Living Economics

Labor on Call
Flexible work scheduling to match customer traffic is one effective way to transform labor from a fixed cost into a variable cost in the retail business.

Wal-Mart has started introducing a new computerized worker scheduling system to better match the number of workers to store customer traffic. The new scheduling will move many of its 1.3 million workers from predictable shifts to flexible shifts. The move promises higher labor productivity and better customer service.

Based on customer traffic data and average time to complete certain tasks, the computerized scheduling-optimizer can estimate how many workers will be needed at any given hour. By better matching staffing with customer traffic, this new scheduling system has essentially turned labor from a fixed cost into a variable cost in a given time window. When the number of workers is fixed regardless of customer traffic, labor is in effect a fixed cost. But if the number of workers varies with customer traffic, labor cost becomes a variable cost.

Flexible worker scheduling is one obvious way to increase labor productivity without increasing labor cost. Moving workers from low traffic hours to high traffic hours elevates marginal product of labor in both time periods.

The cost savings to Wal-Mart is easy to see. Flexible scheduling means that more customers can be taken care of with the same number of work hours. Wal-Mart's payroll for full-time workers (currently at about 1 million) might even fall if flexible work shifts make it impossible for some workers to work full time. The vacated work hours would then be staffed by lower-cost part-time workers.

Flexible scheduling is a boon to customers, of course. In the "good" old days, department stores were closed on weekends when shoppers had time to shop and banks were closed after office hours when customers had time to bank. In some countries, such as New Zealand, hardware stores were closed on weekends just when customers needed to buy hardware to fix up their homes.

References:
  • WSJ 1/3/2007. "Wal-Mart seeks new flexibility in worker shifts."
  • Houston Chronicle 1/4/2007. "Wal-Mart to alter worker scheduling system; software will staff locations to match traffic."
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