipped
“Direct Correlation between Volume and Productivity”
50% of variation in logistics cost can be explained by volume alone
Volume >320,000 Volume <320,000
Cases Shipped/Week 573,901 131,247
Selection (Cases/Hour) 145 119
Direct Labor Throughput Rate 71 65
“The Drivers”
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What is the Impact of Order Size
Order Size >244 Order Size <244
Cases Shipped/Week 483,637 206,467
Selection (Cases/Hour) 133 150
Direct Labor Throughput Rate 67 76
Indirect Throughput Rate 146 206
Total DC Throughput - Cases/Man Hour 46 55
“ Order Size impacts selection rate”
“The Drivers”
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What is the Impact of Item Variety Unique Sku’s Stored in Facility
Sku’s >10,000 Sku’s<10,000
Cases Shipped/Week 446,811 195,224
Selection (Cases/Hour) 141 131
Direct Labor Throughput Rate 72 64
Indirect Throughput Rate 158 172
Total DC Throughput - Cases/Man Hour 50 47
“ More Variety less efficient”
“The Drivers”
Aside from the basics - facility cleanliness, lighting, ergonomics and safety
1) Measuring and improving labor productivity – standards and incentives
2) Warehouse Software and Equipment Technologies
3) Improving picking operations and strategic handling of small orders
4) Measuring product velocity and cube information
5) Layout development and fast / slow concepts
6) Optimized pick location management / slotting
7) Budgeting and accounting of distribution operations with ABC Costing
Opportunities to Lower Operating Costs
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What is the Impact of Standards & Incentive Programs
Incentives No Incentives
Cases Shipped/Week 458,350 181,377
Selection (Cases/Hour) 137 144
Direct Labor Throughput Rate 71 66
Indirect Throughput Rate 161 164
Total DC Throughput - Cases/Man Hour 49 47
Errors 2/1000 4/1000
“ Incentives providing benefits?”
All participants have Standards
“The Drivers”
(1)Operators with incentives are more productive than those W/O
Question Opportunity
We do not measure labor productivity in our warehouse.
For distribution operations with high
wage labor expense or
militant unions,
standards and
incentives can reduce 5-15% labor
expense
We measure labor hours by function mainly for labor planning and budgeting purposes.
We have engineered labor standards in place for some of our job functions. We regularly inform associates of their productivity performance.
We have labor incentives developed against standards
Standards & Incentives
Standards and Incentives
One of the most significant productivity gains in a high volume distribution operation will be derived by:– Implementing and maintaining labor
standards• E.g. Red Prairie, Tom Zosel, In-House
– Implementing an incentive system
Incentive Systems Things we have learned:
– Paying for employee meals is a form of incentive that works well to reduce turnover
– Pay out incentives frequently (e.g. with pay checks)
– Base incentives on individual performance except for receiving, returns, salvage…
– Incentives should include penalties for errors, shorts and unsafe behavior (e.g. lose incentive if errors are encountered)
– Incentives should be based on industrial engineered labor standards, preferably by zone or aisle
– Incentives only paid if no absenteeism for the period
– Incentives should allow an operator to increase wages by a measurable amount (e.g. 20% or more)
Slotting Methodology
Question Opportunity
Our picking is random from all vertical levels of storage.
Optimized setup of a pick line will
often reduce order picking
hours upwards of 15%
Our primary fixed pick locations are not always at ground-level but we try to keep slow movers in locations that are not accessed from ground level
Our pick locations are all at ground level.
Our pick locations are assigned to products by slotting software to maximize picking efficiency.
Location Numbering Systems
X-Pick U-Pick Z-Pick
A = FASTEST ITEMS
B = FAST ITEMS
C = SLOW ITEMS
D = SLOWEST ITEMS
FREQUENT STOP POINT(FAST MOVERS)
A = FASTEST ITEMS
B = FAST ITEMS
C = SLOW ITEMS
D = SLOWEST ITEMS
FREQUENT STOP POINT(FAST MOVERS)
A = FASTEST ITEMS
H = SLOWEST ITEMS
FREQUENT STOP POINT(FAST MOVERS)
A = FASTEST ITEMS
H = SLOWEST ITEMS
FREQUENT STOP POINT(FAST MOVERS)
A = FASTEST ITEMS
B = FAST ITEMS
C = SLOW ITEMS
D = SLOWEST ITEMS
FREQUENT STOP POINT(FAST MOVERS)
A = FASTEST ITEMS
B = FAST ITEMS
C = SLOW ITEMS
D = SLOWEST ITEMS
FREQUENT STOP POINT(FAST MOVERS)
Location address systems should be intuitivee.g. AA-RR-LP (aisle-rack-level-position)
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Bottom Line: Total Labor Savings
Cases Shipped Hours Staff* @ $35k
100,000 439 13 $ 455,000
250,000 1,098 31 $ 1,085,000
500,000 2,195 63 $2,205,000
Potential Savings realized by Wholesale Best of Breed• Total throughput savings of 9 cases/man-hour compared to ROFDA
* at a rate of 35 hours per week
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Results – Payback 1yr
Alternative Total Capital One-Time Costs On-Going Savings Lifetime (years)
A $ (717,200) $ (321,310) $ 1,080,456 1.5 to 2.0
B $ (143,000) $ (172,810) $ 1,029,202 1.0
C $ (126,500) $ (167,310) $ 680,955 .8 to 1.0
Improved Productivity Projections
Cost/Savings Comparison
Labor Rate by Function (Cases per Paid Hour)
Benchmark(Kom Klinic)
Alternative A
Alternative B
Alternative C
Kom Klinic Average
Top 3 Kom Klinic
Moving Stock 653 847 791 741 1,019 1,127
Selection 144 179 182 169 190 257
Loading 482 482 482 482 1,020 1,208
Other N/A N/A N/A N/A 770 2,933
Total Direct Labor Rate 76 89 89 85 95 135
Total Indirect Labor Rate 287 287 287 287 227 297
Total Throughput 60 68 68 65 67 93
DoMoreWithLess
Milk your WMS for More
- can your WMS do more to reduce labor costs, improve inventory management, attain more accurate shipments, and improve space allocation?
- what else can your system do?
- have you looked into add-on capabilities?
Use challenging economic times as an opportunity to scrutinize operational efficiency to help weather the storm and reap benefits when the market turns
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DoMoreWithLess Attack Freight Costs
- use analytical tools to identify how, why, when and where your costs are incurred. Manage freight more efficiently and gain net savings of 3-20%
Make use of Best Practices to Plan, Procure and Manage Freight
- scrutinize processes in planning, procurement and shipping revise or eliminate all those not ideal, innovative or well integrated with other functions
Cash in on ergonomics
- do you have lift trucks or racks with ergonomic features? … are you running regular programs to promote ergonomics and safety? … inform your insurance provider … you could see your premiums drop
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DoMoreWithLess Stop Doing Things
- get end-to-end visibility on your operation and stop shipping, handling or warehousing anything unnecessarily… doing things 2x, 3x, 4x is costly
To-Automate-or-not-to …
- smaller footprint, productivity gains, reduced labor requirement, 18 month to 3 year ROI… may be worth having in place for when the recovery hits
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C-Dock/RLP/FT to Cut handling and Inventory Carrying Costs
- select items to most easily bypass the storage racks and thereby increase efficiency
Question Opportunity
Our financial accounting of logistics expenses is weak. It is difficult to understand our cost structure and how the money is being spent.
Strong accounting, budgeting and ABC
costing are simple and inexpensive and ways to understand
costs
Our financial Accounting and Budgets are strong.
We use ABC Costing to understand the cost of transactions and logistics events.
Accounting/ABC Costing
September 24, 2004
ABC Costing Warehouse Productivity Scorecard
Direct Labor Function
MeasurementCriteria
Average Wage Rate
Including
Fringe Benefits
AverageThroughp
ut Rate/hour
Total Transactions/week
Total Paid
Hours/week
Total Labor
Cost/week
Cost per Transaction
Receiving Pallets Received
$17.37 28.0 5,816 208 $3,607 $0.62
Putaway Pallets Putaway
$22.44 12.7 5,816 458 $10,276 $1.767
Stocking/Stuffing
Cases Cut & Stocked
$22.32 125.9 102,375 813 $18,135 $0.177
Split Case Picking
Pieces Picked $13.97 586.0 1,857,496 3,170 $44,297 $0.0238
Full Case Picking
Cases Picked $14.73 107.0 56,433 527 $7,768 $0.138
Replenishment
Pallets Replenished
$17.93 9.3 6,904 742 $13,310 $1.93
Packing/Checking
Cases Packed & Checked
$14.97 107.7 55,520 516 $7,717 $0.139
Loading Pallets Loaded
$20.86 13.5 3,161 234 $4,884 $1545
Indirect Labor Pieces Shipped
$13.81 138.5 1,913,929 1,001 $13,820 $0.019
Total Pieces Shipped
$16.15 249.6 1,913,929 7,669 $123,814 $0.167
ABC Labor Costing by Process
Cost / Sales Order Line
FunctionCarousel4 pods
Carousel2 pods
Case Flow Rack
Pick to light
Split CaseConventiona
lFull Case
Conventional
DIRECT LABOR
Receiving $0.0051 $0.0051 $0.0051 $0.0051 $0.0051
Putaway $0.0158 $0.0158 $0.0158 $0.0158 $0.0158
Replenishment - Full Case $0.0203 $0.0203
Replenishment – PTL / Carousel $0.0506 $0.0506 $0.0506
Replenishment
Selection – Carousel 4 pods $0.0382
Selection – Carousel 2 pods $0.1291
Selection - Pick to Light $0.0714
Selection – Split Case Conventional $0.3272
Selection – Full Case Conventional $0.2276
Loading $0.2776 $0.2776 $0.2776 $0.2776 $0.2776
Subtotal Direct Labor $0.3822 $0.4732 $0.4155 $0.6409 $0.5413
Ambient Activity Profile
SKUs % cases % Cube % lines
Conventional
Floor 4300 93 95 90VNA 6457 7 5 10
Mechanized
Floor 2457 79 88 73 Active: 1283/52% Mini-Load 8300 21 12 27 Active: 3635/44%
Dynamic Pick Line: Slot only for one shift
ASRS: Dynamic Pick Line
Unit Load/Mini-Load drop required pallets to tunnel
drop required trays to pick face
based on shift or batch orders
restock above: based on history
maintain weight/stackability
Considerations set-up lead time
load stability
available slots and location
Dynamic Slotting: Benefits Picking
– Reduced labor, eliminating merge and travel time Replenishment
– Reduced labor requirements– Dynamic replenishment dependant upon daily SKU requirements– Increased accuracy– Reduce inventory
SKU Density– Higher than conventional racking solutions
Flexibility– Order driven system– Dynamic slots
• Recycle slot after pick• Can assign multiple slots to SKU
Modularity– Easily expandable
Mini-Load Module
Slow Movers: 77% SKUs, 21% Cases, 12% Cube, 27% Lines12’ aisle, pallet jack merge
Order picker truck backup; 35’ high
Mini-Load Input
“Decanting”Pay me now or pay me later
Ergonomic Decanting
Mezzanined StationPallet Lift to Slider Table
Mini-Load: Pick Path
Mezzanined infeed optional
Mini Load Pick Profile
Multiple Tray SizesSystem Controlled Slotting
Cost Comparison
Conventional ASRSBuilding $61,000,000 $46,000,000
ASRS unit load na $27,000,000 mini-load na $8,000,000
Other MH $8,000,000 $4,000,000
Capital $69,300,000 $85,000,000 Labor $12,000,000 $9,500,000
Payback: 8.5 yearsNot Exactly a Slam-Dunk….but
Option 2.5: Embedded Mini Load
Integrate modules within conventional layout
4 in Ambient, 3 in Frozen respect weight range/crushability group national /program accounts
$8mm investment enhanced ergonomics facilitates variety increase streamlined receiving picker merges all product reduced pick errors reduced dock delays reduced truck driver sort order-picker backup experience with automation best of both worlds can retro-fit other facilities
Other? Just Ask DICK
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Supply Chain LabourTransportation
Vechicles
20%
Fuel
24%
Operating
17%
Labour
39%
Stores/Manufacturing
Other
25%
Labour
75%
Warehouse
Rent
25%
Utilities
5%
Computer
2%
Supplies
13%
Labour
55%
Returns
Other
35%
Labour
65%
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What is the Impact of Union versus Non-Union
Union Non Union
Cases Shipped/Week 246,206 562,445
Selection (Cases/Hour) 125 158
Direct Labor Throughput Rate 63 80
Indirect Throughput Rate 141 195
Total DC Throughput - Cases/Man Hour 44 57
“ Non – Union operators are more productive”
“The Drivers”