Supply Chain & Logistics Technology: Step Up Your LMS Practices

As the highest expense for any warehouse or distribution center (DC) operation, labor can be difficult to manage, orchestrate and properly budget. In today’s fast-paced distribution environment, everything from e-commerce demands to omni-channel fulfillment to seasonal sales fluctuations can make labor management even more challenging.

For many logistics operations, labor management systems (LMS) offer the right mix of monitoring, reporting and performance needed to improve workforce productivity and plan more effectively. A blend of software and engineered standards, LMS captures worker activity data and offers the most effective way to perform specific tasks.

Used mainly within the four walls of the warehouse and DC, LMS uses those metrics to track productivity for individual employees or for groups of workers and is generally integrated with existing warehouse management systems (WMS) and other enterprise systems. The software helps managers identify labor expenditures, optimize workforce productivity, and compare activity against both established labor standards and their own internal, historical data.

According to Don Derewecki, senior consultant with supply chain advisory firm St. Onge, the complexities and speed associated with omni-channel distribution and e-commerce have pushed more shippers to improve their labor management practices.

“A lot of companies are now having to service multiple channels, with e-commerce being the main ‘elephant’ in the room at this point,” says Derewecki. “As a result, more sophisticated logistics management systems are coming into play, such as LMS, and are allowing logistics managers to improve their planning, execution and efficiencies across different channels.” Let’s look at how to step up your LMS practices to keep up in today’s omni-channel world.

Step 1: Know it’s time.
As a software application that manages human resources within the warehouse or DC environment, LMS tends to come into play once an operation grows to the point where its labor costs are high enough to warrant the software investment.
Purchased either as best-of-breed applications or as modules that are integrated within a WMS or other supply chain execution platform, LMS is known for its ability to increase labor productivity within high-volume DCs.

The first indication that a company needs LMS are rising labor costs. “That’s the first trigger,” says Derewecki.

Other key indicators include unsatisfactory inventory levels, late and short orders, and the inability to find items within the warehouse. “If you have high error rates on the orders going out to customers, it’s time to consider LMS,” says Derewecki.
“In today’s business environment, customers are becoming intolerant of shipping errors.”

Finally, if order cycle times are too long—a major no-no in the current e-commerce, omni-channel environment—the standards and optimization associated with LMS can help correct the problem. 

Joe Vernon, senior manager, North America supply chain technology for Capgemini, says that he’s seeing more shippers asking for LMS as part of their overall WMS implementations, upgrades or replacements. “Labor or workforce management seems to be ‘coming along for the ride,’ so to speak,” he says.

And those shippers that already have a WMS in place—and that are now feeling the pressures of omni-channel and e-commerce—are now looking for newer warehousing systems that include LMS. “Overall, labor management software looks to be alive and well,” Vernon says, “and on everyone’s minds as they’re implementing WMS.”

In most cases, LMS implementations are being driven by the need to save on labor costs. However, Vernon says that LMS “redos” are also popular right now, and are usually based on a shipper’s realization that—even though it has a labor management system in place and operating—it may be able to squeeze out more productivity or savings with a few system tweaks. And because labor comprises such a large percentage of the average warehouse’s budget, even small improvements can produce notable results.

“Companies are going back and putting labor through the wringer again to see if they can reset their standards, review their assumptions, and re-engineer some practices in order to get their labor management processes to the next level,” says Vernon.  “We used to see this happen with WMS—with companies going back in and looking at their picking strategies and rules, and then doing ‘optimization upgrades’ to get even more out of their systems. Now they’re doing the same thing with labor.”

Step 2: Add tools and functionalities.
Metrics and analytics are on the minds of most shippers these days, including those that use LMS to squeeze maximum productivity out of their warehouse and DC labor forces.

“LMS vendors are definitely feeling the pressure to embed some type of predictive analytics into their solutions,” says Vernon, who sees such demands making an impact on most of the supply chain software sectors right now.

“Predictive analytics is starting to flow down in the supply chain from the planning and forecasting, and it’s making its way down into WMS,” says Vernon. “When it gets there, LMS—which has traditionally had a ‘planning and execution’ presence—will need to provide more smart functionality. It’s going to be asked to do even more.”

For example, shippers will want to know what’s happening on the labor front in real-time, and will want to be able to respond to it immediately and without having to “run a bunch of analytics through a warehousing or business intelligence tool,” says Vernon.

Going forward, Vernon says LMS may also incorporate warehouse- and DC-specific functions like wave picking, where different pick cycles and pick-pack times can be tracked in real-time. Shippers will be able to quickly determine if a shift is running below a certain rate—versus a pre-determined, standard rate—and will be able to respond dynamically by reconfiguring the next wave.

“This is already happening in the omni-channel planning and forecasting space, and it’s where LMS needs to go too,” says Vernon, whose customers are already asking for such functionalities from their labor management systems. “The idea is catching on, and it’s time for it to happen.”

Dwight Klappich, research vice president for Gartner, expects the LMS of the future to be more “descriptive” in nature, or focused on after-the-fact reporting that’s based on solid analytics. If two workers on a specific shift operated below the determined standard—but are both still very valuable and important workers—a dashboard would alert DC managers to the problem and allow for quick diagnosis, resolution and decision making based on the data.

“This is an area that’s been lacking in LMS, but that shippers are beginning to ask for,” says Klappich. One forklift operator, for example, may effectively beat productivity standards—but at the risk of safety—while another may follow all safety protocols but may not operate as quickly as the first operator. “Using LMS, managers will be able to dig a little more into the ‘how’ and the ‘why’ that’s taking place behind the scenes,” says Klappich, “and not just the ‘what.’”

Klappich also expects LMS to help shippers become more proactive with labor planning—a benefit that will be particularly useful for companies that deal with seasonal sales fluctuations and irregular schedule requirements. “Companies are definitely getting interested in this as an LMS functionality,” says Klappich, “instead of just using the software for ex post facto or Big Brother-type reporting on their labor forces,” says Klappich.

Step 3:Understand your needs and what’s out there.
As more companies get involved with omni-channel distribution, Vernon expects an increasing number of shippers to adjust their warehouses to fit that and other emerging business models.

As part of that effort, he predicts more companies will pay attention to labor management and the technology that supports it. “When you start looking at how much Web inventory you have in your building, or what your store footprint is, it has an impact on your LMS,” says Vernon, “and pushes you to re-examine and refine your labor engineering standards.”

To logistics professionals who feel inadequate labor management may be taking a toll on warehouse productivity, accuracy and profitability, Derewecki suggests it’s time to document system support needs. “Get as detailed as possible with performance specifications,” he says, “and then narrow those needs down as much as possible.”

Next, talk to LMS vendors about their offerings as well as other managers who are already using the solution successfully in their own operations. “Have the vendors conduct an onsite visit to walk through your operations and talk to your key employees, including logistics professionals, sales and marketing staff, and finance employees,” adds Derewecki. “All of these people will have a vested interest in the system’s success, so make sure they’re involved and onboard with the project.”