Rediscovering The Classics, Volume VII: Labor Management

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Managing labor in dynamic supply chain environments forces businesses to "sense" demand shifts to better match resources to need. It also requires "sensibility" in properly training and incenting employees to be productive, and engaging third-party expertise when internal objectivity is lacking.

When companies are in periods of flux—experiencing growth or reduction in business, scaling resources to meet seasonality changes, or deeply engaged in a supply chain overhaul—it is often difficult to understand labor needs comparative to existing productivity. Whenever there is a need to reduce labor or consider outsourcing logistics functions to better allocate resources to demand and manage costs, there is resistance.

In an economic downturn, the challenge is infinitely greater. Businesses often tow a fine line between having just enough staff to do a job efficiently and more than enough people to adapt to supply chain changes without impacting service levels. They fight against relying on temporary labor and resist staffing up, but fear the lack of flexibility a bare-bones approach to labor management may create. Finding a balance between productivity and flexibility is a hurdle that invariably forces businesses to look outside the fold for help.

Whether in a warehouse or on the road, matching labor to need is a fundamental responsibility that requires constant communication throughout the supply chain, as well as visibility into forecasted demand.

It also requires a commitment to properly training and tasking employees so they are challenged and productive. People drive enterprise, so empowering employees to be decision-makers, and to make the right decisions, holds as much weight as finding the magic number to meet business expectations.

When Eastman Kodak Company began transforming to a digitally oriented imaging business several years ago, the Rochester, N.Y.-based company also initiated a radical supply chain transformation centered around a lean, demand-driven philosophy.

While Kodak has made significant progress implementing the new business model, it only recently applied it to other traditional functions, including transportation, at Eastman Business Park in Rochester, the manufacturing center for the traditional photographic business.

One year ago, the company partnered with Cardinal Logistics Management, a Concord, N.C., third-party logistics provider, to divest its transportation services division in an effort to reduce costs, gain efficiencies, and focus attention on production-oriented goals.

"We are focusing on our core business, looking to find expertise beyond our internal resources while saving cost and driving innovation," says Arline Liberti, manager, Kodak Rochester Facilities, on the decision to partner with Cardinal.

In so doing, Kodak needed to integrate its transportation units—its courier business, freight truck operation, and tractor/trailer division—to be more productive and efficient.

"When we came on board at Kodak, the company was over-trucked and over-manned," recalls David Wilkinson, Cardinal's northeast regional vice president of operations. Essentially, the company's lean directive had yet to catch up with the organization's transportation piece.

In accordance with its Kodak Operating System (KOS), a lean Six Sigma strategy similar to the Toyota Production System, the company was challenged with scaling transportation labor and resources as it had elsewhere within the enterprise.

"The idea behind the outsourcing arrangement is to keep things moving, transportation on demand, much like the Toyota Production System," says Wilkinson.

The KOS initiative similarly places emphasis on empowering employees to follow kaizen, or continuous improvement processes. This strategy, which necessitates a flexible, adaptive, and team-oriented approach, corresponded with Kodak's new direction for managing transportation, and its arrangement with Cardinal.

Before Cardinal entered the picture, Kodak's transportation units were completely siloed and managed independently of each other, resulting in a lot of driver down time. Operators were trained for specific equipment, so a person worked for the van division but did not have the appropriate licensing to drive a tractor.

"We integrated this transportation part, and cross-trained drivers," says Wilkinson.

Today, utilizing a staff of 65 employees, Cardinal makes more than 350,000 moves a year, transporting product within the Eastman Business Park and using significantly less resources than Kodak did on its own—all within tight delivery windows to support the JIT environment.

In fact, the Eastman Business Park has become a model of just-in-time synchronicity, with Cardinal serving as the conveyance for pulling and transporting product on demand among the campus' facilities, and between Kodak and its customers.

"Kodak's transition caused some inertia," says Wilkinson. "Sixty-five employees were doing what 120 had done previously. People were wondering what would happen when we take that flexibility away. Drivers in particular were concerned that we would double their workload."

Kodak had a similar understanding of the risk involved. "People are our most valuable asset," notes Liberti.

But the company's commitment to re-focusing attention on its product pedigree, rather than non-core service functions, invariably limited growth opportunities for drivers and management on the trucking side of the business.

"First, you have to understand your business need and recognize the value. Second, you have to establish expectations that a third party can perform and sustain," adds Liberti. "There is a risk, but if it operates like it should, it's a win-win situation for Cardinal and Kodak."

Folding its transportation business into Cardinal's operation, and finding a third-party partner that was committed to addressing its workers' needs, allowed Kodak to identify new job opportunities for its staff without entirely shutting down the operation. At the same time, it created a new culture that paired Kodak-seasoned drivers and management with the 3PL's energized approach for reorganizing the transportation department.

"The transportation divisions were so used to doing things the Kodak way that it was difficult to see beyond that. Drivers needed to be empowered to do other tasks and make the right decisions," Wilkinson says.

Cardinal performed an exhaustive recruitment process in outlining new plans for the transportation operation, seeking input from Kodak's drivers and management to identify areas for improvement.

"In an effort to drive total transparency, we shared our plans with the drivers and Kodak's transportation managers," says Wilkinson.

This collective mindshare has enabled Kodak to identify new ways to improve its transportation mechanics. Eastman Business Park is an entity in itself, and it's often difficult for such a large operation to see all its moving parts for what they are. The objectivity an outside partner can bring to streamline operations cannot be overlooked.

"Cardinal is constantly bringing new ideas to the table—optimizing our milk runs, for example—that we can act on," says Liberti. "There is a different motivation than if Kodak was coming up with these ideas itself."

Cardinal translated all this grassroots information into a better model for transportation efficiency. "When we see Kodak operating milk runs with 14 stops, we ask why? Does this run make sense? Are there overlaps?" explains Wilkinson.

Outsourcing the transportation component of Kodak's operations dovetails with its broader corporate effort to drive lean process improvements.

"KOS is a methodology for driving continuous improvement. Our employees are trained in this approach so they can identify better ways to eliminate waste," says Liberti.

This attention to process improvement and quality control is what motivated Kodak to find a service partner that could embrace its transportation operation, utilize existing driver assets, empower them, and drive out costs with a similar lean approach.

Continuous improvement demands constant evaluation and communication. Lean strategy may originate at the corporate level but it ultimately radiates out through an organization and its extended enterprise, touching logistics functions such as transportation and labor management.

"Complacency breeds inefficiency," says Wilkinson. "If you're not being challenged, your resources are not being utilized properly. You want to be productive; your drivers want to be empowered and doing different things every day. They need to feel like they are a part of the process."

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