WAREHOUSE/DC MANAGEMENT Labor Management: Beyond the punch clock BY MAIDA NAPOLITANO, CONTRIBUTING EDITOR While adoption remains low, savvy managers are putting engineered labor standards and related labor management systems to work to jumpstart productivity and gain a new level of operational visibility. Here’s how they’re getting it done. I ntegration with warehouse management systems (WMS)…check. Integration with time and attendance, radio frequency (RF), and voice systems….check. Smart phone and tablet support…check. Web interface and access to cloud computing and storage….check. Clearly, today’s top labor management systems (LMS) are keeping up with the times, evolving from basic standalone systems into sophisticated, packaged WMSLMS solutions geared towards offering real-time visibility of tasks occurring within the four walls of a warehouse or distribution center (DC). In fact, all of these functionalities have been developed just to make it easier for logistics professionals to manage one of the most complex components of the supply chain: its workforce. As such, Tom Stretar, practice leader for enVista, a supply chain consulting irm and LMS integrator, sees labor management as only growing in importance primarily because of how it improves overall performance. He speculates that operations that are not using any form 64 LOGISTICS MANAG EM EN T WWW.LO G I STI C S M G MT.C O M | August 2012 Labor management systems (LMS) Usage/Plan to buy 100% Analysts speculate that operations that are not using some form of LMS are only operating at 60 percent to 75 percent of potential. However, according to Logistics Management’s 2012 Software Users Survey, LMS adoption is not high on reader’s lists. 80% 60% 40% 20% 19% 15% 5% 0% In use Plan to buy/ upgrade Use/plan to buy (NET) Source: Logistics Management, Peerless Research Group (PRG) August 2012 | WWW.LO G I STI C S M G MT.C O M L O G I S T I C S MANAG E M E N T 65 Warehouse/DC Management: LMS “What we also ind is that people then become more creative, with many taking the initiative to improve processes because they want the incentive.” Parker warns that incentive plans may not be as effective in an environment where overtime is commonplace. “Incentive pay must be more lucrative than overtime,” says Parker. “One should minimize overtime for several months before implementing incentive pay.” He also cautions that incentive pay should never be tied to productivity alone. “Quality, service, and safety are also part of an effective incentive pay system.” Improving workforce planning With seasonality, demand volumes can fluctuate. LMS provide supervisors with a scheduling tool that can deine shifts and work schedules. It also allows them to evaluate current and future stafing levels based on both historical and actual work assignment data. “I know that I have 2 million cases coming in next year,” says Welker. “I know my teammates can pick about 200 cases per hour based on my LMS data. I can then determine how many teammates I need on the floor.” Levels of LMS performance (Engineered Performance Management) >115% 95-115% 85-95% 75-85% Incentive compensation Individual productivity reporting with discrete engineered standards, advanced productivity reporting Workload forecasting/manpower planning and individual productivity reporting with multi-variable standards Area productivity reporting and historical standards 60-75% No reporting and no measurements in place Source: enVista Performance targets that can be achieved at different levels of LMS application. GENCO ATC’s labor management edge GENCO ATC IS THE SECOND LARGEST, privately held, non-asset based, third party logistics provider (3PL) in North America. The company runs distribution operations for a wide variety of customers at over 130 sites, employing about 10,000 “teammates.” Until about four years ago, each site was on its own in terms of labor management, mostly tracking workforce performance manually. In 2008, this 3PL provider recognized the growing need for its customers to focus on more productive labor and to identify opportunities for improvement. It decided to invest in a team that would be responsible for overseeing the implementation of labor management solutions at sites driven to achieve higher levels of workforce efficiency. “Our process is to go to a facility, do an analysis of that operation, and identify the opportunity to put in an LMS,” says Melinda Laake, the 3PL’s director of labor management. “For some of our 66 LOGISTICS MANAG EM EN T smaller facilities, if we find that cost prohibitive, we use other technologies to help us systematically track performance.” On occasion, the team would bring in consultants such as enVista, a supply chain consulting firm and LMS integrator. Since its formation, the team has implemented LMS from three leading software providers at 15 different sites around the country. Many of the sites have engineered labor standards in place, some have gone a step further with the implementation of incentive programs. Aside from tracking labor, sites use the data from the LMS to primarily reduce indirect or nonstandard time. Supervisors run reports on a daily basis, constantly looking for opportunities to reduce and eliminate this nonproductive time. They also export data from the LMS into an Excel format to create budget reports and compare them to where they should be on standard. Any gaps are immediately addressed. “We’ve also used the LMS to identify potential opportunities for re-slotting,” adds Laake. “If we see that picking has gone above a 75 percent travel component, then it gives us an opportunity to re-slot that area and reduce travel times.” GENCO facilities across the country have been reaping the benefits of their LMS. On average, labor performance at LMS sites have improved 10 percent to 25 percent—with incentives, it’s up 20 percent to 30 percent. Before, some sites used to bring in additional temps to handle volume fluctuations. Now, many operations are able to keep the same number of teammates and equipment to handle upticks. Laake warns, however, that these systems do not necessarily solve the problems in an operation. “This is a tool to provide the information to solve the problems in the operation—and that’s an important distinction.” —Maida Napolitano, Contributing Editor WWW.LO G I STI C S M G MT.C O M | August 2012 Warehouse/DC Management: LMS Even when initiating a new process, managers can use a combination of historical data and predetermined time standards from the LMS to project the time it takes to complete a task and then calculate the number of workers needed. Developing more accurate costs With an increasing number of value added services being performed at the DC level, many don’t have a good feel for how much they should be charging. More managers are using their LMS to determine exactly how much it costs to ship merchandise through their warehouse and to determine what they need to break even or to realize speciic proit margins. “The system allows the operator to apply cost values to the goal or standard times; thereby, calculating the true cost of performing the task,” says Parker. Parker notes, however, that most LMS are still limited in their ability to process this data within the system, as providers have yet to build a solid module around activity costing. For now, many simply extract LMS data and enter them into custom spreadsheets to develop detailed budgets and costing reports. Simulating “what-if” scenarios With input from the LMS, operators can simulate changes in equipment, processes, or layouts within a facility in a virtual mode to determine the impact on productivity. “Before investing thousands of dollars,” says Parker, “why not take those same orders, reload them into a test environment in the LMS, and compare how many standard minutes it takes with your new layout.” By simulating within the LMS environment, managers recognize the credibility of the simulation results, making it easier to get approval for any upfront capital. However, Parker notes that not many LMS providers offer this option within their system. “We typically have to extract the data, mimic databases, and request assistance from IT personnel to help process the data.” Tips for implementing According to Stretar, LMS implementations usually involve working closely with employees on the floor to improve the operations. “We usually try to optimize August 2012 | WWW.LO G I STI C S M G MT.C O M an operation in conjunction with implementing the software. We then build and audit the standards for that operation,” he says. Incentive programs can then be initiated once the standardized operations have somewhat stabilized—typically after two to three months. Parker believes that the most impor- tant aspect of any LMS implementation is really its change management. “There’s going to be resistance,” he says. “It’s important to educate workers on the system from the very beginning.” —Maida Napolitano is a Contributing Editor to Logistics Management On Schedule, Under Budget, OverͲtheͲTop Service! 2012 2011 2010 2009 2008 2007 2006 2005 That’swhatyouexpect fromyourtransportaƟonservicepartner. That’sexactlywhatTripleCrowndelivers.           Servicethat’swonyourvoteoftransportaƟon excellenceforeightstraightyears. YearaŌeryear,thereasonremainsthesame: TripleCrownprovidesoutstandingvalueandservice.  7KDQN\RXIRUDOORZLQJXVWRVHUYH\RX  DeliveringAmericawithhybridtechnologysince1986 800Ͳ325Ͳ6510 www.TripleCrownSvc.com L O G I S T I C S MANAG E M E N T 67 Copyright of Logistics Management is the property of Peerless Media and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.