Labor management software improves productivity

The economy is forcing every business to take a hard look at the productivity of its labor. That’s nothing new to warehouse and distribution center managers. They live in that universe even when the economy is booming. After all, shaving nickels and dimes off the cost of picking, packing and shipping a carton can make the difference between a profit and a loss on an order.

That’s why labor management (LMS) was one of the fastest-growing segments of the supply chain execution software market even before the recession. The reasons are simple: These applications, which optimize the way associates perform their tasks, deliver results. “A site using labor management is 20 to 30 percent more effective than a non-LMS site,” says Charles Zosel, vice president, Tom Zosel Associates (TZA) (847-540-6543, http://www.tzaconsulting.com).

While that may sound like a sales pitch, it’s not an idle boast. Facilities with as few as 15 to 20 associates have benefited from labor management, especially in complex order fulfillment environments. What’s more, these systems have been around long enough with proven results that LMS is the first tool some experienced DC managers pull out of their kit when they start a new assignment. “In the past, a manager did everything they could to optimize a building before they put in a labor management system,” says Zosel. “Today, we’re seeing managers start with labor, and use that as the foundation to improve the operation going forward.” 

Now, even labor management software providers will tell you that the software is only one piece of the labor management puzzle (see sidebar). “I’m a strong proponent of the fact that the software alone is not the real driver,” says Jim Le Tart, director of marketing for RedPrairie’s labor management product (877-733-7724, http://www.redprairie.com). “It’s the process changes and standards that drives the benefit.”

However, the labor management software systems coming to market today offer much more in the way of functionality than in the past.

Software evolution
By all accounts, the software has undergone a revolution. As recently as a few years ago, labor management was a reporting tool that compared the time it took an employee to perform each task against goal times. Those goals were based on historical averages or a calculated average based on engineering studies. The system used that information to report on the performance of employees, team of employees or a facility over a period of time.

As labor management systems have matured, their scope has expanded from a reporting tool to an operational tool. Today, the systems interact in real time with warehouse management and warehouse control systems to collect data on what employees are doing, how many locations they have visited, what inventory they have handled, what equipment they have used and what paths they traveled. “The system takes all that information and calculates how long it should take to do something,” says Peter Schnorbach, senior director, product management, at Manhattan Associates (770-955-7070, http://www.manh.com).

With those calculations, a labor management system can look at a group of orders to be fulfilled and make extensive calculations to determine how much labor it will take to fill those orders in the optimal way. How extensive? “We looked at one warehouse where 109 people were working across three shifts,” says Schnorbach. “They system considered 80 million variables to determine how best to use those employees throughout the day. We are building more science into LMS applications that will allow users to scientifically solve the labor problem.”

New capabilities for labor
Reporting remains an important piece of labor management, but these systems are capable of much more. The new functionality supports a variety of processes.

Take planning and scheduling. Using engineered labor standards that determine how long it should take to complete a task, the systems calculate the number of people needed to fill a group of orders, down to the number of people required on any given day, on any given shift, and even within a given zone. “What’s more, we can take that schedule and tell you which specific employees you need, based on constraints like an employee’s performance capabilities, their availability to work, their seniority, and the equipment they’re certified to work on,” says Schnorbach.

Once a shift is underway, the system will monitor not just the performance of individual workers, it will also monitor the overall performance of the facility according to the work that is planned for that day. “The system can send an alert to a supervisor or warehouse manager if you’re not hitting your plan, or if you’re going into overtime so that you can make the necessary adjustments,” says TZA’s Zosel.

Labor management can also track time and attendance data for pay and vacations, as well as keep track of the actual tasks performed by an employee against the performance standard set for that employee. That information is used to calculate incentive pay based on performance.

Enabling continuous improvement
Implementing a labor management software system is not a once and done event. Without continual monitoring and fine-tuning, the initial improvements will trail off over time.

For that reason, labor management systems include functionality that enables enhanced performance of associates as well as the overall facility.

Coaching and mentoring, for example, set the stage for continuous improvement. Along with tracking the productivity of associates, the system can identify for management those who are working below the standard, either during a shift or on an on-going basis. “Instead of simply disciplining your associates, the system enables your front line supervisors to become mentors,” says RedPrairie’s Le Tart. “Once you know who’s not working up to par, you can investigate to see if there’s an equipment problem or whether that employee needs training in preferred methods. Whatever the case, you can now take the necessary steps to rectify the problem.”

As a follow up tool, the system can also track whether an associate’s performance has improved as a result of coaching.

Finally, forward-thinking organizations are using labor management to simulate the impact of changes to materials handling systems and processes, like a new conveyor, sortation system or pick line, on labor. Slotting tools, for instance, look at the demand for products to determine the best location in pick faces and storage areas for each stock keeping unit (SKU). By running the slotting plan through a labor management planning application, a manager can calculate whether the benefit from reslotting is worth the cost involved in moving the product. “You may find that it costs you more in labor to move the product than you’ll saving in picking costs after the reslotting,” says Le Tart. “Likewise, if your slotting program gives you three or four alternatives, you can determine which is going to give you the best ROI on your labor.”

As labor management systems become more widely used, and managers learn how to get more from them, vendors say the evolution of functionality will continue. “The systems have come a long way from where they were just a few years ago,” says Manhattan’s Schnorbach. “In the next generation of solutions, you’re going to se more robust forecasting capabilities, and more sophisticated scheduling and optimization capabilities to meet the more complex warehousing environment.”

The benefits of a labor management system

Productivity improvements: 20-to-30% improvements are common with labor management.

Continuous improvement: The productivity gains from a labor management system provide the foundation for continuous improvement going forward. What’s more, if you know the amount of labor required for your current processes, you can better evaluate new technologies and processes that might improve your operations.

Accountability: By collecting real-time data about your employees’ performance, you can hold employees accountable for their work.

Activity-based costing: For third party logistics providers, or distributors offering value-added services to their customers, a labor management system captures actual costs that can be used for billing, or to determine what it costs to serve specific customers.