Labor management has assumed increasing importance in the past 10 years for both transportation and DC operations. The question is “will the trend continue?”
Driver shortage continues as a high priority for carriers. Routing and service optimization software provides high return on investment for both driver and vehicle utilization. Real time monitoring capability permits flexibilities to meet unexpected service requirements. Engine and braking feedback for driving practices lowers fuel costs. Given these benefits, the competition among software providers, especially for metro pickup and delivery, is increasing. Innovation continues with enhancements to handle more complexity and larger fleets with less machine computational time—with an increased emphasis on real world situations. The improvements in the next 12-24 months will be most significant.
In past years, misinformed HR functions blocked engineered labor standards efforts as an invasion of privacy. Even with such resistance, the general acceptance of labor standards has improved based on potential return on investment. One can calculate the return on investment in terms of labor savings versus investment (including internal engineering resources) and the majority of efficiently run operations (without standards) will have high return from a standards implementation.
Labor productivity is a “must” for strategic network modeling, given the multiple capacities (e.g. receiving, shipping) that constitute constraints. For example, the planned capacity of a repack module in 2008 is influenced by several factors, including management driven improvements, possible labor standards, and technology (e.g. pick to light, voice order selection, slotting software, etc.). In a possible network of 10 DC’s, labor improvement of 10% over several years is equivalent to adding a facility. In considering the alternatives where labor impacts the primary capacity (constraint), avoiding a new automated DC (for larger firms) can be worth $75 -100 million.
Labor consideration is a “driver” for locating new DC’s in today’s environment. The strategic network modeling process is typically followed by detailed labor assessments for candidate sites, especially for locations in the Northeast.
The importance of labor optimization is significant today, based on labor (and vehicle + fuel for transportation) expense as percent of total supply chain costs. The move for optimization will continue based on improving software and processes and the relatively high return on investment.
The numbers drive the focus.
John White
White Supply Chain and Operations
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Scenario 1: A large global 2000 company (it really doesn’t matter which industry) views itself primarily as a manufacturer. It has owned manufacturing facilities on several continents that produce most of the company’s products. It views its competitive advantage as being able to streamline its manufacturing facilities. However, because of competitive pressures for lower prices and the need for flexibility it has started to outsource some of its products to 3rd party contractors. It distributes its products in over 30 markets around the globe. ...
