By Caroline White | May 20, 2021
Labor, on average, accounts for 70% of a distribution center’s annual budget. When looking at a cost saving measure, a Labor Management System (LMS) is an appealing option in most facilities with a sufficient number of employees. From identifying productivity bottlenecks to rewarding and thus retaining well-trained, motivated employees, an LMS can cut costs from all portions of a budget. A study found potential savings of up to 7% of total labor for a 3PL with a customized LMS system. Implementation of an LMS has some considerations that are not inherently obvious. While the financial benefit of any labor reducing project makes an LMS appealing to implement at facility launch or when a new WMS is implemented, a delay is recommended. This time should be used to gauge baseline improvement from the WMS system and to have associates learn the new process flow.
Once these baselines are established, a design phase for the LMS should be focused on these key points:
- WMS integration: Most tasks in a warehouse are time-dependent based on the SKUs being processed and not every slow-down is a labor issue. By integrating an LMS into the existing WMS, individual shipments can be tracked, and insights can be developed. For example, a carrier may be loading a certain product poorly on one in four shipments leading to increased receiving times for those SKUs. Without proper metric tracking, these issues will continue to plague the facility. Some LMS systems are fully integrated into the base WMS, and others will require additional effort to implement. Additional integration can be performed with any robotics or warehouse control system (WCS).
- Labor studies for current processes: Establishing baselines and best practices should involve both associates and management. Oftentimes, the ‘ideal’ process drawn from a manager is not the current process used by associates on the floor. Initial bottlenecks and labor excesses can be discovered and remedied even before an LMS is fully implemented.
- Design for all contingencies: Like all systems used for determining metrics, there will be ways to exploit the system. Designing a system requires management and the design team to find and remove as many of these as possible. While no system will truly be perfect, the best systems have few abuse cases and those can be clearly monitored by floor managers. For example, an associate belonging to multiple teams may be allowable in some use cases, but there should be a clear protocol for when and how that time should be counted. Another consideration is the reassignment of team members. If being placed on another line due to a setback in the process flow denies an associate the ability to be rewarded for their time, they will be hesitant to step in and a small slow down in a single line can become a full facility stop.
- Counting at the individual level with roll-up capability: To assure accountability, individual performance is an essential measure. Preferably, an LMS will have a roll-up plan, where each team and the larger facility will also have performance metrics. One of the main benefits for an LMS comes in personal responsibility, but a top-down approach can also provide performance improvements.
- Continuous improvement: An LMS will not solve every problem immediately. While identifying bottlenecks and overages is a key piece of any LMS, a long-term view must be taken for productivity improvements. Slowly increasing benchmarks toward a final goal during go-live and the first few months of operation will give associates time to adjust to the new system.
- Preventing workarounds and encouraging participation: An LMS is only as good as the data it collects. If associates are sharing logins, logging in as an administrator to avoid red tape, or simply not using the system, any insights gained are immediately questionable. Mandating use of the system for all employees and ensuring that the login and use of the system is quick and efficient will be essential to the long-term success of an LMS.
Interested in learning if an LMS implementation is right for your supply chain? Reach out to one of our subject matter experts today at firstname.lastname@example.org to start the journey of realizing your supply chain potential.
Contributor: Ryan Salmon, Supply Chain Consultant at Bricz