The Hidden Cost of Overtime and Shift Scheduling for Manufacturers

Challenges with managing schedules by pen and paper in plants should present an ideal opportunity for putting in place automated systems that shoulder overtime work, shift swapping, and resource management.

According to the U.S. Bureau of Labor Statistics, the average overtime hours worked by manufacturing employees in December 2018 was 3.6 hours per week. Surveys of shiftwork and overtime practices at companies maintaining around-the-clock operations show some employees average up to 500 hours of overtime a year. Along with employees’ requests for overtime, supervisors must distribute (and account for) overtime equitably.

Companies usually distribute overtime based on work practices, seniority, or union contracts. Often, administering the equitable distribution of overtime comes down to a department supervisor recording each employee’s overtime hours on a pad of paper or computer spreadsheet. Many plants have contractual obligations to print out and post schedules in a breakroom or service shop.

Challenges with managing schedules by pen and paper in plants should present an ideal opportunity for putting in place automated systems that shoulder overtime work, shift swapping, and resource management. Despite this, Coleman Consulting Group Managing Partner Frank Pereira, who says his firm has surveyed more than 350,000 employees worldwide, estimates only about 50 percent of manufacturers have scheduling software. Pereira’s firm helps manufacturers analyze their scheduling and overtime practices, and he notes that there are as many ways to keep track of overtime and schedules as there are companies.

According to Capterra, an online platform for finding business software, there are more than 100 makers of shift-swapping software on the market. Software makers report they’re often surprised to see how plant managers tactically view scheduling, even though the way plants manage employee schedules can affect worker retention and satisfaction. Software company executives report that they often find major manufacturers still using computer spreadsheets or even paper and pencil to build schedules and keep track of shift swapping and overtime.

“Automating scheduling is scary for a lot of manufacturers because it’s hard to put a value on it like you could with an ERP implementation that will save 10 percent in shipping costs,” added Pereira, “And, more importantly, employees build their lives around their work schedules, so the risk of something going wrong in implementation far outweighs the benefits of an automated schedule.

“Managers know that messing up the schedule can lead to massive headaches including increased turnover, low morale, poor performance, higher costs, and, if you’re unionized, even a strike,” adds Pereira.

Moving from a manual to an automated system for shift-swapping, scheduling and overtime would, according to an email from United Steelworkers Communications Director Wayne Ranick, “almost certainly be a mandatory subject of bargaining and subject to negotiations.”

While less than 10 percent of U.S. manufacturing employees are part of a union, plant managers note that many employees in non-union plants see their schedule, including overtime, as absolute.

Approaches to Automated Scheduling

Some technology-proficient plant schedulers will build their own IT programs for automating employee requests and tracking demands. Schedulers know their plant’s overtime rules and shift challenges. So a custom-built system can work.

That said, homegrown systems rarely translate well for another plant because scheduling and overtime—and even the language around scheduling—is often unique from plant to plant. For example, while the word layoff at one type of facility would be cause for panic, a worker somewhere else might use the layoff as the equivalent of a rest day (as in, I’m taking a layoff for this Friday’s shift). Managing those nuances and complexity, say consultants, is why it’s been historically so difficult to find and implement a single software solution across multiple plants and manufacturers.

“I think a lot of the challenges with automating shift scheduling revolve around the fact that customers are trying to reconcile two things,” says Peter Draper, director of customer success for Shiftboard, a maker of online scheduling, recruitment, and time-management tools. “First, scheduling at its heart is a science, and there’s a requirement for centralized control and compliance. Second, the workers themselves need flexibility.”

According to Draper, some companies aren’t able to reconcile control and flexibility to adequately address work rules, business needs, and health and safety issues. Most manufacturers have workforce management (WFM) systems and human capital management (HCM) systems in place. Some of these systems have a scheduling capability, so they offer an option for manufacturers. Software scheduling experts say it’s important, though, to ensure your system has the capability to allow workers to opt in for shifts, express preferences or accept an open shift in real-time. 

Midwest Plant Hopes Automation Reduces Grievances, Provides Situational Awareness

A Midwest manufacturing facility recently began implementing scheduling software after calculating it would recoup nearly $5 million over three years by automating how the plant organized shifts, assigned overtime and made callouts to fill shift complements. The plant manager acknowledges that errors from calling out workers via the facility’s manual scheduling system have caused approximately $84,000 in annual payouts for callout-related grievances. The company also spent another $1.5 million annually in salaries for workers researching and resolving these grievances. After analyzing the work that the plant does to maintain its manual scheduling process and resolve grievances, managers calculated they were spending 19,741 man-hours and 9.49 FTEs annually.

“Eliminating grievances with automated shift scheduling software usually means that you automate union or company callout rules specific for each department in a plant,” says Bill Brackett, vice president of services and support for ARCOS, a provider of resource management solutions for critical infrastructure facilities. “You can eliminate time wasted on research by having automated reporting and call data.”

According to Brackett, the value of automation for scheduling is giving managers a way to foresee who is available to work open shifts or split shifts. This, he says, gives plants “full situational awareness and visibility for staffing,” so front-line supervisors can get discretionary time back, while software automatically handles schedule preferences and overtime requests.

Manufacturers constantly look at ways to streamline techniques and reduce production costs for raw materials, steam, and shipping. Manufacturers invest millions for intelligent plant design. But plants may not see that managing scheduling, grievances and shift-swapping have become a sunk cost. Worse yet, many plant managers don’t see the time manual scheduling steals from production and safety. 

Bill Perry is a managing member at MARCH 24 Media LLC.