How Labor Management Systems (LMS) Improve Warehouse Productivity
With labor costs allocating between 30%-60% of a distribution facilities’ budget, it’s no wonder businesses look to Labor Management Systems (LMS) after implementing a Warehouse Manufacturing System (WMS). Fortunately, LMS and WMS work together to provide insightful data pertaining to the labor force.
To better manage human resources within warehouse operations, one can examine LMS through the lens of the following 6 key areas:
Labor Standards per Operation:
Traditionally, labor standards have been provided by engineers and time studies – which is often costly and time-consuming. On the other hand, newer LM solutions calculate these standards by using historical data, eliminating the expense, and decreasing installation time.
Employee Performance:
Transactional history helps the LM solution identify top performers and highlights employees who could benefit from additional training. From there, management can reward top employees for their achievements.
Direct Labor:
Direct labor is the time normally tracked through transactional data which reveals data on employee productivity, or the complexity of a given operation.
Indirect Time:
Indirect time is the time employees spend on tasks unrelated to production. For a warehouse employee, an example might be the amount of time spent charging a lift. A well-performing LM system will offer an alternative method to capture indirect time. One popular method is provided in the form of a user start/stop entry on a tablet or mobile device.
Missing Time:
Missing time is the time that the employee is paid for vs. the time tracked in either direct or indirect labor (and this can get costly!). In fact, it is estimated that only 50%-80% of an employee’s time is direct labor. The remaining time is either indirect or missing. To ensure ROI is achieved, LM systems will typically address the missing time issue first.
For companies that do not track missing time, you will probably see 1 hour per day per employee on average. This means that on an 8-hour shift, 12.5% of the time is left unaccounted for. If indirect time is not logged, you can see how this can quickly grow to a number like 30%-50%, making it extremely difficult to understand true costs.
Cost to Serve:
Engineered Labor Standards focus on a specific standard for a process, whereas “Cost to Serve” takes a holistic approach to obtain your labor costs for customer, employee, process, and product.
The most common method to calculate “Cost to Serve” is as follows:
Cost per Standard Process * Average Transaction Volume= Cost to Serve
This calculation technique can be useful but is dependent upon the accuracy of the engineered manufacturing standard and the ability of the employee to be consistent with that standard. A robust LMS can help elaborate on this calculation with much more precision. By allowing for multiple sources – such as WMS, Transportation Management Systems (TMS), Customer Relationship Management (CRM), Materials Resource Planning (MRP), Time Clocks, and telematics – the system can create a cost and performance model to give you “Cost to Serve” results according to customer, employee, process, and product.
Take a long hard look at your operation. Are you satisfied with your Labor Management practices? If not, let Katalyst help guide the way! Contact Lynn Smith at @gsmith@katalysttech.com to get started.
