Labor management systems: The (very near) future of LMS

Labor is the largest cost center in any facility and, as a result, the focus of many efforts to improve efficiency. Yet, like so many entrenched practices, labor management is often rooted in outdated notions of optimal worker performance, scheduling and training. Bad habits are sometimes so well established that systems proven to dramatically improve labor efficiency seem incompatible with the prevailing culture of an operation.

“The software is very much outpacing the culture,” says John Reichert, director of product marketing for Tecsys, a supply chain software provider. “The typical problem is customers over-staffing both labor and inventory to compensate for the fact that they can’t control either very well.”

Just as technology is enabling lift truck fleet managers to optimize around more data points than simply the hour meter, granular standards in labor management systems (LMS) offer much more detail about worker performance beyond units per hour. In fact, by tying an LMS to the warehouse management system (WMS), transportation management system (TMS), and demand forecasting models, it could soon be common to schedule part-time workers in 1-hour increments, postpone fulfilling incoming orders until a later time of day, and shift a highly cross-trained workforce from the dock to a forklift to a packing station on the fly.

Many of these customer-driven concepts remain in the very early stages of development. Others stand ready for those companies willing to challenge old assumptions. Modern talked to some LMS suppliers to get a sense of current labor management trends and the workforce of tomorrow.

Planning and scheduling
Traditional labor management is good at answering the question: “How productive is my workforce?” However, it never really addresses the question: “How many people do I need?” Effective scheduling and forecasting is becoming a bigger area of focus. “Customers are looking at labor as part of their financial model,” says Charlie Zosel, vice president of TZA. “It enables true activity-based costing models.”

Facilities typically measured productivity by the four walls, dividing throughput by labor cost. With the growth of the LMS market, more customers have seen the value in breaking productivity down by department, by zone and by worker.

“Now we’re seeing the same education process around scheduling, where most people say they know how to schedule,” says Peter Schnorbach, senior director of product management for Manhattan Associates. “If you take three shifts with 100 people, 10 different functions, 20 different process zones, different levels of performance, you’re talking about millions of variables. There are too many to make it humanly possible to optimize without some sort of optimization engine.”

Many companies have been forecasting labor needs for the next few days and weeks based on known existing orders and/or historical performance. In the future, says Reichert, that forecasting will become more sophisticated, similar to demand-planning algorithms. When retailers give information to suppliers about their future needs, for instance, that information will be tied directly into labor planning.

Companies typically think of labor forecasting by the day, says Reichert, but often it is more efficient to break it down by the hour. “For instance, from 3 to 5, I’ll need 10 people on picking and two on packing. Then from 5 to 7, that will change to four pickers and eight packers.”

Operations looking for this type of precision will need an advanced WMS and strong labor management support. It might make sense to tie in TMS as well so orders and the required labor can be prioritized based on ship times. The WMS will then decide what’s most efficient based on those inputs. The first step on this path is to start providing visibility to the supervisor so they can start driving some of these movements.

Intra-day movements of labor
With the right labor in the right place, what happens when an under-performing worker or zone threatens a missed shipping window? A basic LMS might later provide a report on any shortcomings as compared to engineered labor standards, but by then it is too late. The next generation of LMS will provide visibility into potential bottlenecks before they happen, adjusting staffing levels and workloads on the fly.

When dealing with eaches and small orders that come in today and must ship today, it can be difficult to predict what order will arrive in the next hour. “Using standards and per-worker visibility, you can identify top performers and put them where they matter most when you’re under the gun,” says Reichert. The same theory can be applied to slower days, when a worker picking single-line orders might also then pack the order and apply a shipping label.

Intra-day movement of labor requires highly cross-trained workers, a hallmark of the workforce of tomorrow. Although it will take some cultural adjustment, dock workers can then be prepared to either crossdock, jump on a forklift and put away pallets, or move to picking while waiting for the next truck.

“As those barriers come down, the wave of the future is a multi-modal workforce of highly skilled people,” says John Spencer, director of solutions strategy for retail workforce management for RedPrairie.

This sort of flexibility will also require supervisors with up-to-date data and a consistent presence on the floor. “Predictive software doesn’t count for much if you have to run back to the office to receive an alert,” says TZA’s Zosel.

Additionally, says Schnorbach, communication with employees needs to evolve. “Labor doesn’t do anybody any good if you aren’t sharing the information with the people that are doing the work. Generally, companies have a bulletin board in the warehouse. That’s a pretty archaic way of communicating with your employees.” Instead, a company might use social media to recognize top performers, or a flat-panel display akin to flight status monitors at the airport to present a real-time ranking by worker or zone. “This is a great way to incentivize workers to stay out of the bottom ranks and drive performance well above standards,” he adds.

Again, many of these solutions are still in development, and most require a lot of customer preparedness. A good first step, says Spencer, is to deploy wireless infrastructure and equipment or a “bring your own device” system, where workers’ personal smart phones can be used for a variety of work applications. This can provide immediate savings for tasks as simple as time clocks, where 100 or more people can electronically punch in and get straight to work rather than waiting in line.

Transportation integration
Traditionally, transportation carriers and warehouse labor interface only briefly for a quick handshake at the dock door. Going forward, data collected from TMS and LMS will help optimize both workflows and ensure a mutually beneficial relationship. This can be as simple as determining whether it makes sense for the driver or a warehouse worker to perform a task, such as sweeping out the trailer. “How long does it take for the driver to get out, enter the building, find a broom and get to the dock door?” Zosel asks. “And how much does he get paid?”

Advanced LMS software might also be used to inform product handling throughout the warehouse in an effort to optimize outbound shipments. For instance, as an order is packed, the packing station can provide feedback about the size and type of slots at the packing station that are available to fill. The system can then determine what is the best and most efficient order to pick.

Integration between TMS and LMS is perhaps most important on the inbound side, says Spencer, where visibility into coming inventory is critical. Similarly, the impact of incoming orders can be managed based on carrier departure windows. However, end users are hesitant to change processes, especially if it requires any kind of delay.

“Most want to tackle orders as soon as they come in, but if they are confident in the data, it might make much more sense to assemble the complex orders first and then focus on single-line orders right before the carrier window closes,” he says. “But it’s a big cultural hurdle for the supervisor to say, ‘We’ve got these orders, but don’t touch them until 3:30.’ ”

Tying the store to the DC
The concept of “total landed cost” can also be informed by coordinated software in the warehouse, transportation and retail store spaces. “Stores are taking on more fulfillment-related tasks, and that’s driven by the multi-channel push,” says Schnorbach. “Retailers are trying to determine the cheapest place to perform a task.”

The first step, and the one most requested by customers, says RedPrairie’s Spencer, is a unified time and attendance system. They want to leverage the same system in the store and the warehouse, he says, and it’s one of the easier challenges to address. Spencer says the first generation of this system is available, and passes time and attendance data between DC and the store. A fully unified approach is on track for a 2014 release.

Soon, data sharing and robust communication channels between the DC and the store might allow the DC to notify the store manager about outbound shipments, or the store manager might reach out to the DC for availability of promotional items or to discuss any shipment damage. Today, after checking for damage, the store manager must send an e-mail through multi-step corporate channels, says Schnorbach. In the future, the DC manager and store manager will be directly connected, and data about any of those exchanges will be captured in the system.

While the “system” will continue to spread from optimization engines to mobile devices and social networks, Zosel emphasized that the technology of a labor management system is just a small part of the labor management program, calling it merely “the tip of the iceberg.”

Reichert offers the example of a customer whose workers had been used to daily direction such as “unload these two trucks today.” Workers then had a visual sense of how close they were to meeting that objective. The customer was surprised to find that productivity actually decreased after the LMS implementation, when daily direction changed to “just do what the system tells you.”

“The worker’s response was, ‘the system never told me to work fast,’” says Reichert. “What was missing was an appreciation of the human component.”

Companies mentioned in this article
Manhattan Associates
RedPrairie
Tecsys
TZA