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Micah Fairchild Is Your Organization Ready for a Warehouse Labor Management System?

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 By Micah Fairchild

Do You know What's In Store? Wising Up About Warehouse Labor Management Systems

After slugging through a slow recovery, the improving economy is allowing companies to finally address those projects that have been waiting in the wings. On the top of quite a few lists is that of logistical upgrades (or even first-time investments) such as Warehouse Labor Management Systems. In fact, a recent Aberdeen study (Warehouse Management Excellence: Maximizing Resources and Efficiency) found that "companies are looking to both increase efficiency of software and automation across the entire distribution network…to allow for better planning of physical space/locations and labor". Top reasons (as reported by Aberdeen) for companies jumping on the labor management system bandwagon?

  • 45% (of 158 companies) need to support sales growth without adding more labor or space resources
  • 31% are trying to better use historically under-utilized resources
  • 28% are constrained by space and throughput

What do these Labor Management Systems Entail?

Whether it's your employees or your managers, patterns will emerge as to how best accomplish a task or allocate resources. In a warehouse labor management system, these patterns are assessed to see which ones work best. Often referred to as "engineered labor standards", these "best" patterns are then used to accurately identify warehouse inefficiencies—whether it be packing/shipping, receiving, picking, or any of the other numerous processes associated with material flow. Best-in-class systems take this data one step further by analyzing visibility, work-load balancing, planning, and ultimately optimization for customer turn time.

The trend that is appearing of companies re-centering on logistical issues like warehouse management is in direct correlation with the global focus on customer relationship management (CRM). Indeed, Bob Heaney of Aberdeen says, "Today's leaders, more than ever, have mandates to reduce distribution costs while improving the frequency of delivery without diminishing the accuracy of shipments and customer service". As such, managers of those warehouses are looking towards solutions that allow for proactive planning, accurate forecasting, and flexible inputs for labor and resources. Warehouse labor management software provides just such a solution. In fact, companies are leveraging warehouse LMS for about everything you can think of, including:

  • Reporting functions for labor performance analysis
  • Shift scheduling (by week, month, quarter or flexible periods)
  • Identification of employees in need of performance improvement
  • Real-time monitoring of individuals and groups
  • Tracking/paying incentives (performance pay)

Why You Should Care About Warehouse Labor Management Systems

A 2009 study by Infor states that labor can make up nearly 50% of the operating costs, citing that an integrated labor management system can reduce those labor costs by up to 30%. A 2010 study by Gartner, took these stats even farther, indicating that typical warehouses operate at "50-70% of optimal performance" outside of using a labor management system. And just so we're clear, those "typical warehouses" may well already have a decent warehouse management system and productivity tools in place!

Add in performance pay (based on those engineered standards) and according to Gartner's Dwight Klappich, a warehouse can move to, "110-120% of optimal levels for true best-in-class performance". Further, 2011 Aberdeen research found that "best-in-class" organizations wound up reducing total warehouse operating costs by 3.6% (as compared with the previous fiscal year). While systems to deal with warehouse labor data have certainly been around for some time, it's hard to argue with research that supports such significant differences between have and have-not organizations. Perhaps this is the reason why such a wide swath of industries is represented in studies like Aberdeen's. In fact, a 2010 survey conducted by Modern Materials Handling found that Transportation/Warehousing Services, Food & Beverage, Retail, and Automotive industries were all well represented in warehouse LMS adoption. Further, companies ranging in size from less than 40 to 1000+ employees are apparently seeing benefits from this kind of business software.

Labor Management Software Bottom-Line

Gartner's Dwight Klappich remarks that, "Most users with over 100 workers in their warehouses in the U.S. should evaluate or implement an LMS based on engineered standards". Indeed, the product market for warehouse labor management software solutions has brought together a veritable compendium of best practices and is in a place that will likely address any and all warehouse business needs. Still, don't think though that a LMS deployment on its own is enough to enact the results described above. As with many enterprise software initiatives, business strategy and change management must be taken into consideration, with specific consideration given to end-user buy-in. As Aberdeen's Bob Heaney puts it, "It should be noted that while the Best-in-Class are leveraging and balancing cost and service, they do not stop with just investing in the best solutions." End

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While systems to deal with warehouse labor data have certainly been around for some time, it's hard to argue with research that supports such significant differences between have/have-not organizations".


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