The Blue Horseshoe Blog

The Basics of Labor Management – The Pitfalls, Myths and Keys to Success

Posted by Blue Horseshoe on Dec 7, 2012 4:01:01 PM

In my last post about Labor Management, I indicated there were three cornerstones to the program – Planning, Monitoring and Measuring. This is nothing new to those who are familiar with Labor Management and engineered labor standards.  For those who are still not sure how Labor Management and a discrete engineered standards program can help improve productivity with minimum capital investment, let’s look at why Labor Management continues to be a topic of discussion.

Avoid Common Pitfalls – Measure, Monitor and Manage

Labor Management for distribution centers is a continual topic about supply chain journals, market analysts, and presentations at every trade show.  Why does this program seem to continue to have such media coverage but the embracement by companies is still not as mature as things such as warehouse management (WMS), automation (MHE) and other technologies?  Particularly when the benefits of a Labor Management implementation are presented at 15-30+% – sometimes as high as 45% – without major process changes?

To answer this, let’s address where the ROI really is in a Labor Management implementation, how you can avoid the common pitfalls, and most importantly how you can achieve sustainable success that is promised from engineered standard measurements, real-time monitoring and labor planning.

If you think you don’t need Labor Management because you already have Units Per Hour (UPH) and complex WMS reports that show key metrics by department or even individual, think again.  Remember, you cannot manage what you do not measure!  If you are only measuring the units per hour by function, than that is all you can manage to.  And the variation is orders and products is enough to make this an inconsistent measurement.  (Okay, if all you pick is one item of the same size in the same quantity from the same location – then yes, UPH is fine.)

Regardless of the economy, companies always need to know what it costs to run their business.  Labor is one of the largest costs and Labor Management is designed to help you manage it.  Additionally, Labor Management has evolved to provide real-time planning, quality monitoring, and dashboards that make it easier for managers and supervisors to know where the opportunities lie for improvement.

Top Labor Management Myths

For those still unsure of if Labor Management is a priority, or for those that have already dismissed the benefits as being realistic, let’s debunk the myths.

    1. MYTH: Installing a LMS will save us 15-30% without doing anything else. Yes, installing Labor Management does not save you 15-30% alone.  But a LMS will show your managers specifically where opportunities lie much faster and easier than typical reports.
    2. MYTH: Labor Management requires significant maintenance to maintain accurate measurements. Labor Management standards need to fair and consistent.  Too often people use the word accurate.  In fact, I would argue that accuracy is not even a word that should be used in this context.  Regardless, labor management can be as accurate as you want it to be, but in reality the multiple variables allow the standard to be fair and consistent for each associate regardless of the tasks being completed.
    3. MYTH: Labor Management systems require an incentive program to achieve the savings depicted. While the projected savings of 25+% do typically include an incentive program, companies should not ignore the 15-25% – or 10% for that matter – that can be achieved with just the LMS, engineered standards, and a continuous improvement program around the best practices.


How to Build a Foundation for Success

In order to achieve these savings and not approach the common pitfalls, it’s important that companies focus on the fundamentals.  While this list of 4 items does not encompass an complete implementation plan, these are definitely the foundation to success:

    1. Define the right way to do the job. Companies often indicate they have Standard Operating Procedures (SOPs), Job Descriptions or other process documentation.  The problem with these documents is that explain what to do for a job.  They do not explain HOW to do the job.  Best practices, preferred methods, or any true LEAN process document will outline the key steps on how the job should be completed.
    2. Coach your employees to the best method. Supervisors need to become coaches who help show where time is being lost in poor methods.  For example, in a pick to pallet operation, parking in the middle of the aisle vs next to the slot will cost you a significant amount of time.  Show me an SOP that calls out where to park the pallet jack.
    3. Measure what you want to manage. Remember, you cannot manage what you do not measure, but be realistic.  Pareto principle should apply when considering what to measure.  Where is 80% of the labor used – it’s likely only 20% of the operations.?
    4. Praise great performance as much as you counsel poor performance. Labor Management systems should be used to encourage and acknowledge great performance more often that counseling subpar performance.  This is often forgotten by management.  Remember, people like goals and like being acknowledged when exceeding expectations!

Hopefully this has given you a solid starting point for considering Labor Management as your next initiative.  In my next series, we will look at a roadmap of 7 key habits to instill into your operations management team to exceed the expectations and become a true learning organization on continuous improvement.

Read Other Posts from Supply Chain Logistics Series…

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