Yards per man hour, the venerable key performance indicator for most ready mix companies, can be a deceptively complex calculation. Most people assume YMH is total yards divided by total driver hours. That’s simple enough. Until someone begins to think about and justify why certain man-hours or loads should be excluded from the calculation.
Are you able to look at your month-to-date YMH and know if you are going to have a profit or loss once the month closes? If so, you are more fortunate than you realize. If not, please keep reading.
Why yards per man hour is difficult
Debate about YMH often emerges when any two groups discuss it. For example, look at some of the following situations and think about how you handle them when calculating YMH:
- A driver who runs the loader occasionally?
- A batch man who drives?
- Remotely batching or self-batching?
- A driver sitting at the shop waiting for his truck to be repaired?
- Rejected loads?
- Loaning trucks to other divisions?
- Daily safety checks?
- Is it fair to penalize dispatch for things outside of their control?
- Should operations be penalized when dispatch deadheads trucks?
- What about batchers? Should they be penalized when dispatch sits on trucks for too long?
- Should anyone be penalized when drivers perform non-driving duties?
If you have worked these exceptions into your process you may have created a complex, time consuming system which becomes easy to game. That’s where I entered the ready mix world.
Gaming the system
Starting in dispatch, I was quickly exposed to yards per man hour. We were running 10 plants and about 100 trucks to service our 70% commercial customer market. Our target was 3.0 YMH. We also had a mix of owner-operators, union hourly and non-union hourly drivers. After several months I was made responsible for learning the art of calculating, adjusting and defending our YMH. Since my monthly bonus was tied to the YMH, I adapted quickly. I justified the numbers game because it’s what I was taught to do and it was the norm. Despite the manipulation, the YMH, while always being extremely close to 3.0, never really reflected the roller coaster ride of our P&L.
Even without the P&L I knew in my gut how we calculated YMH wasn’t right. And I knew there was a better way.
Finding a new way
About two-years into dispatch it finally occurred to me that what we really needed to measure was yards per total hour. We needed to stop manipulating the system. There is always reason to justify why a certain driver’s chunk of minutes or hours should be excluded from the YMH calculation. It’s easy to point fingers, shift hours and wash our hands of the mess if hours manipulation is allowed. But is this what you want for your company?
If the goal of your company is to maximize profitability, stop using YMH as one of your KPIs. You should begin using yards per total hour. YMH is a polarizing measure which fractions your company into competing groups where hours are shoved around, excuses proliferate and politics thrive. YTH unifies your company because it makes everyone pull in the same direction. There is no hiding hours. Using YTH will help your staff work together to solve the problem of increasing profit through better management of man-hours. YTH encourages everyone to pull the same direction for the same goal – to increase profit.
To calculate YTH, take all hourly employee’s time and use it, no matter what, as the basis for the calculation.
You can quickly and easily recalculate the past 12 months and see how YTH trends with the per yard bottom line of your P&L.
What happened in real life
Our migration from YMH to YTH wasn’t easy. We were part of a larger organization that expected monthly YMH numbers to be reported upstream. But I was fortunate enough to work with a creative management team who allowed our division to try a new way. In the long run, it worked. But we never did escape upstream reporting of YMH. What we did achieve was a better bottom line and simple tool to help us get there, together, as one group of people trying to achieve a goal.