Last month, we released the latest Supply Chain Digest Letter, our hardcopy publication, focused this time on Labor Management Systems for Distribution.
As always, we’ve put together a full set of resources (pdf of the SCDLetter on LMS, articles, an excellent overview video, white papers, expert columnists, profiles of leading LMS providers, etc.) for those interested in Labor Management. You can also subscribe to the SCDigest Letter (upcoming issues on S&OP, Warehouse Management, Sortation Systems, and more).
I will admit to being an LMS proponent. It’s been fun to see the approach go from fairly little known or understood just a few years ago, to being a fairly hot category right now.
Many people think of Labor Management as a software category, and it is, but it’s really more of an operating approach to human resources in the distribution center (and sometimes other functions) that generally includes use of labor planning and reporting software, but also much more.
As we put together this resource center, I kept asking myself: What is there not to like about Labor Management? Nothing is perfect or ever easy in supply chain, but I think LMS is at the favorable end of the continuum versus many other supply chain and logistics strategies and technologies (it was number 2 on our list earlier this year on our recommendation for 2007.)
Just to make sure everyone is on the same page, Labor Management at its fullest is an approach that combines:
- Identification of the best way to do different tasks in the DC
- Developing discrete/engineered standards that account for the specific attributes of each piece of work (travel distance, number of units, equipment being used, size/weight, etc.)
- Software that can dynamically calculate, based on all that, the expected goal time for completion of a specific task. Then, over any number of time periods, it can report how individual workers are performing against that “100% of standard.” The software increasingly also has support for a range of labor planning functions to help decide how to best deploy operators, enable incentive pay calculation, and other functions that go beyond the traditional reporting.
In my view, LMS:
- Generally has a very solid payback for anyone with at least 50 DC associates, and sometimes as low as 30 or fewer. If you are much north of 50, or into the hundreds, the payback can be huge – millions of dollars across a network. 5-20% cost savings or throughout improvement is the norm. Sara Lee Foods, our case study for this Letter, would only say they achieved somewhere between the often quoted 5-15% in total labor savings, but I got the feeling it was at least at the middle of that range.
- It is low risk, in two regards. First, my experience is that the actual return versus the expected has among the least variability of any supply chain investment. So you can be pretty confident you won’t be making excuses as to why the ROI never materialized. Second, while there is always a price for failure, the reality is that if an LMS implementation does go badly, it doesn’t really impact operations. You’ll keep shipping.
- It just makes sense. Static measures (lines per hour, etc.) just aren’t really fair or actionable. Discrete standards are just better. So is measurement at an individual operator level.
- There is a strong element of training (best methods) underlying the whole approach. Who couldn’t stand to increase their training levels, especially when there is a clear path to ROI? And the whole approach gets new and temporary workers up to speed much faster.
- Employees in the end like it very much, especially if they are involved from the start. Contrary to some perceptions, morale and retention go up in most cases.
- Distribution Centers that deploy LMS successfully just seem to run better. There is a feeling of precision in the DC that often accompanies the whole approach. The work accomplishment is also more predictable.
So, I ask again, what is there not to like? Of course not every implementation is successful, and some companies have not achieved the value they expected. I really believe those are the exceptions and the precise reason for those results could be easily identified.
About five years ago, I had a conversation with the executive at the time of GE’s logistics council, who had the job of sort of loosely identifying logistics best practices and potential synergies among GE’s various business units. When I described Labor Management, he said, “Yes, I implemented something just like that when I was running a DC years ago in North Carolina. It was great. But then I left, and I think the system fell into disuse.”
I’ve heard similar stories from others. “One off” systems, without commercial software, deteriorate when the champion moves on to other things. LMS systems today institutionalize advanced labor management.
In the past few years, LMS has moved from something largely confined to grocery and food service sectors, with a small number of exceptions, to dozens of successes in retail, wholesale, food and beverage, consumer goods, 3PLs, and spare parts distribution. Haven’t seen as much in some other sectors, but I might have missed them.
Take a look at the resources that we’ve made available, and see whether LMS might be right for you to consider.
And I’d appreciate some feedback either agreeing that there isn’t much not to like with LMS, or pointing out some downsides I just am not seeing.
How good of a solution is Labor Management? Are there some things not to like? Should more companies be implementing LMS solutions?
Let us know your thoughts at the feedback link below.