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Warehouse & DC Management: Labor Management gets managers beyond the punch clock

While adoption remains low, savvy managers are putting engineered labor standards and related labor management systems to work to jumpstart productivity and gain a new level of operational visibility. Here’s how they’re getting it done.
By Maida Napolitano, Contributing Editor
August 01, 2012

Identifying unproductive time
Pickers may be paid for eight hours, but with reports from the LMS, supervisors can see, to the element level, why there were only six and a half hours of actual productive time.

According to Welker, this is where the LMS has been invaluable to her team. “It gives us the ability to really capture that time where we’re not physically picking,” she says. It’s not necessarily because workers are catching up on last night’s game, for example. Pickers may be spending 10 unproductive minutes waiting for pick tickets, doing safety check sheets, or waiting for product to be replenished. 

“We can find those reasons that they’re not doing productive tasks and eliminate them, making them productive for 7.5 hours per day instead of only 6.5 hours,” says Welker.

Implementing an incentive program
While implementing engineered labor standards may improve productivity by identifying those lagging the curve, it’s the implementation of incentives that sells LMS internally to most workers.

Let’s say it takes a worker two hours to complete a task. If he completes it in only one hour, then he saves the company an hour of labor time, worth $20 per hour. With incentives, the company takes that $20 and shares a percentage of that with its workers, perhaps keeping $10 then giving the worker $10. “Obviously with incentives, productivity increases,” says Welker.  “What we also find is that people then become more creative, with many taking the initiative to improve processes because they want the incentive.”

Parker warns that incentive plans may not be as effective in an environment where overtime is commonplace. “Incentive pay must be more lucrative than overtime,” says Parker. “One should minimize overtime for several months before implementing incentive pay.” He also cautions that incentive pay should never be tied to productivity alone. “Quality, service, and safety are also part of an effective incentive pay system.” 

Improving workforce planning
With seasonality, demand volumes can fluctuate. LMS provide supervisors with a scheduling tool that can define shifts and work schedules. It also allows them to evaluate current and future staffing levels based on both historical and actual work assignment data.

“I know that I have 2 million cases coming in next year,” says Welker. “I know my teammates can pick about 200 cases per hour based on my LMS data. I can then determine how many teammates I need on the floor.”

Even when initiating a new process, managers can use a combination of historical data and predetermined time standards from the LMS to project the time it takes to complete a task and then calculate the number of workers needed. 

Developing more accurate costs
With an increasing number of value added services being performed at the DC level, many don’t have a good feel for how much they should be charging. More managers are using their LMS to determine exactly how much it costs to ship merchandise through their warehouse and to determine what they need to break even or to realize specific profit margins.

“The system allows the operator to apply cost values to the goal or standard times; thereby, calculating the true cost of performing the task,” says Parker. 
Parker notes, however, that most LMS are still limited in their ability to process this data within the system, as providers have yet to build a solid module around activity costing. For now, many simply extract LMS data and enter them into custom spreadsheets to develop detailed budgets and costing reports.

Simulating “what-if” scenarios
With input from the LMS, operators can simulate changes in equipment, processes, or layouts within a facility in a virtual mode to determine the impact on productivity. “Before investing thousands of dollars,” says Parker, “why not take those same orders, reload them into a test environment in the LMS, and compare how many standard minutes it takes with your new layout.”

By simulating within the LMS environment, managers recognize the credibility of the simulation results, making it easier to get approval for any upfront capital. However, Parker notes that not many LMS providers offer this option within their system. “We typically have to extract the data, mimic databases, and request assistance from IT personnel to help process the data.” 

Tips for implementing
According to Stretar, LMS implementations usually involve working closely with employees on the floor to improve the operations. “We usually try to optimize an operation in conjunction with implementing the software. We then build and audit the standards for that operation.” Incentive programs can then be initiated once the standardized operations have somewhat stabilized—“typically after two to three months.”

Parker believes that the most important aspect of any LMS implementation is really its change management. “There’s going to be resistance,” he says. “It’s important to educate workers on the system from the very beginning.”

 

About the Author

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Maida Napolitano
Contributing Editor

Maida Napolitano has worked as a Senior Engineer for various consulting companies specializing in supply chain, logistics, and physical distribution since 1990. She’s is the principal author for the following publications: Using Modeling to Solve Warehousing Problems (WERC); Making the Move to Cross Docking (WERC); The Time, Space & Cost Guide to Better Warehouse Design (Distribution Group); and Pick This! A Compendium of Piece-Pick Process Alternatives (WERC). She has worked for clients in the food, health care, retail, chemical, manufacturing and cosmetics industries, primarily in the field of facility layout and planning, simulation, ergonomics, and statistic analysis. She holds BS and MS degrees in Industrial Engineering from the University of the Philippines and the New Jersey Institute of Technology, respectively. She can be reached at .(JavaScript must be enabled to view this email address).


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