Mention labor management systems, and most warehouse managers probably think of their warehouse management systems (WMS).

A WMS after all determines the best way to pick orders utilizing all the resources available, including labor. But there is a difference between directing the activities of a work force and managing that labor.

"A WMS will generate the optimal picking sequence given all of your constraints," explains Dara Gault, business development leader for labor management for RedPrairie (877-733-7724, www.redprairie.com). "But a WMS won't tell you how much labor you need to do that work; it won't give your operators a completion time to do that work based on labor standards, and it won't tell your associates what to do next if they run out of work."

Those are the jobs of a labor management system. They extend the gains that a facility is already getting from a WMS, especially in large and complex distribution environments.

"A 20 percent reduction of direct labor costs is a conservative figure," says George Bishop, senior vice president for LxLi (416-621-9292, www.lxli.com), a provider of stand-alone labor management systems. "We have seen reductions of up to 50%."

Bishop contends that the savings from a labor management system aren't limited to just lower payroll costs. Fewer workers also translate into fewer pallet jacks, fewer battery changers, or increased throughput within the existing facility and work force. "These are tangible savings that often aren't taken into account when people are implementing a labor system," Bishop says.

Labor management systems are not new. Low margin industries like wholesale food distribution have used them for years to maximize productivity and with excellent results.

Now other industries are discovering the advantages of labor management, especially in very large facilities. "If you have a 100,000 square foot warehouse with twelve people picking orders, the payback may be too long to justify a system," says John J. Sidell, principal and co-founder of ESYNC (419-842-2210, www.esync.com). "The larger and more complex your orderpicking environment, the more benefit."

Still, labor management is a well-kept secret. "I think 80% of users could benefit just from the better forecasting and planning that you get from a labor management system," says Ronald D. Riggin, chief technology officer, MARC Global (800-876-3667, www.marcglobal.com). "And I would estimate that only 30% are using it."

Those returns come from three distinct components for a labor management system: labor planning, execution and reporting.

The creation of labor standards is the first step toward realizing the benefits of labor planning.

One approach is to create a "macro" standard based on statistical metrics: using the historical records of significant drivers like the number of locations visited, the number of cartons created, and the number of units picked to fill the average order, the system determines that the facility picks an average of 1,000 orders with ten workers during a ten hour shift, or 1 order per hour per employee. Using that standard, the system then determines how many operators will be needed to pick orders on the next shift.

The second approach is to create a "discrete" or engineered labor standard. An engineered labor standard breaks down each process into its component parts. Then through time motion studies and work sampling, the system determines how long it takes to safely complete each component of the task.

When planning the amount of labor it will take to fill a wave of orders, the labor management system will then take into account variables like the engineered labor standards for every task required to fill the order. It also takes into account the travel times required to get from location to location, lunch, coffee and personal breaks, the limitations and constraints of equipment and automated systems, and even the weight, cube and type of packaging required for the orders.

"Based on those variables, the system calculates the number of people required to fill the orders, and the time required for every task," Bishop explains.

Once a labor plan has been created and work has been released to the floor, the warehouse management system optimizes the orderpicking tasks.

Labor management, however, still plays a vital role by monitoring the execution of the labor plan.

At the highest level, the system provides dynamic information to management about the shift's progress. "The system is monitoring the warehouse to see if bottlenecks are occurring and provides the tools to alleviate a problem," says Prashant Bhatia, director of product management, Manhattan Associates (770-955-7070, www.manhattanassociates.com). "It can also tell a manager how much work is remaining and whether the facility is ahead or behind schedule. A supervisor then has the ability to reassign work in the system based on what's happening."

At a micro level, a labor management system monitors the performance of individual workers in real time. This is especially important for facilities with incentive-based compensation programs. "With a labor management system, you can provide real-time motivation to the people doing the work," says Gault of RedPrairie. Workers can see how they're doing against the standard for their tasks displayed on their scanning devices. "You're also presenting that information to supervisors who can follow up in real time on poor performance, or give someone a pat on the back," Gault says.

While many companies do provide real-time feedback to operators, others use the system to monitor performance without displaying goal times, according to Siddell of ESYNC. "The more progressive companies we work with believe that their operators are most efficient if they know they're being monitored but aren't given real-time access to their performance," says Siddell.

Performance management is the last component of a labor management system. "Simply put, the system measures how well we did," explains Rob Sweeney, vice president of solutions engineering, Yantra Corp. (978-513-6000, www.yantra.com). "The best measurements are the ones that are most specific and the most granular."

For example, picking a case might be viewed as one task. In reality, it probably involves picking from a pallet location, sending that product to a drop off location, repalletizing on a new pallet, and sending that pallet to the shipping dock.

"The system can track the performance of each of those individual tasks to identify where individuals or the processes are working best and where bottlenecks are occurring," Sweeney says. "That information can also be used to redefine labor standards when order profiles or processes change."

The measurement function also provides a tool to audit employee performance for shops with incentive-based compensation programs, like pharmaceutical distributor AmerisourceBergen (see box on page 44).

Those are just some of the reasons that labor management is expanding today. "A tough economy has caused a lot of people to look at their supply chains to see what can be done," says Bhatia of Manhattan Associates. "That's putting the focus on optimizing labor."