3PL Perspectives
Bridget McCrea | Logistics Management
The current labor crisis has put a new spin on how logistics professionals are leveraging their labor management systems (LMS) to work more efficiently in today’s e-commerce, omni-channel environment.
Survey the business landscape right now and one thing is very clear: finding and keeping quality workers is getting more difficult for companies in all industries.
The logistics, supply chain, warehouse and distribution segments haven’t escaped the trend with more companies looking to automation, robotics and alternate staffing sources to help them get the job done. Add the uptick in e-commerce and omni-channel distribution to the equation, and the need for quality help goes up exponentially for logistics managers that need the right people in the right place and at the right time.
In an arena where companies like Amazon are holding job fairs and hiring 40,000 to 50,000 new full-time workers in a single day – all with the goal of adding 100,000 full-time workers by mid-2018 – companies can’t wait on the sidelines, hoping that good employees come their way. And according to the recent data, the challenges aren’t easing anytime soon.
The Bureau of Labor Statistics (BLS) reported a drop in the national unemployment rate in April – from 4.1 percent to 3.9 percent (the lowest since December 2000). This puts the United States in the longest, consecutive monthly job growth streak on record, with job growth for 2018 averaging 200,000 jobs per month, according to the White House.
Dwight Klappich, research vice president at Gartner, said that these and other labor trends are pushing more companies to explore labor management systems (LMS) as a way to better manage their workforces. Software that has historically focused on tracking employee activity data and reporting on productivity levels, LMS captures and integrates data from multiple sources, including warehouse management systems (WMS), enterprise resource planning systems (ERP), customer relationship management solutions (CRM), time clocks and other sources.
Driving Up Efficiencies
During the past 18 months, Klappich said Gartner has witnessed a “philosophical shift” from using LMS to monitor the cost of labor to leveraging it as a tool for more closely tracking the availability of labor.
“Now, that doesn’t mean that labor cost is not important,” said Klappich, who points to Manhattan and TZA as two firms that have made inroads in the LMS market over the past few years. “However, the companies that are dealing with a lack of available workers want to be able to exploit their labor management capabilities and drive up efficiencies as much as they possibly can.”
Those logistics operations also want to do a better job of seeing what’s coming down the pike, said Klappich, preparing for those future developments and then having the right amount of labor in place. He added that LMS is helping shippers tackle these tasks, and at the same time is allowing them to develop their hiring, training and retention programs. “This is a different tack for LMS, which has historically been tasked with helping shippers squeeze as much effort as possible from their existing workforces, identify their best workers, and single out their low-performers – and then subsequently replace them.”
The overall goal, said Klappich, was to eke the maximum return on every labor dollar and then use the data generated by the LMS to drive up productivity, reduce headcount and save money. For example, a company might have set its sights on a 10 percent reduction in labor. At a cost of $54,000 per year, per employee, that would equate to at least $540,000 in savings over a 12-month period.
However, in the current business environment, that focus has shifted considerably. “Now it’s really more about monitoring your labor force to make sure that: ‘hey, we’re living up to expectations,’” said Klappich, who notes that labor costs continue to be an issue for companies, albeit a lesser one than, say, finding and retaining workers for the warehouse or DC.
Embarking on the Journey
When LMS was still primarily used to offset labor costs, shippers needed a fairly decent-sized labor pool before they could justify the software’s cost. “It was kind of limited to companies that had 100 or more employees,” said Klappich. “In general, it wasn’t until someone had enough of a labor force in place that they could see the advantages of putting the time, effort and expense into the software implementation.”
For example, a shipper that utilizes its LMS to determine that its employees are wasting 90 minutes a day on non-core tasks – multiplied across 50 workers – can use that data to make better use of its workforce, versus just hiring three or four new employees to cover the 75-hour gap. Because today’s cloud-based LMS can help firms identify, calculate and assess these shortfalls, Klappich said that his sector of the supply chain software market will “widen dramatically.”
Another historical roadblock for LMS adoption was the fact that the engineering labor standards it relies on took time to build out, monitor and perfect. Put simply, LMS is not a “one and done” type of implementation, nor does it have a definitive start and end point. “This is a journey,” said Klappich, “that requires a significant investment over time to ensure that standards are up to date and adapting them as the business changes.”
Responding to Real-Time Situations
With automation, robotics and the Internet of Things (IoT) all working together to help lessen shippers’ reliance on human labor, Norm Saenz, Managing Director at supply chain consultancy St. Onge Co., said that LMS continues to play an important role in helping firms effectively control and manage their labor forces.
“Adoption is on the rise,” said Saenz, “and we’re definitely still seeing the trend of LMS being used in the marketplace to help deal with the competition for labor and the fight to stay productive while having high throughput and quick turnaround.”
In many cases, LMS implementations are being driven by an overall need to automate the modern-day warehouse, where many firms still rely on spreadsheets, paper and phone calls to manage their day-to-day operations. Saenz, who recently worked with a large food manufacturer to implement a WMS and LMS, said the latter still tends to be integrated into larger software implementations.
“We do have projects that are LMS-driven, so it’s not like that’s not happening in the market,” said Saenz, “but for the most part labor management isn’t the leading project – the focus is more on warehouse automation redesign.”
Coupling WMS and LMS
As LMS continues to play a more integral role in shippers’ labor management approaches, the software itself is also maturing and morphing. For example, Bob Hood, a Capgemini Principal and Lead for the group’s Move Domain practice, said the lines between WMS and LMS continue to blur.
“Traditionally, shippers have implemented WMS and used it to straighten out their processes and improve efficiencies,” said Hood, “and then subsequently added LMS.”
According to Hood, this approach began to change in 2017, and has since shifted to a completely different mindset. Pointing to Manhattan’s decision to no longer sell LMS as a stand-alone software package, Hood said that the industry is moving to a place where labor management is incorporated into larger, WMS software implementations.
“These two have always been tightly coupled,” said Hood, “but the notion of waiting to add LMS is really no longer appropriate given the significant benefits that can be derived from the capabilities that labor management provides.”
According to Hood, the need to more effectively manage labor in the current hiring environment is also pushing shippers to think about LMS right out of the gate versus after the fact. Whether they’re trying to retain a core workforce, manage temp labor, or build out bench strength, the more data shippers have to work with about those individuals, the better. “Shippers are having to get a lot more aggressive in terms of how they’re managing their workforces,” he said, “and how they deal with casual or temp labor, anticipate labor requirements and avoid overstaffing.”
Consider, for example, the shipper that relies on a temp workforce to carry it through its high seasons, but that’s forced to deal with a completely different “crew” of people from day to day. From the training perspective, getting those individuals up to speed quickly puts a lot of pressure on facility managers who no longer have the luxury of being able to monitor worker activity from a desk situated in a shipping or receiving office.
“Those managers have to be out among the workforce doing real-time training and real-time coaching with the workforce and need to be able to use a tablet or mobile phone to supervise the facilities and monitor performance,” said Hood. “Using LMS in real-time, managers can be detecting areas of imbalance and make adjustments as yet another defense mechanism for this labor situation.”
Going forward, the rise of the “gig economy,” or hiring more temporary workers for short-term engagements, is another trend that will only increase a manager’s need to work without wires and use LMS to supervise and interact with employees on the fly. “It’s about putting tools in the managers’ hands,” said Hood, “and allowing him or her to be out among the workforce in a very dynamic, real-time basis responding to situations as they occur.”
Bridget McCrea is a Contributing Editor for Logistics Management based in Clearwater, FL. She can be reached at [email protected], or on Twitter @BridgetMcCrea.
Reprinted with permission of Logistics Management, a Peerless Media LLC publication.
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