Supply Chain and Logistics Technology: LMS earning respect
While many logistics professionals took a “wait and see” attitude toward labor management systems (LMS), today they’re hearing stories about significant productivity gains in exchange for a fairly low-cost software solution.
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The cost and effort that go into managing labor is no joke. For most organizations, in fact, labor ranks as the biggest cost of doing business. Not only are there salaries, benefits, and bonuses to regularly shell out, but every payroll error, compliance issue, or accidental overpayment eats away at a company’s bottom line.
To help control these costs and ensure that all payouts are warranted and earned inside a logistics operation, an increasing number of companies are turning to labor management systems (LMS). Defined by research giant Gartner as a system that provides labor productivity reporting and planning capabilities, LMS can analyze workforce requirements based on a certain amount of work to be performed and a standard unit of time to carry out each element of work.
These labor productivity planning capabilities provide the ability to measure and report the performance of individuals, groups, or facilities and compare that data to a predefined standard for performing each defined element of work. Put simply, an LMS uses historical data to accurately estimate throughput in the warehouse and then uses that information to schedule regular, overtime, and/or temporary labor in a way that accommodates shifting demand, such as seasonal fluctuations.
Over the next few pages we’ll look at how LMS is currently being put to use inside logistics operations, show both the latest and the expected advancements for this software sector, and then hear from a manufacturer that recently streamlined its timekeeping and reporting processes with a new labor management system.
Momentum is building
The fact that logistics professionals are hearing and reading about companies that are seeing real results from their investments in LMS is prompting more interest in the software, according to Norman Saenz, managing director at supply chain consultancy St. Onge Company. “They’re hearing the stories about productivity gains in exchange for a fairly low-cost software solution,” Saenz explains, “and they want to see some of those solid benefits themselves.”
What makes LMS particularly enticing for logistics operations, Saenz notes, is its ability to go beyond the norm and “naturally drive process improvements” within an organization. “It’s more than just software; it actually looks at the processes that the company is going to be measuring,” says Saenz, “thus promoting a review of the organization’s audit methods, standards, preferred ways of doing things, and so forth.”
With the resultant information in hand, logistics professionals can improve on those processes before they even officially roll out the LMS. “The whole process of studying labor standards is a benefit of installing an LMS,” says Saenz. “That’s the first step because you have to look at the job that’s being standardized and the methods that you want to be measuring.” In many cases, this “up front” assessment of existing can naturally lead to productivity improvements and then pave the way for successful LMS implementations.
But wait, there’s more. Once in place, an LMS can help an operation achieve up to 30 percent in labor savings—yet another benefit of automating a process that for many is still rooted in paper timecards, antiquated timekeeping systems, and manual reporting and reviews. In most cases, Saenz says those benefits are centered within the four walls of the warehouse and distribution center (DC), where different positions and tasks can be effectively standardized to ensure that the right person is doing the right job and within the specified timeframe.
Saenz, who works with managers to evaluate their LMS options, points to best of breed vendors like Kronos, Spalding Software, and Next View Software, and multifaceted software developers like Infor (which owns Workbrain), Manhattan Associates, High Jump, and RedPrairie/JDA as a few of the choices available on the market today. He sees the LMS sector as particularly ripe for new and existing best of breed vendors that can come up with innovative and cutting-edge labor management capabilities.
“As the bigger vendors look at doing large software installations, versus $100,000 LMS projects, that leaves the door open for smaller firms,” adds Saenz.
Time to rock the boat
Ask John Frehse, managing partner at New York-based workforce management consultancy CorePractice, why more companies haven’t historically used LMS and he says cost justification is the major holdup and that it’s followed closely by the emotional aspect of employee labor management.
On one hand, Frehse says logistics professionals haven’t always had the proof that they need to justify an LMS installation, and that the potential labor disruptions that can surface have also kept companies at bay.
“Even when you can justify the cost of an LMS, do you really want to rock the boat?” Frehse asks. “Getting over that hump has been a big challenge for warehouse/DC operations, which tend to spend money everywhere else before actually talking to their employees.”
But that landscape is beginning to change. Forced to shave 5 percent to 10 percent of their operating budgets every year, Frehse says that more logistics professionals are warming up to the idea of opening workforce management conversations with their staff members. As part of that initiative, an increasing number are turning to technology for help.
“LMS software has gotten more mature and now includes more features and functionalities,” says Frehse. “And, quite frankly, most warehouse/DC operations have nowhere else to go to capture cost savings.” Take variable demand planning, for example. Unlike the more predictable seasonal planning, management of variable labor requires an automated, analytical approach that can’t be tackled effectively with paper, pencil, and telephones.
Using an LMS, warehouse management can quickly pick up on leaks in productivity, view real-time productivity levels, identify deviations, and take immediate action. “You can do course corrections on the spot rather than a week later, when you have already missed your chance to optimize your high-cost employees,” says Frehse adding that the time savings alone translates into significant bottom line savings for the organization.
As technology continues to evolve and as warehouse/DC workforce management needs change, LMS vendors are more than likely to develop new functionalities and capabilities to roll with the changes.
A few vendors have already created mobile solutions that allow supervisors and managers to use their LMS while walking around on the DC floor, says Frehse. Still others are exploring the use of location software and Bluetooth technology to easily pinpoint where employees and equipment (lift tracks, pallet jacks) are at any given time within the facility.
“Managers will be able to use the technology to triangulate where someone is in the warehouse, measure travel times, and identify false picks and other wasted trips,” says Frehse. “Location management for workers is the final frontier for labor management in the DC,” Frehse says. “And even though it makes people a little uneasy, it’s an incredibly effective tool from a business perspective.”
About the AuthorBridget McCrea, Editor Bridget McCrea is a Contributing Editor for Logistics Management based in Clearwater, Fla. She has covered the transportation and supply chain space since 1996, and has covered all aspects of the industry for Logistics Management and Supply Chain Management Review. She can be reached at [email protected]
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