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July 19, 2007 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

Labor Management – What’s Not to Like?

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.

Let us know your thoughts.

Want a printable version? Go to:


Dan Gilmore


Interested in Labor Management? Visit our SCDigest Letter on LMS Resource Center


This Week’s Supply Chain News Bites – Only from SCDigest

July 18, 2007
Supply Chain by the Numbers: July 18, 2007

July 17, 2007
Supply Chain Graphic of the Week: World Oil Reserves

July 17, 2007
Research Project to Focus on "Performance Based Service Acquisition" in the Supply Chain

July 17, 2007
As Borders Takes e-Commerce Site Back, CEO Says There Are Many More e-Fulfillment Options Today Than


In keeping with the market’s trend, our Supply Chain and Logistics stock index saw mostly positive results. 

Leading the software group was SAP with a gain of 3.3%. In the hardware group, both Zebra and Intermec netted positive results, up 6.3% and 2.1%, respectively.  The largest weekly gain was realized in the transport and logistics group with Expeditors International up 9.5%.

See stock report.


Automatic ID News: Biometrics Continue to Gain Steam, as Fingerprint Identification Moves Mainstream

From Grocery Stores to Theme Parks, Consumer Fingerprint ID is Growing Rapidly; No More Wallets or Purses? But Will We See Any Backlash from Privacy Groups?

Sara Lee Foods Finds LMS Value

Labor Management Drives Savings, as the Company Standardizes Distribution Processes, and Finds a Way to Achieve Continuous Improvement

This Month's Supply Chain Marketing News - Exclusively for Supply Chain and Logistics Solution Providers


by Stephen Craig and Erik Markeset

What Kind of Results Can You Expect from Carrier Bid Optimization Projects?

Question to SCDigest Has Us Thinking about CBO and the Factors that Impact Potential Savings


Have a supply chain or logistics related questions you need answered?

Ask our panel of experts. See our growing list of questions and answers - share your insight.

Reader Question: What Kind of Savings Do Companies Typically See When They Do a Formal Carrier Bid Process by Lane?

Reader Question: Are Supply Chain Certifications Valuable?


Q. What year did FedEx begin to offer on-line package status tracking?

A. Click to find the answer below



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Feedback is coming in at a rate greater than we can publish it - thanks for your response.

We're really behind again - bear with us. But keep the letters coming!

More Feedback this week from our two-part "Unplugged" interview series on RFID with Procter & Gamble's Dick Cantwell. We received many, many favorable letters, some of which we publish below. That includes our Feedback of the Week from Ron Rose, who comments in part on the role of marketing with RFID and retail. It's a good letter.

You'll find several other interesting responses as well. P&G's Paul Fox, who also participated in the interview, tells SCDigest they have also received nice feedback from others in the industry on our work. Thanks again to Paul and Dick for spending the time with us.

Keep the dialog going! Give us your thoughts on this week's Supply Chain topics. As always, we’ll keep your name anonymous if required.

Feedback of the Week – On Cantwell/RFID

Great interview with Dick Cantwell on RFID!   

I have almost 16 years of experience implementing RFID based systems in electronic toll collection, fast food payment, asset tracking, and supply chain.  What I have consistently seen in the Retail sector is that the motivation for using this (RFID) technology typically focuses on speed of service (operational accuracy and throughput) and customer convenience. 

However, those benefits alone typically do not bring in an ROI that motivates everyone.  Therefore, it requires looking in other areas of the business, such as marketing where the potential for impact is high, but more challenging to quantify. The biggest hurdle I have seen in the Marketing side is to get them to invest in the technology.  There are front-end costs of implementing RFID-based marketing programs that tends to be met with resistance, as the budgets are managed like an established high society club where they do things the way they have for years because of relationships, processes, lack of desire to change.

What motivates Marketing to change?  They get the same budgets every year, then spend them on a variety of media (possibly committed years in advance).  Hopefully the campaigns are more successful than not, then they pat themselves on the back and collect their bonuses. Life is good.  Why change?   Perhaps we can only hope that as a new generation of Marketers come up the ranks that they will understand the value proposition of using technology such as RFID and make a change to the process.  I know we are starting to see some areas where this is happening.  

This may sound like a tainted view of Marketing, but it is not intended to be that at all.  I am only saying that I feel Marketing is a key to exploiting the full benefit of RFID technologies. We need to start looking at ways to move some monies into areas where technology such as RFID can make more of an impact.

Ron Rose

More on Cantwell/RFID:

Great to see Dick's balanced view. The industry, retailers, manufacturers and RFID vendors, have spent many years trying to figure out the true value of RFID. The early pioneers such as Marks & Spencer, Wal*Mart and P&G have learnt that the ROI comes from a variety of business solutions.

Each must be approached on a step by step basis. It takes time, money, skill and enthusiasm to pursue these goals, but these companies are now demonstrating clear results.

Phil Calderbank
Director Global Marketing RFID & Security
Avery Dennison

Excellent work.  I also believe the report highlights that the technologies are morphing so quickly that it is hard to distinguish what is RFID, passive, semi-passive, active, semi-active, sensor RFID, or RTLS.  I believe compliance should be a joint venture not a mandate.

Dr. Erick C. Jones
Assistant Professor
University of Nebraska-Lincoln

I think Dick Cantwell at P&G is right on. We tend to forget one of the fundamentals of successful SCM is the effective allocation of scarce resources and RFID is no exception. Plans to apply the technology to everything in sight is poor strategy at the outset. Putting it to use in high impact programs (in or outbound) will drive the learning curve while creating returns at the same time. Once in place, RFID will find the appropriate “water level” and be a success, just as barcode technology did.

Tom  Anderson
SVP, Supply Chain Management
Formerly with Rand McNally & Company


Q.  What year did FedEx begin to offer on-line package status tracking?

A. 1994

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