You no longer have to rely on your workers for that information. Today's sophisticated software can tell you everything you want to know about your staffers' productivity.
Martha Spizziri has been a writer and editor for more than 30 years. She spent 11 years at Logistics Management and was web editor at Modern Materials Handling magazine for five years, starting with the website's launch in 1996. She has long experience in developing and managing Web-based products.
When engine and generator maker Briggs & Stratton began to implement a labor management system (LMS) in its DC, David Zuern thought he knew what to expect. The company already had a warehouse management system (WMS) in place, so he assumed he'd find that the DC was operating at pretty close to maximum efficiency. As it turned out, there was a surprise in store for him. "We discovered that the way we were slotting product was very, very haphazard and created a lot of wasted time for the pickers," explains Zuern, who is the company's director of distribution operations. As a result, Briggs & Stratton reslotted its product to boost efficiency.
Discoveries like this are typical for companies that implement an LMS. Labor management systems build on warehousing systems (many WMS vendors have developed LMS modules), but they approach the process from an entirely different perspective. Whereas a WMS manages order and inventory, an LMS tracks the activities of people, based on input from the WMS about tasks that must be performed.
"People have started to max out what they could do with inventory and are turning to the next big project, which is labor," says Peter Schnorbach, senior director of product management, labor and slotting at software specialist Manhattan Associates. He notes that labor costs typically account for close to half the cost of distribution, which makes them an obvious place to look for savings.
When Briggs & Stratton implemented its LMS, RedPrairie's DLx Labor, Zuern saw productivity increases in the 20- to 25-percent range. That's typical, says Greg Aimi of AMR Research. Implementation of a labor management program typically results in a 10- to 30-percent gain in productivity, he reports. That may not sound like much, but for most operations, it actually translates into significant savings. Labor costs can make the difference between profit and loss, especially in low-margin businesses. And payback for these systems can be quick: A study by ARC Advisory Group found that most companies saw a return on their investment in less than a year.
Even those eye-popping savings haven't made the LMS standard equipment in the modern DC, however. Though common in industries like grocery distribution, labor management systems have yet to be widely adopted in many business segments.
No quick fix
Popular perception notwithstanding, the benefits of labor management don't come from just installing a piece of software—far from it. "If you think labor management is software you can take out of a box and plug in, you won't see the full results," Zuern warns. "This is not a quick-fix, outof- the-box solution." Troy VanWormer, a founding partner of XCD Performance Consultants in Rancho Santa Margarita, Calif., agrees. "One of the reasons a lot of these programs fail is [that people] think it's a systems or technology project. It's not. It's a people project."
Rather, the technology should be seen as an enabler for a complete labor management program, a significant undertaking requiring thousands of observations of every task performed in the DC. Those observations provide the basis for the development of engineered labor standards—best practices for each job. The idea is to determine how long it should take to do each specific task and then use the software to compare workers' performance against those standards.
In the end, says Zuern,"[l]abor management programs are about working smarter, not harder—getting more done in the same amount of time." Once Briggs & Stratton embarked on the observation phase, he says, it became obvious that "the barriers to productivity were more prevalent than we had imagined. Discovering this forced us to look at and re-engineer processes—and this was a good thing."
labor leaders
Ready to give LMS a try but don't know where to turn? Here's a
short list of consultants and software suppliers that specialize in
labor management systems.
These observations must be done for each facility where the LMS is being implemented, even if each handles the same products as a sister site. "That's the only way to do it, because each DC has different characteristics," explains Lillian Warrington, engineered labor standards project manager for food-service distributor Perlman- Rocque, which implemented LMS in all four of its warehouses in 2005. "They use different equipment. Some handle different product." And each warehouse's layout is a little different, too.
Observing and quantifying tasks can take several months, but VanWormer explains why it's necessary: "You can base your data on historical averages, but if you're historically bad, the number is not very high." You could also set standards based on what seems like a reasonable expectation: "You pick 120 units per hour, so we think you can do 150." But that standard is subjective. And a blanket units-per-hour measurement is not accurate, either. If one worker is picking items that weigh 60 pounds each while another worker picks items that weigh half a pound, they obviously won't be able to pick the same number of units per hour.
Chris Smith, director of process improvement for pharmaceutical distributor McKesson, explains how engineered standards are helping his company. "Under the old productivity metric, you only had one overall score on how someone did. You had no visibility if they were doing well in one area and not in another." Now, he says, you can see if they need help in a particular area, and that has helped employees succeed at meeting labor standards—as well as helping the program succeed as a whole.
A shift in culture
Perhaps the biggest change that resulted from Briggs & Stratton's labor management program was the culture change within the DC. In the old days, says Zuern, supervisors had no way of knowing whether people just looked busy or were actually being productive. "But now," he says, "employees have to meet the [productivity] standard every day. They're responsible for their own performance. That means employees come to us very quickly with problems that are getting in the way of productivity."
In fact,he says, employees brought to light a number of procedural holdups that had long gone unreported. "Once we started to hear about them, we realized that we really did need to fix these issues so we could be more productive, and that really got us rolling," he says. "Labor management has changed the culture. ... Supervisors and associates are working together to maximize productivity, rather than against each other. ... Supervisors are now problem solvers more than enforcers. ... So what we ended up with was a much more productive, smarter-working workforce, higher throughput, and a culture of process improvement."
Realistic standards are crucial to worker acceptance of the project—and to its overall success, Zuern says. He reports that Briggs & Stratton encountered very little resistance when it went to expand the LMS beyond its pick, pack and ship operation to its kitting and packaging operation because workers could see that the standards were achievable.
It's more than a matter of employee morale, however. Companies that set unreasonably high standards in hopes of promoting a little workplace hustle risk compromising both accuracy and safety. Ultimately, the costs associated with quality problems and accidents could end up erasing any savings resulting from productivity gains.
Of course, some positions lend themselves more readily to the development of credible standards than others."Those positions that have more variability in the tasks—shipping and customer return—provided more challenge," says Chris Smith. "Our philosophy was never to force a standard where it didn't make sense." The company chose to count tasks that couldn't be measured easily as "indirect time," which was weighted differently than direct time but nonetheless recorded. "The system counts the indirect time," he says, "so we can see what they're doing."
Selling the system
Aside from the amount of work that goes into engineering the labor standards, one of the main challenges of implementing an LMS can be handling the transition. "One of my biggest messages is 'Don't underestimate the change management aspect of the program,'" says McKesson's Chris Smith. "Make sure there is strong support from senior executives. Make sure there is tight alignment with field operators and with human resources." At McKesson, field operators were shown P&L statements indicating the savings that could be achieved from the LMS program, which helped secure their cooperation.
Managing change also entails making sure pickers and packers know why the system is being implemented: "not just to lower costs, but to remain competitive," explains Zuern. And Warrington says that at Perlman-Rocque, where three out of the four DCs are unionized, "we not only solicited the union's involvement, but had them work with us on it, which I think helped the process tremendously. We had an open-book project. Anything they wanted to know was available to them." Workers even did some work-process observations. "Addressing their concerns was paramount. I think that made the project a success."
Ongoing external changes are a factor, too. "Our business is dynamic, so our engineers are supporting ongoing training, and our DCs go through process improvements—in part to improve productivity, but also to accommodate legislative changes," notes Smith of McKesson. The company has a dedicated human resources person to manage the personnel aspects of the program, including an incentive program that's based on the productivity standards.
Once standards have been established, there will be a transitional period as employees learn to work to the standard. At Briggs & Stratton, employees were given 60 days after the system went live to gradually work up to full productivity.
Similarly, there's a learning curve in implementation as a whole. When McKesson started implementing a WMS a little over two years ago in two pilot DCs, it took six months to get each DC up and running. "Today our rollout is three months," says Smith. The company has implemented LMS in 26 of its 31 DCs to date, and the remaining five are expected to be online by April 2007.
Worth the effort
Now that they know what's involved, would the managers who've been through an LMS implementation do it again? "There are a lot of benefits to this, but implementing an LMS is [a] very detailed [process] and it's very hard work," says Zuern of Briggs & Stratton. Still, he char acterizes it as a worthwhile effort. "Today, we can truly operate with fewer people, and the greater throughput is evident in the DC." Productivity increased roughly 20 to 25 percent across both operations. The company was able to reduce pick, pack and ship headcount by about 18 percent right away. A few employees left because they didn't want to work under the new standards, he says, but most found it easy to meet the standard after learning how to eliminate the non-valueadded activities in their daily jobs.
In the end, he believes, the program has been a positive experience. "It took a lot of pressure off everybody. Managing employee expectations is a lot easier when everyone knows exactly what those expectations are and feedback is readily available." And the benefits didn't end there, he says. "The culture change is the big improvement—it lets us focus on the things that matter most to our business and our customers."
At McKesson, Chris Smith has no trouble ticking off a list of benefits he's seen from the LMS: "The enhanced productivity within our DCs, reduction of overtime, service-level improvements, the visibility regarding performance." This visibility allows supervisors to continually improve their coaching and feedback to associates, and thus to keep improving performance over time.
Perlman-Rocque also reports good results from its LMS installation. "We saw improvements in productivity and reduction of cost of up to 20-plus percent per DC," says Warrington. There was no workforce reduction, but the company did reduce overtime. And, she says, it has made the job of the front-line supervisors much easier. "They're probably the happiest folks here, because now they know how long work should take. They can manage better. They're less under the gun because there's less ambiguity." Though it required a lot of time and effort to make sure the labor standards were fair, it was worth it, she says. "I'm thrilled with the results we accomplished over the last year and a half."
10 tips for a smooth LMS implementation
There's a lot more to a successful LMS implementation than simply working out the technical details. Charlie Zosel of Tom Zosel & Associates and Peter Schnorbach of Manhattan Associates offer the following tips for making your program a success:
From Zosel:
Get management involved. No program will succeed without management's backing and involvement. A consultant can help, but management's support is essential because the company has to change its culture.
Learn how to coach and counsel. It's not enough to know how to issue commands; you need to know how to help people perform better, while still holding them accountable to the standard.
Proceedwith caution with incentive programs. Incentives can bring tremendous rewards, but only if you have a solid program in place. Before you start using your LMS as the basis for an incentive program, make sure you have a realistic baseline for standards so you're not paying incentives for substandard work. You can always add an incentive component later.
Consider Web hosting. Using an LMS that is Web-deployed makes maintenance easier and helps keep overall costs down, since you only have to install it in one location.
Don't take shortcuts when engineering the labor standards. Without good rates, it's garbage in, garbage out.
From Schnorbach:
Make sure you choose software that accommodates your company's engineering standards. If your company's culture centers on individual performance, you don't want to be locked into a system that's geared more for teams. Look for a system that can accommodate multiple standards.
Keep it simple. Resist the urge to set up a system that requires a "super user"—supervisors will be interacting with the system daily.
Don't set the bar too high at the outset. Begin at a mid point and gradually increase the productivity standards until workers are reaching 100 percent.
Don't forget to factor in fatigue. When building standards, remember to allow for what's known as personal fatigue and delay (PF&D). Someone picking large, heavy boxes will have a different fatigue factor from someone who's picking boxes of tissue paper. Look for a system that allows for multiple PF&D factors—by activity, time of day and product profile. 5. Don't stint on the data collection. The more information you can get, the more precisely you'll be able to track what people are doing and the more you'll get out of your system.
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."