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  • Faouzi Charfadi

Too Much Overtime Will Kill Your Business


In business, we match productivity with rapidity. The real meaning of productivity is a measure of how efficiently a person completes a task. By being more productive, individuals can complete their work efficiently, tackle jobs quicker, enjoy more free time, and feel less stressed.


I remember when a client that was in trouble called me. He told me his employee overtime was out of control and he needed to figure out how to reduce the overtime expense.


Reduce the fleet? Limit overtime to 10 hours per week? Either of those solutions meant missing a lot of deliveries. He was asking for help, and I was going to give it to him!


Now, let me provide a little background.


The business was a service delivery operation. They had an average of 12,500 cartons and 2,500 locations to deliver daily. 50 trucks, 250 cartons per driver, and 50 stops. Each driver had 10 hours a day and 50 hours weekly to make the deliveries. The budgeted cost:

# Drivers

Cost/Reg hr

Cost/OT hr

Weekly Reg hr

Weekly OT hr

Cost/Reg hrs

Cost/OT hrs

Weekly Cost

Annual

Cost

50

$17.00

$25.50

2,000

500

$34,000

$12,750

$46,750

$2,431,000


The actual cost was significantly higher than what was budgeted, and the delivery service level needed to be improved.


Most of the business’s customers were open from 7 am to 5 pm., so when a driver worked more than ten hours, chances were that customers were closed for the day. The last few deliveries were not made on time, falling short of the expected standard of customer service. Here is the actual cost:

# Drivers

Cost/Reg hr

Cost/OT hr

Weekly Reg hr

Weekly OT hr

Cost/Reg hrs

Cost/OT hrs

Weekly

Cost

Annual

Cost

50

$17.00

$25.50

2,000

700

$34,000

$17,850

$51,850

$2,696,200


The annual actual cost was over $265,200. This was unsustainable, and a solution was needed quickly.


Knowing my client had a few spare trucks and drivers, I made a proposal that didn’t make sense to him at first. But when I showed him the numbers, he realized it was a clever idea.


The last few cartons' overtime and redeliveries cost the company the most, which meant they needed more trucks in order to make all deliveries on time. So, I added four more trucks and reduced the budgeted overtime from 10 hours per week to 6.25 hours per week. Here is what was proposed:

#

Drivers

Cost/Reg

hr

Cost/OT

hr

Weekly

Reg hr

Weekly

OT hr

Cost/Reg

hrs

Cost/OT

hrs

Weekly

Cost

Annual

Cost

54

$17.00

$25.50

2,000

337.5

$34,000

$8,606.25

$42,606.25

$2,215,525.25


The proposed solution was under budget and saved $480,675 to the actual cost. The service level would increase, and all deliveries would be made on time.

Desc.

Budget

Actual

Proposed

# Drivers

50

50

54

Cost/Reg hr

$17.00

$17.00

$17.00

Cost/OT hr

$25.50

$25.50

$25.50

Weekly Reg hrs

2,000

2,000

2,000

Weekly OT hrs

500

700

337.5

Weekly Total hrs

2,500

2,700

2,337.5

Weekly Cost Reg hrs

$34,000

$34,000

$34,000

Weekly Cost OT hrs

$12,750

$17,850

$8,606.25

Weekly Cost

$46,750

$51,850

$42,606.25

Annual Cost

$2,431,000

$2,696,200

$2,215,525

Another happy customer.


At MSSBTA, we know how important overtime labor can affect your business, and we are here to help control it. With the fast-paced, 24/7 nature of today’s global economy, the issue of overtime labor has become even more pressing. Process improvement can significantly benefit businesses by streamlining operations, reducing costs, increasing efficiency, and improving customer satisfaction. MSSBTA are experts in the matter, and our greatest joy is to have the customer happy. Now, you have drivers completing their task efficiently—the real meaning of productivity.


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