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Expert Insight: Labor Management Systems (LMS)
  By Dan Gilmore, Editor, Supply Chain Digest  
  July 14, 2007  

Logistics Insight: Getting LMS Implementation Right


The ROI from Labor Management is There, Plus Other Operational Benefits, but You Will Get There Faster and Easier by Following these LMS Project Guidelines

Gilmore Says:
Consider conducting an internal Labor Management System to get a large number of team players up to speed quickly, and get questions and concerns on the table.

What do you say? Send us your comments here

There are a number of keys to having a quality Labor Management System implementation. As with most supply chain initiatives, “Change Management” is critical for success, and it seems to be especially true for LMS implementations.

Below, we take you through some keys through the lifecycle of a Labor Management project.

Initial Education: Consider an Internal Workshop First

While there is growing understanding about Labor Management in Logistics generally, it is still a new concept to many companies. Often, the trigger for accompany to begin looking at LMS is someone coming into the company from outside the organization who had successful experience with LMS previously, and makes a strong case for adoption.

Supply Chain Digest recommends that to kick off a project, companies consider holding a half day work shop on LMS that includes logistics executives down to floor level supervisors. The purpose is to educate as many as possible in the organization about what LMS is and isn’t, its benefits, and other foundational information, and to dispel myths or other misconceptions that members of the team may hold.

These workshops could be led by a knowledgeable internal employee, especially one that has managed an LMS project elsewhere. It would also be relatively easy to find a consultant or LMS vendor to participate in the effort.

The benefits: you’ll save months of time educating team members in the traditional way, get buy-in much faster, and get issues on the table that might be barriers to support.

Get a Detailed Assessment of Expected Savings

Receiving a detailed savings estimate on the potential for labor management early on from either a consultant or Labor Management System solution provider can be an important step to galvanize the process internally.

Company management will often be surprised at the magnitude of the potential productivity gains and labor savings, and the resulting insight can drive a much higher level of executive support and prioritization of an LMS effort.

In some cases, the resulting productivity gains can also help companies avoid or delay expected capital projects to add a facility or expand current ones – news that will always be well received by company management and generate considerable support.

Clearly Articulate Goals Internally

It is important to determine what you really trying to achieve as a result of the LMS implementation. Is it a specific amount of hard labor cost savings? Over what period of time? Or is the focus more on improving throughput within existing cost structures? Avoid capital expenditures?

It’s important to be very clear on these goals at all levels, especially since in some scenarios reduction in head count may be involved (though with the level of labor turnover in most DCs that shouldn’t be an issue).

Still, one 3PL that has implemented LMS made it very clear to its DC managers that if the LMS showed overstaffing in a facility or area, that headcount would need to be reduced, or the project couldn’t be cost justified.

Fuzziness about goals and expectations will lead to problems down the road.

Involve Floor Level Associates and Supervisors Early On

As the LMS project begins, it is absolutely critical to get the involvement of both operators and supervisors very early on in the project, not just managers and IEs.

Companies should clearly want to avoid the impression that the LMS is being dictated down from on high. As with any program, if those affected most feel that have been participants in the process from the start, their support down the road is much more likely. Finally, supervisors and operators almost invariably have excellent ideas about how productivity can be increased, such as by improving the methods used.

Focus on the Role and Training of Supervisors

With the implementation of LMS, no job changes more dramatically than that of front line supervisor.

Most have to learn a whole new way of managing. First, they need to learn to use the information and reporting from LMS software rather than subjective observation as the primary mean to assess employee performance.

Second, supervisors need to understand in detail the best methods for each process, and to learn how to effectively “coach” employees that are not meeting standards appropriately.

The reality is that in almost all cases there are some supervisors who cannot make the transition. But the success of the overall project will be enormously enhanced by focusing intently on the role of supervisor and providing the right level of training and support to them.

Determine How You Want to Roll Out LMS by Function and Facility

If you have a multi-DC logistics network, you will have to make some decisions about how you want to roll out LMS capabilities. For example, should you pick as the pilot DC to be the one you think will be the easiest, or the one with the largest savings potential? Should you roll out one function, such as order picking, to all DCs, then repeat that approach for other processes? Or should you do every process in the first DC before moving on to the next?

There are no right answers to these questions, but it is important to think them through in detail. SCDigest believes overall themajority of companies select for the first install a DC where they believe the DC Manager is fully behind the initiative and is one of the best facility managers. The majority also tends to do most functions in a given DC first before moving to a second, but we’ve seen companies with enormous opportunities in picking and replenishment apply LMS to that process in sequential DCs first to capture the most savings early on, then go back to other functions.

Bake Supervisor Duties into Their Performance Expectations

Following from the previous tip, the most companies most successful with LMS are those that set clear new expectation for supervisors, and use that as a basis for their own evaluations.

For example, you might require supervisors to conduct a set number of employee observations per week/month to evaluate whether operators are following the defined best methods. You might also require supervisors to conduct and document their coaching activities either overall, or for employees falling below some specific amount of standard over a period of time.

Work Hard to Install Confidence that the Data is Right

Nothing will harm the success of the new system than if operators (and supervisors) don’t have confidence that the data is accurate and performance is not being measured effectively. This means companies should put a lot of effort into explaining how the “black box” of the standards calculator works, well prepare supervisors to answer operator questions, and look hard on go live to ensure themeasures are in fact accurate.

Watch Closely for Performance Outliers

Upon go live and on an on-going basis thereafter, it is important to review data relative to performance against standard to look for outliers on both the plus and minus side that may signal the goal time calculations need to be reworked.

Despite the best engineering effort, it is quite common for calculations or algorithms to be off in the first few weeks of go-live for a process or area. In some cases, this may be obvious early on, but in other cases it may take 10-12 weeks to determine there is an issue. If in that time employees seem to be achieving more than plus or minus 5% of standard on a consistent basis, it may signal the need for review. In some cases, the actual performance may be even more off expectations.

LMS users need to monitor this even after the initial deployment is fine tuned. Especially in large DC networks, many things can change at an individual facility, from storage mode changes to adding new material handling vehicles to software/process changes, etc.Any of these can have an impact on the standard, but often companies don’t immediately make the change, or don’t do so optimally. Pay attention to the data to see when achievement starts to drift one way or the other.

Agree or disgree with our expert's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the web site. Upon request, comments will be posted with the respondents name or company withheld.

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