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  Manufacturing Insights   |   September, 2008
Labor Benefits Achieved with Automated Traceability
by Thomas R. Cutler

The labor benefits from traceability are significant. Many food companies use piece rate systems to pay employees. Most of the systems are manual – both for collecting information and calculating the payroll. Often these manual systems require that the employees self-report the number of cartons packed via a form they provide to a supervisor. The supervisor visually reviews the form and then files it with the payroll department, which has a clerk enter the data into a computer system.

The key disadvantage of this type of system the self-reported production is often more than the enterprise’s total production, meaning that some employees are being overpaid for their true production and there is no precise way to know who is not telling the truth. This inefficient process also requires the employee to take time keeping track of his or her production, for the supervisor to review the reported piece rate, and for the payroll clerk to key-in the report. Transcription data-entry errors are common.

Some food production organizations require employees put a unique mark on each unit they produce and later tally all of these marks, fill out a form, and submit it to payroll for data entry. This approach is less self-serving and still highly prone to employee error and very labor intensive.

Traceability provides production and plant managers a new toolset for realizing value and boosting profits as well as addressing labor issues – cost, productivity, and labor-related quality. Nowhere is the impact of traceability more apparent than in the food industry; hiring and keeping trained labor remains an ongoing management challenge. According to William R. Pape, Founder and Executive Vice President of SaaS (Software-as-a-Service) traceability technology TraceGains, "Managers want to know how they can effectively reward the best employees, improve labor productivity, and provide focused training for employees who need it. Well-designed traceability systems can generate both the raw information and the visualized on-line reporting tools that can help any management team get the most out of its labor pool.”

Automated Traceability Impacts Labor Costs

Pape suggests, “The best solution involves the traceability system automatically recording the production unit’s creation and automatically associating the production unit with a specific employee. The traceability system then automatically updates the employee’s payroll record for each carton, notifying his or her supervisor via a real-time dashboard how the employee is doing compared to minimum expected performance and historical performance, and automatically calculating the employee’s piece rate payment. This approach not only removes human subjectivity from the equation and reduces labor, but it also provides a highly accurate performance count and gives supervisory management a real-time look at who may need help. When a normally productive employee shows a dip in performance, it’s a clue that the employee may need a visit from a supervisor.”

Some managers have implemented an automated piece rate system by asking employees to put a label on a box and then manually scan the label to feed information into the traceability system. The disadvantage of this approach is that it adds floor or field labor to each piece-rate employee and requires the capital investment of automated scanning and electronic data reporting equipment. This is rarely a good tradeoff, and organizations such as TraceGains have developed systems for automatic data collection that do not require this capital investment for the employee and add little time to the employee’s task.

The labor required to produce an accurate piece-rate report is dramatically reduced with automated traceability because companies do not need to have people in the production process manually counting marks or manually entering the piece-rate data into the computer. The total production payment to laborers represents the actual production number.

Several companies using traceability systems with the piece-rate module have not only reduced their piece-rate payouts and provided a more accurate payment to each employee, but they have also reduced the labor overhead cost to generate their piece-rate payrolls.

Traceability: Building the Pedigree

An effective traceability system preserves identity across product transformations, building the pedigree of a finished product shipped to the customer. By identifying the employees who worked on each piece and part, we know who had some part in producing a single item. Pape noted, “If the finished product began as a fruit or vegetable, we know who planted it, who was involved in cultivation, who harvested it, who handled it during packing and finally who boxed it. Knowing these facts by themselves isn’t that useful. However, gold stars (for good quality) and black marks (for poorer quality) can be sent back upstream to each person involved at each production stage. By reviewing (over time) the average number of black marks or gold stars at each stage of transformation, we can determine where quality is being enhanced and by whom, and where quality is being reduced and by whom. The roadmap to enhanced quality becomes obvious.”

A traceability system with a labor tracking module provides results in near real-time and can also used to improve labor productivity and identify training needs. Traceability actually establishes a motivation tool by providing employees feedback on how they are doing – comparing them against their recent history and their personal best as well as measuring them against workforce in general. These performance statistics are an interesting carrot, not a stick, letting employees evaluate themselves and where they stand in comparison to others.

Providing performance feedback to an employee, in near real-time, offers a scorecard for self-evaluation. It also provides supervisors a way to determine which employees may need additional training. Labor remains one of the key costs in any food enterprise; increasing labor productivity and using tools to help the labor force improve product quality is one of the many benefits that can result from implementing a real-time automated traceability system.

Thomas R. Cutler is the President & CEO of Fort Lauderdale, Florida-based TR Cutler, Inc. ( Cutler is the founder of the Manufacturing Media Consortium of three thousand journalists and editors writing about trends in manufacturing. Cutler is a member of the Society of Professional Journalist and author more than 300 feature articles annually regarding the manufacturing sector. Cutler can be contacted at See More Details.

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