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Focus: Distribution/Materials Handling

Feature Article from Our Distribution and Materials Handling Subject Area - See All

From SCDigest's On-Target E-Magazine

Jan. 25, 2012

Logistics News: The 10 Myths of Labor Management Systems

Consistent ROI Producer May Add Even More Value in Multi-Channel World

Cliff Holste, Materials Handling Editor

Labor Management Systems (LMS) is one of our favorite supply chain related applications. Why? Because of its consistent ROI, and very favorable "pain to gain" ratio.

SCDigest Says:

It seems to SCDigest that as good a solution as LMS has been, its potential value will be even more enhanced with the emergence of multi-channel commerce.

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What is a Labor Management Sytstem? The heart may be the software that reports on the performance of individual associates against discrete standards or goal times for tasks in the DC, but most providers will say that a complete solution requies several other elements in addition to the software tool itself.

Those other elements include:

• Development of best practices or methods for how to do speciifc tasks in the DC

• Development of engineered, discrete standards for each tasks against which performance will be tracked, based on the specifics of each task

• Focused attention on the change management aspects of the program, from how supervisors need to adjust their approaches to smart use of rewards, recognition, and incentives.

It seems to SCDigest that as good a solution as LMS has been, its potential value will be even more enhanced with the emergence of multi-channel commerce. Why? Because LMS will be able to provide very rich "cost to serve" data needed to maximize pricing strategies and driver channel profitability.

Several years ago, we developed a list of the "7 Myths of Labor Management," and thought is was time to reprint that list and add to it a bit.

Below, you will find our new list of the 10 Myths of Labor Management.

1. LMS is not an Executive Level Issue: Some logistics executives have viewed Labor Management as just a lower level warehouse issue. Wrong. The cost savings alone make it worth executive attention, and the ability for better budgeting, resource planning, and execution consistency should also serve to make LMS a key tool for executives to look for supply chain improvements.

2. If I have a WMS, I am getting Labor Management: While a growing number of Warehouse Management System providers now also offer LMS, the traditional productivity tracking capabilities of a WMS do not provide the benefits of a true LMS.

3. Employee Morale Will Go Down: Many companies mistakenly believe that while Labor Management may be good for the company, it will be poorly accepted by employees. The results, however, consistently demonstrate the opposite. Employee morale and retention goes up after LMS implementation, especially if incentive pay programs are used.

4. It Won’t Work Well in a Union Environment: Some companies worry that labor won’t be accepted by a union, or it will cause problems. Again, the evidence is the opposite. Many of the first LMS implementations were in union shops, and there are dozens of examples of successful implementations. Getting union operator involvement early is key though.

5. LMS will Require a lot of IT Resources: While implementation of LMS software and integration with existing systems will take some IT resources, the need and intensity of IT effort is simply minimal compared with most supply chain software projects, and is rarely a significant barrier to adoption.

6. “Labor Management” is an Unenlightened Approach to Managing Associates: Done well, with employee involvement upfront, a strong emphasis on supervisors playing a “coaching” role, incentive pay programs and other elements, LMS can be seen as a very progressive approach to workforce management.

(Distribution/Materials Handling Story Continues Below )

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7. Labor Management Results are Over Rated: Companies often think that stories of productivity gains in areas like case or piece picking of 30-40% just aren’t possible. We won’t go as far as to say they are common, but there are lots of validated stories where we’ve seen those levels. 20% or greater gains in labor intensive areas are the norm.

8. Labor Management is Primarily for Retail-Related Distribution Centers: While it's true that LMS really got its footing and grocery retailing some two decades ago, it has expanded well beyond that into almost every sector. Certainly it has been adopted in many other areas of retail distribution (e.g., The Sports Authority, The Gap, many others), but has been a success in many other industries as well, such as consumer packaged goods (e.g., Kraft Foods, Tyson), 3PLs (e.g., Millard Refrigerated, DCS Logistics), general industrial (e.g., Cummins, Briggs & Stratton), and many others, including even some hospitality companies (e.g., Gaylord hotels).

9. A Large number of Employees are Needed in the DC to Produce ROI: While DCs with more than 100 total associates will deliver a strong ROI almost 100% of the time, DCs with as few as 50 associates across all shifts - and sometimes even fewer - will often see very strong returns We've seen the ROI work for DCs with as few as 35 workers.

10. I Can't Do LMS if I Do Not Have a Tier 1 WMS: Simply not true. While adding an LMS system to a strong WMS provides many advantages, dozens of companies have significantly improved DC productivity by connected LMS either to early versions of ERP WMS that had low levels of functionality, older legacy WMSs, or the most basic of warehouse systems. Most LMSs enable the user to interact directly with the system to begin and end tasks, for example.

If you haven't looked lately, 2012 may be as good a time as any to see if LMS can deliver results for your distribution operations.

What would you add or subtract from our LMS myths? Let us know your thoughts at the Feedback button below.

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11. Labor Management Systems require Engineered Labor Standards: To get the 20%+ performance gains, engineered standards may be required. However, many companies can take a Crawl, Walk, then Run approach to LMS implementations. Engineered standards can be phased in.

12. Labor Management Systems are only needed for incentive pay programs, which we are not planning on: Again, it`s not necessary to achieve the gains depicted. Incentives are definitely not something companies should attempt to tackle on the initial implementation. Reward programs should be considered a separate initiative, designed to be self-funding. However, LMS should be something that is in place for a proper and sustainable incentive program.

13. We have LEAN, Six Sigma or some other “Continuous Improvement Program” already. We don’t need Labor Management: The foundation of any continuous improvement program is work methods and measurement. Nothing does this better than a LMS at supporting this.

14. We don`t need a Labor Management system, we have Time & Attendance tracking hours: Time & Attendance systems do not have the granularity and visibility that an LMS. In fact, many LMS have time and attendance modules that can replace the legacy system, reducing total cost of ownership.

Ultimately, companies that have hesitated to consider a Labor Management program may feel they do not have the time to do. Companies even go as far as to say that they are planning on a LMS, but just haven`t gotten “around to it”. This article should serve those companies as their “Round To It”.

Brian Lindenmeyer
Managing Director of Engineering Services
The Open Sky Group
Jan, 27 2012