The food and beverage industry has traditionally operated on tight margins. It is no surprise, then, that labor management systems (LMS) found a home early on in many companies’ operations. However, in recent years, LMS has gotten more attention from other sectors as operating costs have come under increased scrutiny, explains Peter Schnorbach, senior director, product management at Manhattan Associates.
LMS vendors have also changed, he says. “The current market is basically split into two types of vendors,” Schnorbach explains. “There are vendors like Manhattan Associates that sell labor management as part of a broader suite of supply chain products; and there are consulting firms and others that tend to sell labor management as a standalone solution.” The market for standalone labor management is shrinking, though.
“We’ve noticed that in the past few years, our customers have started buying labor management as part of a larger WMS product suite,” says Schnorbach.
HighJump Software, another major player in the LMS space, confirms this trend. In their white paper, entitled, 5 Reasons You Can’t Afford to Postpone Your Labor Management Project (see sidebar), the vendor states: “Many companies wonder if they need a WMS to implement a labor management system. Even though an LMS does not require a WMS, you will see the greatest level of benefit if you have both systems. Some companies implement only an LMS, while others add labor management to an existing WMS. Combining WMS and LMS provides a full solution for managing and planning labor activities. In addition to product information, the WMS provides the LMS with tasks such as pick plans, and activities such as shipping, receiving, etc. The LMS can then calculate time for each task or activity and provide real-time and historical visibility to actual versus standard.”
The case for LMS
Despite the workforce productivity gains that LMS delivers, the application is not an easy sell for some companies. Schnorbach says when he does encounter resistance it tends to come from companies who fear their employees will view LMS as “something that is constantly looking over their shoulder.” In fact, LMS not only gives a more accurate measure of what’s going on with labor resources, the results can be used to establish incentive programs that reward workers.
“Companies tend to measure their employees by averages,” says Schnorbach, “For example, the number of units picked per hour. They are not taking into consideration that one employee may be picking really heavy items at the farthest corner of the warehouse, which means more travel time and physical exertion, versus an employee who is picking really light items right up front. If a company is measuring units picked per hour, they are measuring unfairly. In addition, some employees figure out how to get the easier assignments. They know how they are being measured, so they take assignments that make them look good.”
When a company can effectively communicate to employees that LMS is more objective, it begins to become much more acceptable. “It comes down to proper education,” says Schnorbach.
Naturally, monetary incentives are also very persuasive. “We’re seeing a lot more companies take this route. That is, if you work harder, you get paid more,” says Schnorbach. “Ultimately, the company is lowering their cost of goods sold because they’re producing more goods per hour. They can share some of that gain with employees. It’s a win-win.”
There is a psychological component at play, too. “People really like to keep score, no matter what it is they are doing,” Schnorbach says.
He tells of one client, a large East Coast grocer, who uses labor management in conjunction with their WMS and voice picking system. “Once an employee accepts an assignment, our system will interface with the voice picking system, and the voice picking system will actually tell them how much time they have to complete the assignment. They know up front how much time they have, which they really like. Then, as soon as they are done with their assignment, the system gives them a productivity report. It becomes a big motivator for the employee to keep on task. Overall, the employees really love it.”