Flawless Order Execution has a Labor Problem
In recent years, operations leaders consistently list confidence in their labor – across multiple dimensions – as an ongoing concern. The ongoing challenge of securing, retaining, and optimizing labor has become even more pronounced in recent times due to various factors such as availability, temperament, and skill set of workers. Consider that a lot is rooted in the relationship between your team and the systems and tools they use day in and day out. Morale is driven equally by the work and the processes. Maintaining or increasing that morale directly indicates whether you have a labor problem or a competitive advantage.
In the dynamic world of warehouse management, the workforce is the backbone of efficient operations. The role of technology, particularly the labor management system (LMS), becomes crucial in managing labor resources and developing teams effectively. When integrated with a Warehouse Management System (WMS), the LMS doesn’t just enhance operational efficiency, it unlocks a multitude of benefits for your warehouse operations.
However, determining the need for an LMS requires a nuanced understanding of your warehouse’s unique requirements and challenges; it’s not a one-size-fits-all solution. Reviewing your business plan, current and future needs, and knowledge of available solutions is not just critical, it’s a testament to your expertise and leadership in determining the right time to evolve your operational toolkit.
While it starts and ends with the team in the warehouse, we’ll explore how you get there.
Introduction
Before we explore the specifics of integrating an LMS into your warehouse operations, it’s essential to grasp the fundamental difference between a Warehouse Management System (WMS) and a Labor Management System (LMS). A WMS primarily focuses on tracking, disposing, and delivering inventory, while an LMS provides a deeper insight into workforce productivity and utilization. Understanding these distinctions is key to effective warehouse management.
There is not a one-size-fits-all approach to any supply chain. You can over-engineer a simple process and under-support a complex one. To appreciate the difference, let’s start with understanding the solutions.
Understanding a Labor Management Program
A Labor Management Program (LMP) is a comprehensive system designed to optimize workforce utilization. While a WMS is effective in tracking, disposition, and delivery of inventory, it has inherent limitations in labor management. The labor functionality of a WMS is primarily viewed through the lens of these areas, highlighting the need for a more robust system like an LMS.
However, an LMS doesn’t replace a WMS, but rather complements it. It provides deeper insight into workforce productivity and utilization, enhancing the transactional focus of a WMS. It focuses on the productivity and utilization of individuals across multiple functions and tasks over time, thereby creating a synergy between the two systems.
Together, these systems empower a holistic approach to warehouse management, leveraging the strengths of each to achieve operational excellence greater than a standalone WMS. This integration is not just a solution, it’s a strategy that you can trust to address your evolving warehouse challenges.
What does the WMS do on its own?
The WMS, as the backbone of any facility, excels in managing inventory, replenishment tasks, and order execution—both B2B and DTC. It efficiently handles all tasks related to in-and-out processing, with a primary focus on the movement of goods. These are the system’s designed use cases, which drive all secondary functions, like reporting. The system thinks about the movement of goods first.
The WMS operates at a facility level, emphasizing transactional metrics such as picks, receiving, and throughput per hour. Transactional metrics, in this context, refer to the number of transactions or tasks completed within a specific time frame. If you need to understand the number of orders processed or sometimes the profitability of an operation, WMS is a champion. But this will be in aggregate. You can think of this as management-level reporting.
You know what your team did, but you don’t have details on how they did it. You increasingly lack intelligence on how individuals performed over time horizons – today vs. yesterday or performance to standards.
The WMS’s focus on historical performance standards doesn’t align with the need for real-time workforce optimization. WMS reports focus on task execution and gloss over critical factors such as mid-shift reassignment, movement between areas, and coaching and development tasks that are not part of the execution.
The limitations of WMS present an opportunity to enhance its functionalities with an LMS. Where the key tasks of a WMS are assignment and execution, an LMS provides real-time visibility to associate performance relative to expectation. The integration also supports worker coaching, feedback, development, and reward, paving the way for a more efficient and productive warehouse operation.
Signs That Indicate the Need for an LMS in Your Warehouse
Because a WMS can report on aggregate performance, it’s often seen as a “good enough” solution for managing teams. However, although a WMS provides high-level reporting on what was accomplished, it doesn’t manage performance, provide operational analytics, or offer management tools like learning curves, labor planning, coaching, and incentive pay, which can be crucial in identifying areas for improvement and setting realistic performance expectations.
Several indicators suggest the necessity of integrating an LMS into your warehouse operations:
- High labor costs: Are labor costs, such as cost per unit, trending up with no clear underlying factor?
- Inefficient resource utilization: Are you using more labor to do the same tasks or falling behind?
- Inaccurate inventory management: Are you struggling to meet demand without excessive overtime or experiencing high employee turnover?
- Manual processes leading to errors: Are you having difficulty meeting customer demands and service level agreements?
Difficulty optimizing labor resources underscores the urgency of implementing an LMS to complement your WMS.
An LMS can provide the in-depth reporting, analytics, and management tools needed to optimize your labor force. A common misconception is that this is about oversight and control. Still, many labor management insights can highlight process inefficiencies that affect the entire workforce but are currently hiding beneath execution and throughput metrics.
How the WMS and LMS Address Warehouse Challenges
Solutions, by design, have focus areas. You don’t expect your warehouse or order management solutions to have best-in-class labor management. Conversely, you aren’t expecting the labor solution to track your inventory. Together, you get the best of both worlds.
Integrating WMS and LMS paves the way for comprehensive solutions to warehouse challenges. These systems not only enhance efficiency and accuracy but also optimize labor allocation, track workforce performance in real-time, and automate repetitive tasks. The result? Actionable insights for continuous improvement and a potential for significant cost savings. Case studies vividly demonstrate the tangible benefits of LMS implementation, ranging from improved throughput to enhanced workforce morale.
Case Study
The Client
American Tire Distributors (ATD) is one of the largest independent suppliers of tires to the replacement tire market. ATD operates more than 130 distribution centers.
The Challenge
Like many organizations, ATD faced rising labor costs, high overtime, and high personnel turnover.
The Solution:
Utilizing TZA’s ProTrack LMS, they realized an average performance improvement of 11%, with some sites seeing UPH improvement of 25 to 30 percent within the first year of implementation.
Considerations for Choosing the Right WMS and LMS
Not every solution is created equal. Each will provide very different features and capabilities. Some are specialized by industry, and some are ideal for a particular problem. There are several solutions on the market in any category, and focusing on your use case and your ideal outcome should guide your selection process.
Selecting the appropriate WMS and LMS involves evaluating factors such as:
- The supplier’s expertise and track record in your industry
- The solution’s overall fit to the needs of the business, including:
- Scalability – Can the solution grow with your business volumes?
- Compatibility – Does the solution meet your Technical and Business Security standards and guidelines?
- User-friendliness – Ease of use and new-user training
- Your budget, expected savings, and return on investment timeline. Is the ROI clearly there and measurable to create a sense of accountability?
- Fit with the specific needs and goals of your warehouse and labor management programs.
Ensuring that your selection meets your needs – today and a reasonable amount into the future – is essential for maximizing ROI and driving long-term success.
The Path Forward
The right system will unlock powerful, game-changing insights driving your ability to operate profitably. While a lot of preparation is necessary to run a selection, the more information you have, the better the outcome. WMS and LMS are not something to choose mindlessly, as the wrong solution can reduce effectiveness at the wrong time. At the right time, these systems are critical to growing the business and defending the value you’ve built.
In conclusion, the decision to integrate an LMS into your warehouse operations hinges on various factors unique to your business, industry, and organizational culture. Warehouse managers can effectively navigate labor-management complexities while driving efficiency and productivity by assessing current needs and leveraging the synergies between WMS and LMS. As technology continues to evolve, embracing innovative solutions will be instrumental in shaping the future of warehouses.
Author: John Seidl for TZA. (Joe Henderson Deposco, supporting)
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