How gilt implemented a successful labor management system ops summit 2013

How Gilt Implemented a

Successful Labor Management System

STEVE JOHNSON Principal

CHRISTOPHER HALKYARD Chief Supply Chain Officer

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AGENDA

• GILT – Who & Where?

• KEYS for a Successful Labor Management System

• Why Implement a Labor Management System

• Louisville Distribution Center (LDC):

Case Study Results

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• Born in 2007 - “Taking the New York invitation only sample sale to the internet superhighway”

• Invitation Only Shopping – Highly Coveted, Luxury Products & Experiences @ Insider Prices

• Advance Previews – Brands, Designers

• Pioneer of internet “Flash Sale” Concept - Most sales start at noon ET and last only 36 hours, making Gilt.com an exclusive shopping destination for luxury at up to 70% off.

• Apparel, Accessories (Women’s, Men’s, Children’s), Home Décor, Lifestyle items, Local Experiences & Luxury Travel packages

National Fulfillment & Distribution Center Louisville, KY New Distribution Center Opened 2010-11

Labor Management System implemented 2012

Bonus incentive system being implemented 2013

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KEYS to a Successful Labor Management System (LMS)

Determine whether & how an LMS will benefit your operation

Understand that change management is the first step

What is the best way to achieve associate & Mgt. buy-in early?

How do I select an LMS software system?

How should I communicate productivity feedback?

What results can I expect? What has Gilt achieved thus far?

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Why Implement a Labor Management System

Timely performance feedback and gratification for employees

Improved productivity & Reduced cost per unit

Higher associate compensation with the addition of Bonus Incentive Plan

Improved service level/throughput cycle time & accuracy/quality

Friendly competition among employees

Consistent Preferred Methods

Additional tools for budgeting and planning

Increased job satisfaction among employees

More knowledgeable management team

Improved communication and levels of trust

Reduced Turnover

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50%

63%72%

80%

91%

110%

0%

20%

40%

60%

80%

100%

120%

Ave

rag

e

Pe

rfo

rma

nce

Unmeasured Continuous

Improvement

Peer Comparison Benchmark

Standards

Engineered

Standards

REWARD$

Compensation

Method of Measurement / Recognition

LABOR MANAGEMENT

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-10%

10%

30%

50%

70%

90%

110%

130%

150%

Performance Before & After Improvement Shift

Performance Before Improvement Performance After Improvement


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SUCCEEDsm

Labor Management System - Gilt Groupe Louisville DC Year "0" Year 1 Year 2 Year 3 Year 4 Year 5

Johnson Stephens Consulting Fees ($290,000)

Johnson Stephens Consulting Est. Travel & Reimbursible Expenses ($159,000)

NextView Implementation Cost & Travel Expenses ($95,000)

NextView Annual Subscription Fee (min 250 users @ $3,250 per mo.) ($39,000) ($39,000) ($39,000) ($39,000) ($39,000)

SUCCEED Scoreboards ($90,000)

Annual Depreciation - Fees, Expenses, Hardware (5 years) ($126,800) ($126,800) ($126,800) ($126,800) ($126,800)

Projected Annual Payroll Savings $980,520 $1,180,326 $1,362,414 $1,433,131 $1,504,788

Annual JSC Standards Maintenance & Audit Fees ($30,000) ($30,000) ($30,000) ($30,000)

Annual JSC Standards Maintenance & Audit Travel Expenses ($9,000) ($9,000) ($9,000) ($9,000)

Net Annual Savings (Pre-Tax) $814,720 $975,526 $1,157,614 $1,228,331 $1,299,988Memo: Cumulative Net Program Savings $814,720 $1,790,246 $2,947,860 $4,176,192 $5,476,180

Tax (40%) X ($325,888) ($390,210) ($463,046) ($491,333) ($519,995)

After Tax Gain/Savings = $488,832 $585,316 $694,568 $736,999 $779,993

Depreciation Add-Back + $126,800 $126,800 $126,800 $126,800 $126,800

Net Annual Savings (After-Tax) = $615,632 $712,116 $821,368 $863,799 $906,793

Internal Rate of Return = 99.7%

Return on Investment (ROI) = 91.5%

Project Payback (months) = 13 Months

Key = Rapid ROI through Productivity Improvement

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Prepare Change Management Management Training Lean Distribution Standard Operating Procedures

SUCCEED sm LMS Stage 1

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KEY = CHANGE MANAGEMENT = Associate/Mgt. Buy-In

Item

Suggested

By Operation Area

Time

Frame

Target

Date

Implemented

Date

Point of

Contact Classification Lean Opportunity Description Comments

70 JSC Sell 1st Packing Intermediate Steve / Nate CapEx

Poor lighting over sell first packing stations

Must-Intermediate (Next time electrician is in

building issue will be addressed) Pending

Capex Approval

71 JSC Sell 1st Packing Short 06/01/12 Additional USPS processing machine at Sell 1st

station

USPS is going away Target June 1st UPS to take

over and more will be know in coming weeks

76 JSC Sell 1st Packing Intermediate Steve Eddy WMS Change

Look into new shipping software to provide

greater ability to ship multiple packages onto

a single tracking number reducing manual

entry time

Investigate changes on Quiet side follow up

2 JSC / Rick Returns Returns Intermediate Rick Spears Internal

Return stations need to be uniform and have

same supplies for each associate (Ex. Box

cutter Vs. Safety knife) and station layout /

setup need to be identical

Rick Spears point

7 JSC / Rick Returns Returns Intermediate John Kondor CapEx

Add conveyor to feed stations with return

items (Work) in a tote with paperwork instead

of having individual Gaylords at each work

station to help with overall work flow

Follow up with John

53 JSC Returns Returns Short Rick Spears Internal

Items are being processed incorrectly due to

missing RMA forms or labels might not be

attached to correct unit

Rick Spears point in process

Gilt Groupe Louisville DC Lean Opportunities

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KEY = CHANGE MANAGEMENT = Associate/Mgt. Buy-In This is more than engineering. Red denotes Change Management which requires

active Management participation

1. Determine Key Volume Indicators (KVIs)

2. Establish & utilize the preferred method – Lean Distribution

3. List the steps required to complete the KVIs

4. Gain approval of step descriptions

5. Observe and repeatedly time each step

6. Rate the productivity of each performance sample

7. Review the required sample size for each step

8. Determine the rate of occurrence of each step

9. Calculate time required for each step

10. Summarize the time value of each KVI

11. Apply the appropriate engineered allowances

12. Review result with managers and gain consensus

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Develop Metrics Engineered Standards


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Time Time

Steps (sec) (min)

5 Obtain Tote and Scan 4 .059 1 : 1 0.059

10 Remove and Verify Product 4 .071 1 : 1 0.071

15 Inspect VIP Order 6 .099 1 : 22.0 0.005

20 Stack Empty Tote 3 .055 1 : 1 0.055

25 Scan SO Label 4 .062 1 : 1 0.062

30 Select and Build Carton 14 .229 1 : 1 0.229

35 Apply SO Label 3 .049 1 : 1 0.049

40 Insert Promotional Mailer 6 .100 1 : 6.5 0.015

45 Add Tissue Paper 9 .152 1 : 3.1 0.049

50 Add Dunnage 7 .124 1 : 1.3 0.093

55 Place Units - Accessories 4 .074 1 : 3.77 0.020

60 Place Units - Flat Packs 3 .057 1 : 10.39 0.005

65 Place Units - GOH 6 .103 1 : 3.23 0.032

70 Place Units - Home 7 .124 1 : 6.17 0.020

75 Place Units - Shoes 6 .096 1 : 6.00 0.016

80 Insert Pack List 4 .073 1 : 1 0.073

85 Seal Carton 6 .097 1 : 1 0.097

90 Place Carton on Conveyor 3 .052 1 : 1 0.052

95 Place Tote on Monorail 2 .032 1 : 2.5 0.013

100 Process "Push" Tote 12 .194 1 : 10.9 0.018

Total Element Time 0.145 0.169 0.719

Personal Allowance 2.0% 0.020 0.020 0.020

Unavoidable Delay 2.0% 0.020 0.020 0.020

Fatigue 5.0% 0.050 0.050 0.050

Breaks 6.3% 0.063 0.063 0.063

Total Allowances 15.3% 1.153 1.153 1.153

TOTAL EARNED TIME 0.167 0.195 0.829

Packing - CartonsEngineered Standard

Rate ofTotes Units Cartons

Occurrence

Key = Discrete

Measurement = Engineered

Standards

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Feedback LMS Software Coaching Daily and/or Real Time Feedback


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KEY = LMS Software Selection: Criteria

Able to handle discrete, multi-variable engineered standards?

Automatic Data Collection (ADC) vs. Manual methods (logs)?

Minimized manual reporting has come to fruition – sometimes only non-standard time logs needed

RF, Light Directed, Voice Directed, Kiosks are sources of ADC

Real Time vs. Batch, Daily Feedback – What’s important to you?

Flexible reports to tailor to your operation

Software as a Service (SaaS) model vs. on-site hosted, server?

SaaS for LMS extremely viable & robust software systems available now

Interface to ERP/WMS: Does your WMS have an LMS and is it robust and do you like it? Operations & I. T. coordination is critical!

Easy interface to existing WMS, automated timekeeping systems, etc.

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KEY = Feedback– , Digital Scoreboards: Real Time vs.

Daily or both?

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KEY = Feedback – Daily Reports,

Gilt = Real Time Feedback

% Performance increase 15 % points in three month period

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Case Study:

Schedule

LMS Engineering & Development = March 2012 through Dec 2012

Live Reporting (1st area) = August 2012

Digital Scoreboards = October 2012

Bonus Incentives “pilot” = March-April 2013

Bonus Incentive Plan implementation = Summer 2013

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Successful Labor Management System Case Study:

Results – % Performance

Area Fall 2012 April 2013

Receiving 75% 92%

Putaway 68% 94%

Picking 84% 105%

Packing 73% 103%

Shipping/Manifest 88% 112%

Returns 69% 92%

Actual Savings on target with original proposal savings/ROI

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Additional likely items for implementation

1. Bonus Incentive Plan – Summer 2013

2. Implement reflective incentives for those work functions not measurable using individual or team standards

3. Managers & Supervisors Bonus Incentive Plan

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Questions?

Thank You!!

Business

How gilt implemented a successful labor management system ops summit 2013