OKLAHOMA CITY -- Use of an activity-based pay program at three distribution facilities has helped Fleming Cos. here reduce the time its drivers spend at a delivery site, while still maintaining customer-service levels.
Activity-based pay compensates drivers only for services performed, such as each mile they drive, the deliveries and pickups they make and the pallets they move.
This compensation method is currently in use at Fleming's facilities in Lubbock and El Paso, Texas, as well as Nashville, Tenn., which all employ nonunion drivers. Fleming outsources the transportation function to a third-party company at these distribution centers.
"We wanted to take drivers off the hourly pay system that compensated them by the ticking clock, which required us to pay by the hour, sometimes by the minute," said John Boultier, director of transportation and traffic at Fleming.
"We know that drivers are very savvy on the hourly system," he added. "Once they establish their desired income, they'll set their own hours. Even with the most effective engineered standards and measurement programs, drivers get many opportunities to play with the system."
Boultier spoke at the "Logistics Outsourcing: A Performance Analysis" session of the Productivity Convention & Exposition held recently in Philadelphia.
Activity-based pay was implemented by the third-party provider, Logix, Long Grove, Ill., at Fleming's Lubbock and El Paso facilities two years ago. It resulted in a 40% reduction in stop times, Boultier told SN in a separate interview.
"When drivers saw their paycheck, they became more aware that they were being paid by the activity, not the hours, which motivated them to empty the loads out and come back for additional loads," he explained. As drivers came back for more loads, they began to earn more than when they worked by the hour. In many cases, drivers worked fewer hours than before because they weren't driven to stay out in order to make their weekly pay.
Boultier said 75% of the original drivers are still working at these two facilities. "The hard-working guys stayed with us and earned more," he said. "And those that weren't fell out of the system."
Unlike Lubbock and El Paso, which serviced mostly supermarkets, Nashville serviced small independent operators, many of whom were concerned that activity-based pay would cause the driver to rush through the delivery.
To address these concerns, Logix paid for a telephone survey by an outside company. The study revealed that since the outsourcing occurred, 38% of respondents said transportation service levels improved, while 60% said they stayed the same. Only 2% of respondents said transportation service declined.