Human resources are the main component of each business. So, workforce optimization is important for companies as it affects operational effectiveness, productivity, and, in the end, profitability.
In this blog post, we will talk about labor market challenges and trends, problems that businesses face due to staff shortages and low productivity, and decisions that can make human resource utilization much more efficient and better organized.
- Organizing labor
- Understanding labor productivity
- Optimizing cost for labor
- Staff scheduling
- Planning the labor dispatch process
Issues and trends in the global labor market
In 2022, high-income countries had a general labor market recovery, but at the same time, many sectors experienced labor shortages. For example, in the second quarter of 2022, in Europe, almost three in 10 manufacturing and service firms had a lack of workers, resulting in production slowdowns.
In the United States, businesses in retail and wholesale of consumer goods reported that close to 70% of job openings remained unfilled. At the same time, around 55% of roles were unfilled in manufacturing and 45% in leisure and hospitality.
The hiring rate decreased over the past year, as shown in a sample of 17 countries illustrated below:
According to The Future of Jobs Report 2023, this year’s main negative effects on the labor market are slower economic growth, increased geopolitical divisions, and the rising cost of living for consumers. Also, supply shortages and the higher cost of inputs are influencing the situation.
Businesses report difficulties in retaining workers. Due to an ongoing cost-of-living crisis, real wages are dropping, and changing worker expectations and concerns about the quality of work are becoming more prominent issues globally.
LinkedIn’s Global Talent Trends Report found that employees’ top value, beyond compensation and work-life balance, is flexibility (e.g., a four-day work week), followed by upskilling and career growth, as well as challenging and impactful work.
Large-scale job growth in the next five years is expected in education, agriculture, and digital commerce and trade. The largest losses are predicted in administrative roles and in traditional security, factory, and commerce roles.
Surveyed companies report that investing in learning and training as well as automating processes are the most common workforce strategies to deliver business goals.
Labor problems businesses resolve using simulation
Workforce optimization helps businesses to properly utilize human resources and accomplish tasks with a high level of productivity. The following success stories will show you how you can organize the labor, understand its productivity, optimize costs for staff, and schedule the shifts using simulation modeling.
Grocery retailers wanted to know the staffing required to operate their micro-fulfillment centers. It was challenging to organize the labor necessary for a system that includes both automated and manual aspects. They also needed to understand how different scenarios would impact their ability to fulfill orders.
The developers created a workforce optimization model using AnyLogic. The results gave an hour-by-hour breakdown of how many people are working, where they are working, the total number required, the staff utilization, how many orders can be fulfilled with the number of people simulated, etc.
The decision-makers for an ice cream manufacturer wanted to understand how to use resources more effectively. The modelers simulated various scenarios and the changing of cold store parameters depending on the season, rack load, staff shifts, and more. The model builders could use real data from different periods of operation to analyze performance.
The results of the simulation experiment enabled stakeholders to estimate whether a scenario is successful or not for different combinations of resources as well as resource utilization.
An enterprise that operates in the secondary mortgage market, Fannie Mae, intended to optimize resources in project management. They needed to define the number of analysts required to accomplish all processes and to identify possibilities for multitasking. For these purposes, a project management optimization model was built.
The results of the model showed how many trades were processed over time and the capacity of different types of analysts. Also, it was possible to assess how many and which kind of analysts the company needed to deal with different trade volumes. The model helped the stakeholders with workforce and project management optimization.
Understanding labor productivity
An off-site construction factory in the US required a lot of manual labor. It was difficult to understand the implications of labor productivity, cycle time, and downtime.
An AnyLogic model was created to simulate actions and interactions of autonomous agents, which in this case were the construction workers. Input data included every process and discrete activity, as well as all manual workforce or construction labor.
Using what-if scenarios, model builders looked at the trade-offs between productivity and new activities and could then make informed decisions before implementing strategies in the factory.
Optimizing cost for labor
A fast-food restaurant, McDonald’s, intended to equip and staff its kitchens to obtain the best financial yield possible for the menu expansion. The model created with AnyLogic enabled more informed decision-making for equipment purchases and staffing.
The simulation model delivered results for a variety of demand profiles and restaurant configurations. The benefits of testing several scenarios helped optimize cost tradeoffs for labor and equipment.
When opening a new store, a franchisee should determine the best labor scheduling for a particular design layout. A company from the HoReCa (hotels, restaurants, and cafes) industry, Domino’s, needed to find out the right number of staff on a given shift for a particular layout. At a new store, the builders came up with one layout, and the model developers created two alternative plans to compare.
By using AnyLogic simulation, it was possible to identify efficiencies and reduce dispatch times for their products by 4.5%.
Planning the labor dispatch process
The maritime employers association, which is responsible for ensuring a reliable supply of trained, qualified longshore labor for all its ports, experienced record labor shortages. To address this problem, they needed to analyze skills-matching at dispatch and the determination of training needs.
Engineers created a digital twin to simulate the labor dispatch process and analyze training needs. They determined an optimal three-year return on investment for training and examined labor needs in a port terminal expansion scenario. The results indicated the port would have a 300% increase in labor needs.
To sum up: technological transformations for better labor productivity
Simulation modeling is useful for proper staff utilization and labor productivity estimation. The time has come for business leaders to decisively shape technological transformations and ensure that future investments contribute to better jobs and opportunities for both enterprises and employees.
Subscribe to the AnyLogic newsletter to be inspired by new blog posts about simulation and the best models.