Mapping Inventory or Supply chain concept into HR function
Customize cross functional concepts or framework into HR function
I started my career as a Finance, Supply chain and Personnel officer for a
small scale organization. The concept I learnt were unforgettable. After I
spent more than 10 years in this field, I took HR as my professional career.
However, the lesson learnt in supply chain and financial concept made a lot of
impact in my professional as well as personal life.
The words of renowned Tamil poet Subramanya Bharathi (Bharathiar) s made
lot of impact in my mind and heart. His famous poetic words about building a
nation were to bring all kinds of best things from nook and corner of the
Universe. Based on this, I thought about exploring to bring certain concepts of
supply chain and cost accounting functions to customize the HR needs? In
this regard, I have tried my best to customize the Inventory control process to
Human resource planning and Manpower planning process. This article may
provide some insight into defining a new framework for manpower planning
exercise. This is a little long article and I would like all to read fully and send
your comments. All suggestions and comments are welcome.
I took several concepts of inventory management and tried to map the same
for Manpower is planning and Manpower costing exercise. These concepts
may not be applicable for all business domains, particularly for knowledge
based Industry.

Maximum Level (Manpower No’s.)

Minimum Level (Manpower No’s)

Re-order Level (Manpower No’s)

Average Level (Manpower No’s)

Safety Manpower Limit

Re-order period

TAT (Turn Around Time) calculation
Calculation matrix
Assumption
1. Definition of percentage of utilization of capacity is based on the
previous estimates or Delphi estimation of the employer.
2. Due to the combination of skill and competency factor of the team, the
capacity utilization may vary. Organization has to decide the work force
combination for their capacity level.
1. For example high performing organization’s 100% capacity may be
120% capacity for mediocre performing organization.
3. Idle time is also included in the capacity definition.
Capacity Definition

Ideal or Optimal Capacity = 100 capacity utilization (Capacity
utilization of single manpower in production units or production hours or
output)

Maximum capacity = 120% or 130% of capacity utilization (capacity
percentage and level will defined by the organization)

Minimum Capacity = 90 % of capacity utilization - Capacity percentage
will be defined by the organization

Total capacity – Total capacity planned for the year
Ideal or Optimal Man power = Total capacity of the planned / Ideal capacity
of one Manpower
Maximum Manpower = Total Capacity Planned / minimum Capacity
utilization of one manpower
Minimum Manpower = Total Capacity Planned / Maximum capacity
utilization of one manpower
Average Manpower = Min. Manpower + Max. Manpower/2
Safety Manpower limit is fixed less than Minimum Level
For example one employee can handle 50 calls per day – ideal capacity will
be 50 calls
Maximum capacity will be 120% of 50 (60).
Minimum capacity will be 90% of 50 (45).
In the similar way, the ideal capacity, maximum and minimum capacity will be
defined either in production hours or production units.
If the organization is allocating the Manpower based cost allocation,
Maximum cost on Manpower = X
Based on the present estimates what will be percentage of utilization? Based
on the calculation matrix, we can define maximum, minimum and ideal
manpower utilization matrix.
Re-order level – based on life cycle, TAT period of the workforce, adhoc,
future business scenario and attrition level of the organization, the estimated
value will vary. Level in which talent acquisition process starts to work
depends on the positions/roles.
Re-order period - Turnaround time estimate for the role + employability
period
Employability period is the time period to train the workforce and make them
right fit or productive for the job profile.
TAT – Turnaround time - time period required to fill the role/job – based
on market scenario, demand and supply factors.
If organization decides for lateral hiring, the employability period will be
reduced considerably.
Based on the life cycle of the organization the better framework will be
as follows:
Life cycle of the Business – Initial period Strategy
If the organization is in initial stage of the business life cycle, they can go for
minimum level of manpower matrix to strengthen their profitability as well as
their shareholder’s value.
Below the Minimum value will be Re-order value for the organization. Multifunctional expertise is the right workforce. The work force will be given ‘stretch
target’ to balance the re-order level.
Life cycle of the Business – Growth Strategy
1. Moving towards specialized workforce for the respective job.
2. If the organization is growing exponentially, and then Maximum
Manpower limit up to normal growth level has to be maintained.
3. Based on the exponential growth period, contractual nature of the
manpower will be explored as permanent, temporary, contract staffing,
fixed and casual employment.
4. Once the organization reaches the normal growth stage, the stated reorder level will be the base for further recruitment process.
Life-cycle of the Business – Maturity Strategy
1. The organization has to minimize the cost of operation to survive in the
competitive world. So, capacity utilization has to be raised to 100% level
with the help of high performing workforce. Stretch target for the
employees of the organization will reduce salary overhead /expenses.
2. Re-order level will be between ideal work force level and Maximum work
force level. Stretch target will balance the re-order level aspect.
Life-cycle of the Business – Decline Strategy
1. Minimize the loss is the prime objective of this organizations. Utilization
of manpower effectively is the essential requirement of the organization.
Keeping the Re-ordering level very close to minimum level, thereby
increasing the capacity utilization will be right strategy. Temp staffing
methodology is perfect fit for these kinds of organization because it will
mitigate the exit barrier risk also.
2. Assignment based temp staffing will reduce salary and establishment
expenses for this kind of organization.
Other Inventory Concepts
ABC (Always Better Control) and HML (High, Medium and Low price)
This framework will provide a solution to minimize the Inventory cost. What is
the right quantity and value of the inventory based on the high, medium and
low value classifications?
The same way HR can define the strategy based on the nature of the
business, management Grid and the cost proportion of the management Grid
accordingly.
Based on the nature of the business, number of top, middle and lower level
executives and costing framework of the organization will be determined.
ABC methodology will provide solution for right manpower numbers and
manpower cost proposition.
Example 1
If it is a process industry, the right size of lower, middle and top level
executives (Quantity and cost) will bring the right manpower costing for the
organization. We can define the span of control and scalar chain for the
organization, the right proposition of top, middle and lower level managers
and cost of the same also.
Example 2
If the Industry is high end consultancy organization and the organization is
providing high value added services, then high valued employees will be more
and low value employees of the organization will be less.
We can use ABC and HML analysis as a tool to define the manpower and
manpower costing of the organization based on the nature of the business of
the organization.
The grid may look like this according to the nature of the business. We may
have to define different grids for cost and Numbers also.
A -Top level Management
B –Middle level Management
C -Lower level Management
This tool will define the approximate ratio of quantity of top, middle and lower
level management and cost proportion of top, middle and lower level
management.
This will be an effective tool for manpower planning process.
VED (Vital, Essential, Desirable) and SDE (Scarce, Difficult and Easy)
VED and SDE framework in inventory control process will overcome the
shortage of material. To overcome the uncertain scenarios, the materials are
classified into Vital, Essential and Desirable. The right quantity (minimum
level) based on the importance of the materials will be kept on stock to
overcome the uncertainty. It is a preventive control process.
Another Aspect is demand and supply factor. Based on the estimation of
demand and supply factors of the materials in the prevailing market, the right
quantity of material will be kept as stock to overcome the uncertain conditions.
Right retention strategy has to be derived to retain the scare and difficult
resources. Or training needs are to be analysed and action taken.
In Human resource planning this concept will give lot of solutions. Keeping
vital and essential resources as core resources of the organization and
outsource the desirable resource to keep the organization out of exit barrier
risk. Technology and business processes becoming obsolete day by day. The
organizations are compelled to work in VUCA environment (Volatility,
Uncertainty, Complexity and Ambiguity) state in a dynamic business
environment. So, change process is a compulsory one for all organization.
During the change process, the organization may require re-engineering
process. Due to re-engineering process certain processes will become
redundant. There is higher need to restructure the organization to face the
dynamic challenges. During this pace, the organization has to downsize the
manpower. At that stage, the exit barrier risk will be very high if all the
employees are employed in the rolls of the organization. So, organization will
adopt the combination of permanent, fixed term, contract and casual
employment strategies towards appointment of people to the respective job
profile.
Right bench strength for right kind of job profile is also arrived at through this
framework.
Seasonal or Non-Seasonal Control
This is another framework of inventory control. This will be applicable for
seasonal industries. The same way, we can apply this framework for seasonal
jobs and seasonal business organization. Seasonal and non-seasonal period
will be identified and defined. Based on the requirement of the season or
business, the organization can define the strategy on the manpower
requirement by executing outsourcing contract or fixed term employment
contract. The organization will overcome workforce, idle time and underutilization of manpower and thereby reduce the overall manpower cost of the
organization.
FSN Analysis (Fast moving, slow moving and non-moving)
This methodology can be used for attrition analysis. Based on the attrition
data, the fast moving, slow moving and non-moving demographics will be
identified. Once the organization identifies the analytic of fast, slow and non-
moving people, right diagnosis process has to be formulated to identify the
reason for the attrition. Based on the diagnosis, the organization can
implement the right intervention process to improve the retention rate.
Apart from the retention process, the organization is in a position to forecast
the fast movers and make necessary plan by way of creating adequate
resources to overcome the business exigencies.
HR professional, recruiters and manpower agencies can provide views on the
above article. Your inputs will encourage me to fine-tune the framework and
make it more valuable.
Just in Time concept
Recruitment
Social network and mobile network are effective tools which are
providing just in time solution to the recruitment process.
Based on the tools available and the present analytics of the
organization on minimal TAT achieved by the organization will be
considered as the right tools for just in time recruitment process.
Keeping people on channel or pipeline will reduce the time span and
right kind of planning facilitate the organisation towards effective
implementation of Just in time concept.
Essential factors required for implementation of Just in Time concept in
Recruitment process
1. Resource planning process and the advance information about the
time of requirement of the resource.
2. Present attrition rate and extrapolation of future
3. Growth prospective information about the organization
4. Demand /Supply ratio of every role
5. Present TAT level of all roles
6. Present effective tools which are reducing the Turnaround time.
Training
1. Preparation of manuals, unsynchronized training by way of
recorded training videos.
2. Effective planning on training calendar in line with business
requirement.