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Overtime Costs: Metrics to track

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  • #30201

    McFee
    Participant

    Has anyone had success in a Six Sigma Project focusing on overtime costs.  I am discussing with my team possible metrics for measure, with the goal of giving the managers a tool to control and plan costs.

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    #78418

    Ovidiu Contras
    Participant

    Derek ,
    No success with overtime projects at this point ,but I’m curious about how do you handle overtime as a project …what was people’s reaction ? I’d suspect nothing very enthusiastic ….
    Cheers

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    #78420

    McFee
    Participant

    Currently the projected is being scoped and discussions are with managers (exempts) that do not receive overtime.  Current measures are only showing total overtime costs, it is not broken down into categories (ie-call-in, holiday, sickness, etc.).  I would like to first begin to classify reason’s for overtime, take data from weekly time charts, to provide a more clear picture on if there is a problem, or opportunities to improve.  Any suggestions are appreciated.
     
    Derek 

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    #78427

    Mares
    Participant

    Derek,
    I was involved in an Overtime reduction project a couple of years ago. I am a BB, but my role was Process Owner in that opportunity.
    I cannot share the project, but if you take a look of it, what you could see is a very simple approach: Definition, SIPOC, Process Map, FMEA and elemental statistical tools.
    The root cause was that scheduling of activities was very poor, and most of the tasks were performed as required. But it was extremely hard to demonstrate that. The value of  Six Sigma methodology was to uncover those bad practices and behaviors with objective data. No other manager / supervisor had been able to demonstrate that by talking. The process was a laboratory, and a very important point is that operators were not the only responsible.
    Two key success factors were:
    – Project Team: It was formed by the BB, the Process Owner, the Plant Engineer, two lab technicians (recognized and respected by their fellows) and the Union Representative.
    – The BB: Basically she became a communicator – a person who was in charge of talk with each technician, explain the project and the business need with all the information available.
    The project lasts 9 months and was extremely succesful, with more than US$ 200K of hard benefits. Some scheduling and communication tools were put in practice, but in my opinion the key point was that the people understood the business impact of their behavior and also felt confident that no penalties were planned regarding the “past times”.
    Its my experience.
    Regards… Adrian

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    #78428

    Mares
    Participant

    Derek,
    I forgot the metrics:
    Monthly Overtime (Total Hours/month and Total Cost/month). Both controlled with a I-MR chart. Operators were in charge to put the data in and present to managers.
    Regards… Adrian
     

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    #78570

    shree nanguneri
    Member

    Hi,
    If one of the principles of six sigma was to show ROI (Return on investment) why would one run the OT under the six sigma banne?
     Either someone is getting the OT approved based on a financial need (very rarely the case) and so there is a justified need for additional resources or someone is not getting the justified using a value proposition model (usually the case OT gets assigned based on how much money is left in the coffers and looks to small to be questioned).
    Thus it doesn’t look like a six sigma project because the basic policy of OT approval has probably been violated (thus causing concern for the mgt) which is justifying the need for OT.
    Running a six sigma project on OT without finding the need for OT $ may be a risk.  Thus this may be a policy evaluation of OT approval and  policy compliance “Nike” type just do it project where the solution is probably known.  Your data will point to such findings I hope.  Good luck.
    Shree

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    #78580

    Kevin Alderson
    Participant

    As Shree commented, i would not have thought that this would fall under ‘six sigma’ project. It would be better using lean manufacturing techniques. I deploy a mixture, using six sigma tools and lean manufacture together to root out real causes. In cases like overtime, process flow analysis used with activity based costing would be ideal.
    Kevin. 

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    #78581

    Mares
    Participant

    Shree, Kevin,
    Thanks for your comments. In order to be more additive, overtime in a large industrial facility may be a big problem, although standards are not violated. In that case, line supervision may approve overtime because an excess of work. If you only apply the law the decision is right.
    The REAL problem is that the number of people you have to perform activities is OK, but the process is wrong. In my experience, it is extremely difficult to uncover the real causes because they are hidden below behaviors, bad practices and old paradigms. The value of a sistematic approach (avoid Six Sigma title) is to unleash the causes, deeply rooted in a culture. The line supervision, in that case, becomes part of the problem (they look at the tree… not the forest).
    Now… if the way to solve the problem is a Six Sigma or a Lean approach, it is a kind of philosophical discussion, in my personal (and modest) opinion. From a business point of view the problem must be fixed out.
    Best regards… Adrian

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    #78582

    shree nanguneri
    Member

    Hi Adrian,
    If the OT is still being approved without the ROI justification then it is a cultural issue and has a deeper root to be dealt with.  How about helping them to use the concept of ROI and then when the OT reaches a certain threshold the diminishing returns justify some kind of additional staff to be hired.
    I am not sure if you have considered this exercise.  Running this concept from a finance point of view may be easier than a six sigma program or lean project because people tend to get to boxed when we title it.  After all ae have 3 goals in mind if you agree:
    Transfer of knowledge, Change inBehavior and ROI or bottom line profitability.  If that is accomplished it doesn’t quite matter if it came from an ROI 101 or six sigma/lean project. 
    Just wanted to share this with you.
    Shree

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    #78583

    Mares
    Participant

    Shree,
    Great thoughts! Let me build up more on them…
    Three processes to move forward:

    Transfer of knowledge
    Behavior change
    Focus on ROI (as a mindset change)
    Each process has its goals and techniques, but they move towards excellence in all aspects, of course also in bottom line results.
    Hope this add a little value… Regards… Adrian

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    #78585

    shree nanguneri
    Member

    Thanks for your compliments Adrian.  Have a great day.  Should you need any other clarification, I can be reached at [email protected]
    Shree

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    #78709

    Thompson
    Member

    Adrian,
    How receptive was the union in your overtime project?  What concerns did the union have in regards to being a stakeholder in the process as some union members probably benefited from the overtime.  Was there a recognition / reward incentive that benefited the company and the union at the end of the project?
    Thanks,
    Thompson
     

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    #78776

    Mares
    Participant

    Thompson,
    The Union attitude was positive as it facilitated the process of eliminate barriers and establish new behaviors. BUT, for a better understanding of this behavior it is needed to know something about the previous process.
    The plant I am talking about is located in Argentina, a country were Unions are very powerful. Almost seven years ago, we started a process to increase productivity by the implementation of best practices, renew some facilities and empower people. Regarding the last point, a continuous process was iniciated towards a self management system by providing operators business information (with no restrictions), authority to take decisions and accountability for them.
    As people became more skillful and got more expertise about business matters, they could better understand the impact of salaries (also overtime) in manufacturing costs and Net Income. The Union had to fit itself to this new reality, improving the level of their discussion points.
    At present, operators have no supervision, no time control either. They take their own decisions also in overtime. In this particular case, the problem was complex because the root cause was not clear enough. The Union position was that users were demanding an excessive and non value extra work. They live with the problem until it become a real problem… then they wanted to become part of the solution.
    Regards…
    Adrian

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