Steeply rising manpower costs has become the boardroom agenda in most firms including retail, employing large semi-skilled workforce – be it retail chains, food service stores or manufacturing setups. India has seen exponential growth in opportunities for semi-skilled manpower over the last decade with sharp rise in number of start-ups and small & medium scale industries. This increase in opportunities has also further complicated the staffing challenge due to high attrition creating nightmares for managers who are finding it extremely difficult not only to staff but also to hire and retain manpower.
With higher than optimal manpower staffing, hiring crunch and steeply rising minimum wages across India, “rising manpower cost is becoming the next big issue for retailers.”
Taking the case of retail, the Indian retail industry is expected to cross US $900 bn this year. Wages cost an average retailer 20 percent of total sales – which is expected to go up by 10 percent as wage increase year over year. Given this mounting cost, retailers have to find another US $18 billion every year to continue to stay profitable. Retailers have two choices – cut other operating & non-operating costs or pass on the cost through price increase – either of which will compromise the customer experience and negatively impact sales in the longer term.
If we analyze the pattern of manpower more carefully, we find often that there is large variation in demand based on seasonality – be it month of the year, day of the week or hours of the day.
For instance, in a grocery retail store most of the business happens during weekends and evening hours of weekdays.
Optimal manpower staffing in such variable demand scenarios becomes a major challenge and organizations often undertake staffing based on “peak demand “to avoid a “perceptible sales or output loss” thus holding excess manpower during lean hours.
Retailers with high variability in demand pattern and large workforce can manage manpower cost through a two-pronged strategy of optimising manpower deployment and ensuring supply of manpower that mirrors demand.
Optimising Manpower Deployment
Optimise Demand: Managers develop staffing basis the “forecasted manpower demand”, which is a function of amount of work per unit activity forecasted. Many organisations today have sub optimal staffing due to incorrect workload estimation as well as demand forecasting.
With the advancement in technology, digitisation and changed external context,the amount of work required per unit activity has undergone a sea-change. Many activities have become redundant while others take a fraction of what it used to, a decade earlier. Undertaking a comprehensive time-motion assessment can fundamentally correct this anomaly and remove sources of inefficiency. In addition, there are digital tools and algorithms which can also fundamentally improve forecast accuracy based taking into consideration multiple influencing factors (in many cases 10+) and historical data/ patterns.
Further retailers can tackle the problem of suboptimal staffing, using a scientific tool that allows to plan manpower for slots as small as half hour. The scientific tool breaks down demand into smaller time slots and ensures manpower is staffed as per requirement closely mirroring demand. Digital rosters are then created and leveraged for on-ground staffing.
Optimise Utilisation: Many retailers view utilisation only from the lens of sweating its resources viz. ‘quantum’. However, the quality lens mostly gets skipped ‘are we utilising the resources in the right way? There are two key factors that impact quality: automation levels and skillbased deployment. Retailers that adapt to latest automation techniques and digital solutions reap benefits of improved utilisation levels of manpower. Further, skill-based manpower deployment yields the maximum ROI and hence it is imperative to develop the skill matrix of each employee and map the employee to the right workstation.
Optimising Manpower Supply
Ensuring supply of right skill manpower at right time is the biggest challenge for any recruiter and the challenge becomes even more difficult in a variable demand scenario. Hiring plans should be developed to match the manpower demand suggested by the model. Ideal state for any recruiter would be to exactly mirror the supply of manpower with the demand and ensure there is minimum attrition in the system.
Mirroring Manpower Supply with Demand: Most retailers deploy manpower for peak demand. In multiple situations, ~30% of the time spent by such manpower goes into non-value adding activities. Using outputs of manpower deployment tool, managers can predict the exact amount of manpower required to mirror the demand pattern and hence weed out inefficiencies. Retailers should factor two nuances while preparing their recruitment strategy- constant demand should be met using fixed manpower resources whereas the seasonality related peak (day, week, month) should be met using part time/ flexi manpower. The last decade has seen a paradigm shift in the acceptance of part time jobs across the country. People from all walks of life are accepting part time job offers to make that extra buck. This has unlocked a vast ocean of opportunities for the firms in India that can deploy part time manpower. Such employees can be deployed during the peak hours of work thus adding the same value as that of a full timer but at almost half the cost.
Further, retailers can “variablise fixed manpower” by leveraging flexi shifts and technology. For instance, states which allow spread over of shifts beyond 8 hours with break in between, a portion of fixed manpower can be deployed in flexi-shifts across two peaks of the day.
Rapid disruptions in ecosystem with emergence of start-ups have also resulted in higher employee turnover rates. Internal factors can be (not limited to) due to culture, compensation, stress or growth opportunities. Companies should invest time and energy in capturing on ground feedback to improve the work culture External factors are mostly linked with employment opportunities with other players. Established organisations need to communicate a clear value proposition in terms of job stability, career path and enhancing skill set. It has been observed that firms who provide a clear picture of career growth have seen that employees stick with the organization for a much longer period.
On the Road to Perfection
“Continuous improvement is better than delayed perfection”- Mark Twain.
The path to becoming a leaner and fitter is full of challenges, but technological solutions have emerged that can make this journey possible in an economical and effective manner. A lean operating model focused on core functions along with flexible, technology-backed processes that balance control with efficiency and a capability development framework can drastically improve productivity. Forward thinking retailers have already upped the ante by deploying such technologies throughout their supply chain and are reaping benefits of a much lower manpower cost.