February 10, 2014
Column | techwatch

LMS: No longer just a tool for warehousing

As more retailers grapple with the challenges of in-store order fulfillment, they're turning to software once used strictly within the confines of the DC.

By James A. Cooke

Not so long ago, the use of labor management software (LMS) was pretty much limited to warehouses and distribution centers, where it managed the activities of workers who pick, pack, and ship orders. But that's no longer the case. As more retailers begin filling Internet orders from store inventories, they're starting to use the software to oversee those same activities within their retail outlets.

As the name suggests, labor management software is designed to measure individual worker activity—say, item or case picking or putaway—against a preset standard. Traditionally, the systems have measured performance using "time stamps" recorded via bar-code swipes—for instance, when a warehouse worker removes a case from storage, he or she scans the bar code on the box, creating a time stamp for that activity. That allows the worker's actual performance to be compared against a "target time" or benchmark, so that any deficiencies can be identified and addressed. Some of the newer systems rely on signals from real-time location systems, rather than bar-code scans, to track activity. (See "Equipment makers eyeing LMS market?" November 2013.)

Although labor management systems have been around since the late '80s, their use really took off during the economic downturn as companies sought ways to rev up throughput without hiring additional workers. Now, it appears these systems are about to get a similar boost from the omnichannel revolution—the push by retailers to sell merchandise through multiple channels, both digital and physical.

There are a couple of reasons for that. First off, the omnichannel phenomenon has changed the game in retail DCs. Operations that once primarily filled orders for pallet and case quantities are suddenly finding themselves picking a lot more individual items, which is significantly more labor-intensive (and thus, costly). "With the omnichannel push, companies are finding that there are increased labor requirements with the discrete order picking that is the hallmark of direct-to-consumer fulfillment," says Jason Franklin, director of sales engineering at Knighted, an Intelligrated Company. That's led many retailers to turn to an LMS to make their distribution operations more efficient, he says.

The other part of the story is that order fulfillment is no longer the sole province of warehouses and DCs. With the advent of the omnichannel revolution, more retailers are filling orders placed online from their store stocks—which means some store workers now find themselves picking merchandise from the back room or front of the store and packing the orders for shipment. But order fulfillment and shipping has proved a huge challenge for stores, which may not be set up or outfitted to handle these tasks. A recent survey conducted by DC Velocity in conjunction with the ARC Advisory Group found that store fulfillment activities overwhelmingly lack the efficiency and precision of execution found in a DC.

So it's probably no surprise that software vendors like Manhattan Associates and JDA are seeing more retailers employing labor management systems within their stores to manage in-store picking. Typically, the LMS is linked to the store's order management system. "As retailers start to perform new processes within the store in support of omnichannel commerce—like pickup from the store or fulfillment from a store—a bigger percentage of store budget will go to nonsales-type activities and processes," says Peter Schnorbach, senior director of product management at Manhattan. "That's going to drive retailers to want to optimize processes and manage them just the way they do in the warehouse. They want to measure how long it takes to do things. They want to put standard processes in place across all stores in their network."

As retailers seek to bring their in-store fulfillment operations up to DC standards, look for more of them to invest in labor management software to help manage store workers. "The smart retailers are trying to figure out how to establish a repeatable process that they can put into every store," says Schnorbach. "They have to bring the discipline that exists in their warehouse into the store if they want to do this [omnichannel fulfillment] well."

About the Author

James A. Cooke
James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP’s Supply Chain Quarterly and a staff writer for DC Velocity.

More articles by James A. Cooke

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