January 31, 2023

How to Make Effective Overtime Planning

In the supply chain, some jobs can’t always be done during regular business hours. We need more time to finish the job. Which means there will be extra costs to pay for employees to work overtime. But just because there is sometimes a need for overtime doesn’t mean that the implementation can be left to run wild. This is why you need to plan for overtime so that the costs aren’t too high and the work done in the extra time is still useful.

What caused overtime?

There are many reasons why you might have to work extra hours. Here are some of them.

  1. There is a problem with how the supply chain works. Sometimes things go wrong, like a machine breaking down or materials not getting there on time. Because of this, your supply chain operations have stopped, and your output is falling further behind the goals you set. To reach this goal, you have to work extra hours because you don’t have enough regular working time left.
  2. Work that is too much for what can be done. Sometimes, the rise in sales or production volume is bigger than the increase in production capacity. And overtime is the only way to finish the work.
  3. Seasonality. There is a time called “peak season” in some fields. During that time, the market demand will go up. So is the work you have to do to meet the request. Since this busy time is only temporary, increasing production capacity is not a solution. In this situation, it makes sense to work extra hours. There will be extra costs, but they won’t be as high as they would be if you increased production capacity but then didn’t use it because your busiest time was over.

Does working overtime help your business?

The next question is whether or not working overtime is good or bad for business.

The answer depends on why the overtime is happening. If you often work overtime because there are so many problems that stop your supply chain operations, that is a clear sign that your way of working is not effective. In this situation, you need to do something to keep the cost of overtime down. In situations like this, overtime costs are often not planned for, so it will have a direct effect on the company’s finances.

how to make overtime planning effectively

In the second case, if you have to work overtime because you don’t have enough operating capacity, you should look at how often you have to work overtime.

If it only happens sometimes, it’s not a big deal. But it won’t be good if you have to work overtime every day. Human physique has limitations. The same goes for thoughts. Your team will get both physically and mentally tired if they work overtime every day and don’t have much time to rest. The work did not turn out as well as it could have. Even worse, it will hurt the business even more.

In this case, you need to increase how much you can do. Even if you can’t get rid of overtime completely, you can at least limit it so that your team has enough time to rest and recover from physical and mental fatigue.

What about working overtime because of the seasons?

In the case of seasonality, working overtime isn’t a big deal because this time of year only lasts for a short time. But if you know when your busiest time of year is every year, storing stock ahead of time can be one of the best ways to cut down on overtime when demand is high. You could also hire temporary workers to help with the high demand during this time.

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How to make a plan for overtime

If, in the end, working overtime is the best solution, then the next question is how to plan overtime.

Before we move on with this important discussion, make sure you’ve also joined the scmguide telegram channel to stay up to date on the latest blog posts and learn more about supply chain management in general.

Let’s take each one in turn.

Budget it

If you know ahead of time that you will need to work overtime to meet demand goals, you need to plan for the costs of overtime.

You can include the overtime fee in your selling price, or you can check how much the overtime fee affects your profit and decide from there.

how to make overtime planning effectively

You can also try to cut costs in other areas to pay for the overtime, if you can. The important thing is to make sure that the overtime is really needed, whether it’s planned overtime or money you’ve set aside in case something goes wrong with your business. But in the second case, you still have to decide how much of the overtime fee you will pay. And, of course, it has to get smaller as time goes on and you make changes.

If you have a plan for sales or production for the next few months, it will be much easier to figure out how much money you need to make to pay for overtime. You can figure out how much overtime you’ll need during that time and multiply that number by how much overtime costs per hour. If you make a budget for overtime, it will be easier to come up with a supply chain strategy and make changes if you need to.

Figure out how long you need to work

You need to figure out how long it will take to meet the needs of the market. Compare these needs to what you can do right now. Based on this difference, you can decide whether you need to add more capacity or just work overtime for a while.

If adding operating capacity will only leave that space empty in the future, then overtime might be the best solution.

Plan overtime

The next step is to plan out when you will do your overtime, either during the week or on the weekend. You have to figure out which of the two costs is less and compare them. Are several hours of overtime during the week cheaper than one hour of overtime on the weekend?

Use these things to help you decide how to schedule your overtime. Again, make sure your team has enough time to rest so they can get their bodies and minds back in shape.

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Choose who has to work extra hours

The next step is to decide who has to work overtime. Until what level? Is it enough to staff level, for example, or maybe supervisors or managers?

Of course, the overtime fee will be different for each level. That’s something you have to think about. Including what kind of work needs to be done. Is it a routine job that can be done with little oversight or work that needs to be supervised from a higher level, like making decisions?

Set targets

What do you hope to get out of the overtime? Define it. You can’t just ask your team to work overtime without setting clear goals. With goals, you can see how well the extra time you spent was used.

How to cut down on overtime

As I said above, it may be impossible to avoid some overtime work. But you can still cut down on overtime because of things like downtime.

Your job is to make your normal work more efficient, whether it’s through better tools or better skills on the job. Adding tools to speed up the work process is another way to make sure that work can be done in a normal overtime of time without having to work extra hours.

Work that takes a lot of time should be outsourced

You can also choose this. You can cut down on the amount of work your team has to do by outsourcing tasks that don’t add much value but take a long time to finish. Of course, you still need to figure out carefully which one will save you the most money. Then, make a decision.

In this option, you can also add several temporary workers. Sometimes, it’s better to hire someone else to do certain tasks so you can focus on your main job, which requires more skills and has a bigger impact.

Conclusion

There are times when you have to work overtime. The job requires it. But if it’s not handled well, it can have a big effect because the hourly rate will be higher than usual.

Keep track of your overtime. Budget and schedule it. So you can make and change your strategy better to keep making money.

And, just as important, pay attention to your workers’ physical and mental health. Don’t let them get worse physically and mentally because they have to work overtime. Because if that’s the case, you’ll have to pay more.

Hope it helps!

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Dicky Saputra

16+ years of experience in supply chain management. I help companies improve their end to end supply chain performance.

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