Labor management, visibility and optimizing the employee efforts, has been a pain-point for all industries alike for over years. Apart from being one of the major drivers of your operational budget (sometimes almost 20% of your total budget), the efficiency of the labor management processes determine the overall seamless functioning of your DCs and also in turn thus affects the bottom line. Thus not to be confused it with being a HR’s headache, let’s accept the fact that, it’s as much as a strategic partner of your business operations as much as any other part of it. But this is a scenario that is maybe true for the early 2020, when the days were simple and our operating models were well-defined and manageable.
With the onset of the global pandemic, industries have seen their business processes transformed daily, and the most important learning from this situation was, you have to be ready to adapt and transform with the situations and you need a more resilient supply chain for that, now more than ever. While the global businesses are recuperating from the sudden changes in the way they perform their business, the common factor that has been the major transformational force for them is “adopting the digital wave”. Moving the dependency on physical processes to the digitalization and automated version of them, has been a game changer and one of the most important decision for them in the past few months. As the businesses move towards a more digitalized supply chain and operating model, DCs need to start focusing on their labor operations, employee productivity and visibility too. And exploring how embracing the digital age of warehouse labor management might help them become more resilient and better prepared, apart from improving their processes multi-fold, reduce overall costs and effectively manage their labor in the ‘new normal’.
Global DCs have been facing the pinch of the effects of this global pandemic from every segment of its operations. Newly introduced social distancing norms at workplaces, to labor shortages across globe (in US recently the unemployment rate is nearly as high as 10.1%), demand fluctuations and order fulfillment woes with mismanaged workforce, has caused many organizations to look deeply into improving their warehouse labor management. Warehouse Labor Management Systems, has become the need of this hour, providing organizations with increased visibility into labor metrics, give them enhanced scalability and better decision making and implementation of ‘new normal’ norms with smarter data-driven operational aids.
But what are main pain-points you might be solving with the adoption of Warehouse Labor Management Systems in your DCs/Warehouses:
Most businesses without the LMS have no specific process execution standards in place to measure their day’s work against. Hence loses out on opportunities to identify the processes that need optimization and can be improved. This also creates problem in analyzing the employee productivity and mostly are dependent on team manager’s manual inspection and daily feedbacks. Similarly the labor costing also gets affected due to lack of set standards and hence businesses end up paying more labor costs than what might be required. They need engineered labor standards (ELS) the systematic study of a warehouse operations on a neutral basis (to include even delays, fatigue and breaks) to help them in better understanding of output expectancy, set goals for employees and provide insights into processes or teams that need optimization or boosting.
In peak seasons and due to e-commerce boom, businesses need to have insightful data available with them to accommodate the resources based on their abilities for a faster, smoother and smarter operation. So that even during the high order processing rates they know what point of their process needs how many more resources and who are his best choices to be put in each process as an extra hand. Similarly in normal times, lack of visibility into labor productivity creates challenges for managers to identify the processes or resources that need more attention or optimization. Any process error or bottlenecks take time to be recognized and by then it had already caused a lot of delay and high incurred costs.
Given the trend of qualified labor shortage in DCs across countries like US, the focus of labor management has shifted from sticks to carrots. MHI estimates the annual turnover rate for material handling and logistics positions at 25%. Apart from process optimizations, businesses need LMS more to boost employee morale (and productivity at same time) and improve retention more than to remove their bottom 10% underperforming staffs which it used to be the focus in earlier times. Businesses now want to improve employee engagement with special perks to top performers, not only to create a better rewarding structure and improve retention but also to boost the laggards into performing well to achieve the similar rewards. Similarly the causes of underperforming resources need to be identified to impart better mentoring and coaching to boost their productivity.
Lack of LMS for businesses around the globe cause high labor costs and lack of opportunity to contest the labor costs incurred. Since labor costs take up almost 20% of the total logistics costs, so the amount that it encompasses is a large chunk of the businesses’ budgets. Lack of visibility into labor requirements and the associated costs lead to not only spending more than required but also increases the extra expenses like incentivized pays or perks associated with the labors.
Businesses sometimes have issues in identifying the better performers due to lack of real-time and smart data to understand the inequities involved with productivity comparisons between employees. For e.g. two employees with different path traversed in a distribution center to pick orders of the same size and dimensions cannot be compared based on the time taken, analysis needs to take into consideration the amount of extra path traversed as well to ensure that all parameters of the labor efforts are taken into account. Hence many companies even opt for telematics based data integrated with LMS, so as they know exactly the efforts that one had to put in and use them for better productivity rating and incentive payouts.
Mostly businesses go for unit inspections manually to check the workloads on different process units and if any challenges have occurred. Many a times the bottlenecks and issues take time to be discovered and thus by then it affects the labor costing and process timelines. Real-time insights into the activities and labor utilization can help managers identify process issues faster and take care of the challenges with better resource allocation or smarter insights.
Companies now are doing what-if scenario analysis to understand how to effectively manage the similar levels of worker productivity in DCs without compromising on any norms of the ‘new normal’ like social distancing and other guidelines. They are in need of a more dynamic, smart and flexible system that has an incorporated component to help them plan and execute the operations more effectively as per the new norms. LMS with a social distancing feature built in can help in planning of labor in particular areas better and to maintain the right amount of people in a given area and zone so as the social distancing and minimum workforce gathering criteria is maintained properly.
Laying the foundation to a more resilient and proactive DC operations, starts with digitalization of your warehouse operations and labor management becomes an integral part of it to ensure that managers have the right tools to help them guide their workforce and operations through the troubled times and also create a more effective process framework for the future. Warehouse labor management systems can help you and your workforce achieve that.
So have you laid down the plans for embracing the digital age of warehouse labor management, yet? What are your thoughts?
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President and CEO, Highway 905
Srini Vaidy is the President and CEO of the award-winning, cloud-based logistics technology provider Highway 905. He is an established innovator in the Supply Chain & Logistics space, with an ever-dying passion for coding and technology. For more than 30 years he has been ideating customer-centric and efficiency-driven supply chain execution solutions for the Fortune 500 to help them optimize their logistics costs and strengthen their competitive market position. With one eye on technological trends and the other on the happenings in the logistics space, he likes providing readers with an interesting perspective on the future of logistics industry.