October 2012 | Case Studies | DC Solutions

Putting Labor Management Systems to Work

Tags: Logistics I.T., Labor Management

Workers in an APL facility

Using a labor management system to identify training needs allows companies to implement programs and initiatives that help motivate workers toward continual performance improvement.

Many companies dismiss labor management systems as too expensive or unnecessary. But these misconceptions may cause them to miss out on big benefits.

Many supply chain experts extol the virtues of labor management systems (LMS), citing distribution center (DC) operations cost savings of up to 15 percent. These solutions collect worker data, such as inventory handled, equipment used, and paths traveled.

LMS investments may be high on companies' wishlists, but many businesses remain reluctant to take the plunge. In some cases, the reasons for this resistance—such as not having a large enough DC workforce to merit an automated approach—are valid. In other cases, however, the lack of enthusiasm for LMS may be based on outdated or exaggerated perceptions.

Here's a look at some reasons companies cite for not implementing LMS—and the benefits they might be missing as a result.

Perception: A good LMS will be expensive, and we can't afford it.

Some well-known LMS options are indeed expensive, with price tags that can quickly add up to $1 million with implementation and support costs—and extraordinary functionality that can make them worth every penny.

But the current market also includes numerous lower-priced LMS offerings, many of which provide all the horsepower most facilities need, especially in the years immediately following implementation. Mid-range systems cost less than six figures per facility, and work exceedingly well.

Don't assume your company can't participate in an LMS initiative just because it is not prepared to fund a top-tier system. It may be possible to achieve most of your objectives for a fraction of the price. And you can always upgrade later.

Perception: It requires too much time and effort to collect the day-to-day individual performance data an LMS needs.

Detailed, accurate performance data is the lifeblood of an LMS. But unless a facility is starting the process from scratch —and most are not—obtaining this data doesn't have to turn into a work-intensive headache. In fact, if your DC has a warehouse management system (WMS), keeps transaction logs, or maintains other forms of line-item detail, it's probably already gathering much of the information an LMS will need.

Implementing an LMS isn't for the faint of heart, but it is usually more than worth it, especially in labor-intensive industries such as warehousing.

Granted, that information may not be available in exactly the LMS format required. That can be remedied by either opting for an LMS that's part of your existing WMS, or by having your IT personnel create scripting that allows your WMS and LMS to integrate. And should you still have data input gaps, floor-sited, data-entry kiosks are often a viable solution.

Perception: Our company's facilities wouldn't get much benefit from an LMS, because we're already doing a good job of measuring how well our DC workforce performs.

Any DC worth its salt is already monitoring and measuring its productive time. Even so, few are able to do it on the granular level an LMS allows.

Facilities managers who have deployed an LMS often praise the many doors this degree of precision has opened. One manager says LMS allowed his facility to better stratify and set realistic productivity standards, even for those activities that already seemed to have well-defined performance targets.

Another manager expresses surprise at how well LMS helped identify employees most in need of coaching or additional training—and they weren't always the employees he would have predicted. In fact, the numbers revealed that some of the least productive-appearing employees were instead some of the most efficient, because their jobs involved more steps.

An LMS also allows facilities to capture and categorize something other systems and methodologies usually don't: the approximately 15 percent of each shift that constitutes the typical warehouse worker's unproductive time. When this time becomes measurable, it becomes far more manageable—and ultimately more controllable. This area could be where your company finds some of its largest productivity gains.

Perception: An LMS is only useful for reducing non-productive time, and we're already doing that well, so we don't have much to gain.

LMS solutions provide the ability to identify under-performing shifts or individuals. How your company chooses to use this information is up to you.

If you employ it only as a tool to isolate problems and lower the boom on sub-par performers, you may successfully reduce inefficiency. If you use the data to identify and fulfill coaching, mentoring, and training needs, however, you can realize more important gains: improved productivity and enhanced morale.

Although the two intentions may not seem that far apart, the latter is much more conducive to building an operational culture focused on continuous improvement and doing the best work possible. And often, those are the qualities that yield a more dramatic and sustained return on investment.

LMS productivity-enhancing potential can be even more pronounced if your company also uses it to analyze, recognize, and reward employees who are performing particularly well. In addition to motivating them to keep up the good work, it may help you uncover some innovative ways they're performing a task—insight that can help improve standard processes.

It may also serve as motivation for others—because sometimes simply knowing that someone else is ahead is all it takes to encourage a better effort.

Perception: Our workforce won't like having an LMS.

The thought of being monitored and measured can be disconcerting, which is why many companies anticipate trepidation from their workforce when an LMS is introduced. But that doesn't have to be the case.

Be open with the facility's workforce about the upcoming LMS implementation, bringing these personnel into the loop long before engineers arrive to begin setting standards. Educate them about why LMS is such an important tool, how it will enable their facility to work even better and smarter, and why that will support business retention and growth—and, hence, everyone's job security.

Don't underestimate the importance of effectively communicating with your workforce throughout your LMS journey. And don't leave that communication to just anyone—use the expertise of HR and other experienced communications professionals to help ensure you've considered all the nuances.

Should you wish to give your LMS effort an additional dose of grassroots enthusiasm, consider allowing members of your workforce to be the beneficiaries of some improvements it yields. Nothing has the potential to earn an LMS lots of extra fans quite as quickly or effectively as a formal employee gainsharing initiative.

Perception: If an LMS doesn't show immediate results, we didn't make a good decision to use one.

Just as Rome wasn't built in a day, the journey from LMS implementation to efficacy isn't likely to be rapid.

It can take a while to get primary users up to speed, even in an operation that is systems-savvy. And it can take even longer to try out all the capabilities and see how—or whether—they should work at your particular operation.

For example, one facility that has been especially successful with LMS spent several months tweaking its data processes and tasks—and determining exactly how many categories it wanted to measure—after its system was installed. Among the lessons it learned: There is such a thing as too much granularity, which is why it backed off from a high of 44 measures to the 28 in place today.

Just as importantly, the facility spent several more months using the system in tandem with its previous productivity managing tools and getting all its personnel familiar with the LMS before going fully live.

A commitment to operational disciplines is also imperative, because even small matters such as waiting a few days before getting a temporary employee onboarded, or having multiple employees share user IDs, can dilute the validity of the information an LMS provides—and ultimately how well it will work for your facility.

An LMS can work wonders, but only if you pay attention to the fundamentals.

Perception: Considering all these caveats, it's just not worth it.

By now, you probably realize that establishing an LMS isn't for the faint of heart. But here's the good news: It is usually more than worth it, especially in labor-intensive industries such as warehousing, where staffing is typically the largest single variable cost.

From better-running pick lines to more efficient receiving, the rumors of the potential savings LMS delivers are not exaggerated. Nor are the other benefits, which can include the ability to better plan and forecast day-to-day staffing needs, mentor employees, and accurately budget long-term expenses—and to establish a true culture of excellence and efficiency within your operations.

Do your homework. Calculate the return on investment. Look into the options available. And consider doing a pilot to test the concept for yourself. You'll probably be glad you did—and sorry you didn't do it sooner.


David Frentzel is vice president, global contract logistics, APL Logistics.