Labor management systems improve warehouse productivity, but users slow to adopt

Supply chain execution (SCE) software vendors say they have a quick way to get warehouses operating at peak efficiencies, but industry experts warn that this approach is not necessarily easy, which is making companies reluctant to sign on. The answer, according to the software vendors, is to implement a labor management system (LMS), which typically comes with an embedded set of bes...

06/01/2006


Supply chain execution (SCE) software vendors say they have a quick way to get warehouses operating at peak efficiencies, but industry experts warn that this approach is not necessarily easy, which is making companies reluctant to sign on.

The answer, according to the software vendors, is to implement a labor management system (LMS), which typically comes with an embedded set of best specific task practices and key performance indicators. Such a system can bring a warehouse to 100-percent potential capacity almost immediately, according to Paul Wolf, VP of workforce performance management for SCE vendor RedPrairie . Wolf says most warehouses operate at roughly two-thirds of their potential capacity.

RedPrairie calls its LMS DLx Labor, and bills it as the heart of its workforce performance management suite. The application measures the performance of workers against "preferred methods" for completing tasks, and reports the results to both the worker and management. The goal, Wolf says, is to get workers to perform tasks in the best and safest way every time. "That's where you really see the efficiencies," says Wolf.

When engine maker Briggs & Stratton implemented the RedPrairie suite, including DLx Labor, at its Menomonee Falls, Wis.-based distribution center, productivity went from 67 percent to 100 percent. Within a month, the company reduced its workforce 18 percent while increasing pick, pack, and ship throughput. It also increased packaging productivity 20 percent within the first two weeks of implementation, leading to labor savings of approximately $1 million per year.

In spite of such results, many companies choose to do without a LMS due to its cost, says Tom Singer, a principal with supply chain consultancy Tompkins Associates , Raleigh, N.C. "There's a positive ROI, but there's also a heavy investment in licenses and integration that put the systems out of the reach of many smaller operations," he warns.

More than that, developing best practices for each task may require the help of an industrial engineer, says Singer, adding, "It's a ton of work to set up."

For many companies, such systems are low on the priority list for improving warehouse operations. "They don't see labor management as a core competency, and want to spend the money on other things," says Singer.

That is not to say that the market for LMS isn't growing. Other supply chain execution vendors, including Manhattan Associates and HighJump Software , offer LMS applications.

Steve Banker, director of supply chain management at Dedham, Mass.-based ARC Advisory Group , says LMS is just now breaking out of its core niche in food & beverage retailing and into markets such as office supplies and sporting goods. He predicts an 11.5-percent compound annual growth rate over the next three years.

Ironically, LMS adoption in manufacturing may be slowed by automation itself. "The higher the labor content of what you're doing in a factory, the more benefit an LMS brings," says Banker. "The more automated a factory is, the less it needs it."





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