Supply Chain Technology: LMS is coming into its own

The continued need to drive costs out of the supply chain is slowly, but surely pushing labor management system adoption rates. Our Technology Correspondent offers a snapshot of the LMS market and examines the issues driving its use inside the four walls as well as in the cabs of the nation’s private fleets.

By Bridget McCrea · May 1, 2011

Labor management systems (LMS) have been around for years, making the market a fairly mature and proven one by supply chain software standards.

Used primarily as a way to manage and track the labor activities for distribution operations, LMS typically incorporates real-time interaction with warehouse management systems (WMS). Most often used within the four walls of a warehouse, these systems report on labor activity, and then compare that activity against historical data and established labor standards.

However, despite LMS’ knack for enhancing worker productivity and shaving labor costs, adoption rates for the software have been less than impressive over the last few years. “Historically, LMS was the purview of large facilities with 200 or more workers, with the grocery segment being a particularly large user of these systems,” says Dwight Klappich, research vice president for Gartner, Inc. “And as this history shows, LMS implementation costs have just been easier to justify with larger labor forces.”

But that sentiment could change, says Klappich, as more software vendors offer LMS as part of their supply chain software suites—and as companies across the board strive for improved labor management practices. “Demand for labor management is up, and at the same time the solutions have become more achievable for a wider array of companies,” he says. “As a result, we could see more companies turning to LMS.”

Also pushing companies to explore their labor management is a continued need to drive costs out of the supply chain.

While business activity is picking up nationally, the number of jobs isn’t increasing to meet that growth. Calling this phenomenon a “people-less” recovery, Klappich says companies are using technology like LMS to maintain growth without having to add new employees to the roster.

“LMS is a key productivity tool that addresses labor, and is particularly relevant for logistics professionals that want to be able to do more work with the same number of people, or fewer,” Klappich says. To help companies achieve that goal, LMS creates an environment where worker productivity can be monitored, and adjusted accordingly, to ensure that all employees are performing optimally, and as efficiently as possible.

Over the next few pages, we’ll look more closely at the LMS market and the key issues pushing its adoption inside the four walls as well as in the driver seats of the nation’s private fleets. We’ll also introduce you to a national waste management firm that’s managed to get its arms around driver tracking to create a leaner workforce as a result of its labor management process.

All eyes on labor
In most cases, LMS is used to manage what’s going in within the four walls of a warehouse or distribution center where the highest number of opportunities to track and control labor costs exist.

“There’s so much labor concentrated in the warehouse, and many opportunities to optimize those labor activities,” explains Marc Bessho, consulting manager at supply chain advisory firm Capgemini. “There’s also room for cost reduction and asset utilization—both of which can be tackled by an LMS.”

Klappich concurs, and says vendors like Kronos, Red Prairie, and Manhattan Associates have all honed their LMSs—either standalone, or as part of a larger supply chain software platform—to the point where implementations result in improved human capital management, and better oversight on important factors like time and attendance.

Supply chain organizations that implement LMS frequently experience a “pretty massive upside in return for their investments,” according to Bessho, although convincing logistics managers of that ROI isn’t always easy. “Sometimes it’s a hard sell,” he says. “What many companies don’t realize is that by putting key performance indicators (KPIs) in place to measure worker inactivity, they can gain 30 percent to 40 percent improvements in utilization within the warehouse.”

Couple those gains with the productivity gains that result when a shipper achieves better workforce visibility, and the pay-for-performance associated with engineering labor standards, says Bessho, and the case for LMS becomes even more compelling.

“Using an LMS, companies can track and report on individual performance, and then compare actual versus standard performance,” says Clint Reiser, a research analyst with supply chain technology consultancy ARC Advisory Group. “Using that data, shippers can keep a closer eye on employees and work processes, and use that feedback to make improvements, manage processes more effectively, and create incentive-based programs.”

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About the Author

Bridget McCrea
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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