Mapping Inventory or Supply chain concept into HR function
Customize cross functional concepts or framework into HR function
I started my career as a Finance, Supply chain and Personnel officer for a small scale organization. The concept I learnt were unforgettable. After I spent more than 10years in this field, I took HR as my professional career. However, the lesson learnt in supply chain and financial concept made a lot of impact in my professional as well as personal life.
The words of renowned Tamil poet SubramanyaBharathi (Bharathiar) ‘s made lot of impact in my mind and heart. His famous poetic words about building a nation were to bring all kinds of best things from nook and corner of the Universe. Based on this, I thought about exploring to bring certain concepts of supply chain and cost accounting functions to customize the HR needs? In this regard, I have tried my best to customize the Inventory control process to Human resource planning and Manpower planning process. This article may provide some insight into defining a new framework for manpower planning exercise. This is a little long article and I would like all to read fully and send your comments. All suggestions and comments are welcome.
I took several concepts of inventory management and tried to map the same for Manpower is planning and Manpower costing exercise. These concepts may not be applicable for all business domains, particularly for knowledge based Industry.
- Maximum Level (Manpower No’s.)
- Minimum Level (Manpower No’s)
- Re-order Level (Manpower No’s)
- Average Level (Manpower No’s)
- Safety Manpower Limit
- Re-order period
- TAT (Turn Around Time) calculation
Calculation matrix
Assumption
- Definition of percentage of utilization of capacity is based on the previous estimates or Delphi estimation of the employer.
- Due to the combination of skill and competency factor of the team, the capacity utilization may vary. Organization has to decide the work force combination for their capacity level.
- For example high performing organization’s 100% capacity may be 120% capacity for mediocre performing organization.
- Idle time is also included in the capacity definition.
Capacity Definition
- Ideal or Optimal Capacity= 100 capacity utilization (Capacity utilization of single manpower in production units or production hours or output)
- Maximum capacity =120% or 130% of capacity utilization (capacity percentage and level will defined by the organization)
- Minimum Capacity =90 % of capacity utilization - Capacity percentage will be defined by the organization
- Total capacity – Total capacity planned for the year
Ideal or Optimal Man power =Total capacity of the planned / Ideal capacity of one Manpower
Maximum Manpower =Total Capacity Planned / minimum Capacity utilization of one manpower
Minimum Manpower =Total Capacity Planned / Maximum capacity utilization of one manpower
Average Manpower = Min. Manpower + Max. Manpower/2
Safety Manpower limit is fixed less than Minimum Level
For example one employee can handle 50 calls per day – ideal capacity will be 50 calls
Maximum capacity will be 120% of 50 (60).
Minimum capacity will be 90% of 50 (45).
In the similar way, the ideal capacity, maximum and minimum capacity will be defined either in production hours or production units.
If the organization is allocating the Manpower based cost allocation,
Maximum cost on Manpower = X
Based on the present estimates what will be percentage of utilization? Based on the calculation matrix, we can define maximum, minimum and ideal manpower utilization matrix.
Re-order level– based on life cycle, TAT period of the workforce, adhoc, future business scenario and attrition level of the organization, the estimated value will vary. Level in which talent acquisition process starts to work depends on the positions/roles.
Re-order period- Turnaround time estimate for the role + employability period
Employability period is the time period to train the workforce and make them right fit or productive for the job profile.
TAT – Turnaround time - time period required to fill the role/job – based on market scenario, demand and supply factors.
If organization decides for lateral hiring, the employability period will be reduced considerably.
Based on the life cycle of the organization the better framework will be as follows:
Life cycle of the Business – Initial period Strategy
If the organization is in initial stage of the business life cycle, they can go for minimum level of manpower matrix to strengthen their profitability as well as their shareholder’s value.
Below the Minimum value will be Re-order value for the organization. Multi-functional expertise is the right workforce. The work force will be given ‘stretch target’ to balance the re-order level.
Life cycle of the Business – Growth Strategy
- Moving towards specialized workforce for the respective job.
- If the organization is growing exponentially, and then Maximum Manpower limit up to normal growth level has to be maintained.
- Based on the exponential growth period, contractual nature of the manpower will be explored as permanent, temporary, contract staffing, fixed and casual employment.
- Once the organization reaches the normal growth stage, the stated re-order level will be the base for further recruitment process.
Life-cycle of the Business – Maturity Strategy
- The organization has to minimize the cost of operation to survive in the competitive world. So, capacity utilization has to be raised to 100% level with the help of high performing workforce. Stretch target for the employees of the organization will reduce salary overhead /expenses.
- Re-order level will be between ideal work force level and Maximum work force level. Stretch target will balance the re-order level aspect.
Life-cycle of the Business – Decline Strategy
- Minimize the loss is the prime objective of this organizations. Utilization of manpower effectively is the essential requirement of the organization. Keeping the Re-ordering level very close to minimum level, thereby increasing the capacity utilization will be right strategy. Temp staffing methodology is perfect fit for these kinds of organization because it will mitigate the exit barrier risk also.
- Assignment based temp staffing will reduce salary and establishment expenses for this kind of organization.
Other Inventory Concepts
ABC (Always Better Control) and HML (High, Medium and Low price)
This framework will provide a solution to minimize the Inventory cost. What is the right quantity and value of the inventory based on the high, medium and low value classifications?
The same way HR can define the strategy based on the nature of the business, management Grid and the cost proportion of the management Grid accordingly.
Based on the nature of the business, number of top, middle and lower level executives and costing framework of the organization will be determined.
ABC methodology will provide solution for right manpower numbers and manpower cost proposition.
Example 1
If it is a process industry, theright size of lower, middle and top level executives (Quantity and cost) will bring the right manpower costing for the organization. We can define the span of control and scalar chain for the organization, the right proposition of top, middle and lower level managers and cost of the same also.
Example 2
If the Industry is high end consultancy organization and the organization is providing high value added services, then high valued employees will be more and low value employees of the organization will be less.
We can use ABC and HML analysis as a tool to define the manpower and manpower costing of the organization based on the nature of the business of the organization.
The grid may look like this according to the nature of the business. We may have to define different grids for cost and Numbers also.
A -Top level Management
B –Middle level Management
C-Lower level Management
This tool will define the approximate ratio of quantity of top, middle and lower level management and cost proportion of top, middle and lower level management.
This will be an effective tool for manpower planning process.
VED (Vital, Essential, Desirable) and SDE (Scarce, Difficult and Easy)
VED and SDE framework in inventory control process will overcome the shortage of material. To overcome the uncertain scenarios, the materials are classified into Vital, Essential and Desirable. The right quantity (minimum level) based on the importance of the materials will be kept on stock to overcome the uncertainty. It is a preventive control process.
Another Aspect is demand and supply factor. Based on the estimation of demand and supply factors of the materials in the prevailing market, the right quantity of material will be kept as stock to overcome the uncertain conditions. Right retention strategy has to be derived to retain the scare and difficult resources. Or training needs are to be analysed and action taken.
In Human resource planning this concept will give lot of solutions. Keeping vital and essential resources as core resources of the organization and outsource the desirable resource to keep the organization out of exit barrier risk. Technology and business processes becoming obsolete day by day. The organizations are compelled to work in VUCA environment (Volatility, Uncertainty, Complexity and Ambiguity) state in a dynamic business environment. So, change process is a compulsory one for all organization. During the change process, the organization may require re-engineering process. Due to re-engineering process certain processes will become redundant. There is higher need to restructure the organization to face the dynamic challenges. During this pace, the organization has to downsize the manpower. At that stage, the exit barrier risk will be very high if all the employees are employed in the rolls of the organization. So, organization will adopt the combination of permanent, fixed term, contract and casual employment strategies towards appointment of people to the respective job profile.
Right bench strength for right kind of job profile is also arrived at through this framework.
Seasonal or Non-Seasonal Control
This is another framework of inventory control. This will be applicable for seasonal industries. The same way, we can apply this framework for seasonal jobs and seasonal business organization. Seasonal and non-seasonal period will be identified and defined. Based on the requirement of the season or business, the organization can define the strategy on the manpower requirement by executing outsourcing contract or fixed term employment contract. The organization will overcome workforce, idle time and under- utilization of manpower and thereby reduce the overall manpower cost of the organization.
FSN Analysis (Fast moving, slow moving and non-moving)
This methodology can be used for attrition analysis. Based on the attrition data, the fast moving, slow moving and non-moving demographics will be identified. Once the organization identifies the analytic of fast, slow and non-moving people, right diagnosis process has to be formulated to identify the reason for the attrition. Based on the diagnosis, the organization can implement the right intervention process to improve the retention rate.
Apart from the retention process, the organization is in a position to forecast the fast movers and make necessary plan by way of creating adequate resources to overcome the business exigencies.
HR professional, recruitersand manpower agencies can provide views on the above article. Your inputs will encourage me to fine-tune the framework and make it more valuable.
Just in Time concept
Recruitment
Social network and mobile network are effective tools which are providing just in time solution to the recruitment process.
Based on the tools available and the present analytics of the organization on minimal TAT achieved by the organization will be considered as the right tools for just in time recruitment process.
Keeping people on channel or pipeline will reduce the time span and right kind of planning facilitate the organisation towards effective implementation of Just in time concept.
Essential factors required for implementation of Just in Time concept in Recruitment process
- Resource planning process and the advance information about the time of requirement of the resource.
- Present attrition rate and extrapolation of future
- Growth prospective information about the organization
- Demand /Supply ratio of every role
- Present TAT level of all roles
- Present effective tools which are reducing the Turnaround time.
Training
- Preparation of manuals, unsynchronized training by way of recorded training videos.
- Effective planning on training calendar in line with business requirement.