Supply Chain News Bites - Only from SCDigest
 

-June 11, 2009

 
 

Supply Chain Graphic of the Week: Determining the ROI for Labor Management Systems

 
  PUMP Methodology Provides Clear Picture of the Potential, Cornerstone Solutions Says  
 

By SCDigest Editorial Staff

 
 

There is growing recognition that Labor Management Systems (LMS) can deliver significant savings for distribution center operations.

But how can you assess the potential from LMS for your operations?

In a Supply Chain Videocast this week on Supply Chain Digest, John Pearce and Brian Carlson from Cornerstone Solutions recommended the "PUMP" methodology to answer that question.

PUMP is an acronym for Performance = Utilization X Methods X Pace. In other words, total productivity can be determined and estimated by an assessment of the percent of utilization of DC associates, the effectiveness of the "methods" used doing DC tasks, and the speed or pace of associate efforts. To view the on-demand videocast, go to: Why Time is Right for Labor Management Systems Videocast.

 

Example PUMP Analysis for Labor Management Systems

 

Source: Cornerstone Solutions

A couple of points are key:

  • The formula is multiplicative - U x M x P means, correctly, that what look like relatively modest misses from 100% in each area turn out to create substantial misses overall.
  • As shown in the chart, this approach, based on floor level analysis, can enable companies to get a very clear view of the LMS potential. In this generic but typical example, the PUMP analysis shows that with very conservative estimates in terms of potential improvement, the estimate is that the need for full time equivalent employees in the DC would change from 66 currenrly to just 44.7 - nearly a 33% decrease.

Agree or disagree? What is your perspective? Let us know your thoughts at the Feedback button below.

 
 
Send an Email