November 1, 2005
operations insight | Labor Productivity

One logistics specialist coming right up!

one logistics specialist coming right up!

When a client needs a data analyst in Denver or a logistician in Luxembourg, IBM's revolutionary labor management system can dispatch the right person for the job at a moment's notice.

By John R. Johnson

Just days before Hurricane Katrina slammed into the Gulf Coast, the phone rang at IBM's Global Services consulting division. On the line was a frantic caller who wanted 14 IBM consultants dispatched immediately to Baton Rouge, La.; Washington, D.C.; and several sites in South Carolina to help with disaster recovery plans. And the caller (a large publicly traded company and major IBM customer) didn't want just any consultants: It wanted specialists with expertise in data analysis, process improvement, logistics management and information management.

As recently as 18 months ago, IBM might not have been able to meet that request on such short notice. But this time, it was no problem. In less than 24 hours, the specialists requested were in place and ready to roll.

What allowed IBM to do that was a program launched last year known as the Workplace Management Initiative. WMI, as it's known, basically allows Big Blue to manage personnel the same way it manages its inventories of semiconductors and hard drives, albeit with one important difference: "We always remember that we're dealing with people, not parts," says Daniel Forno, vice president of labor optimization, IBM Integrated Supply Chain.

The project is still in the middle stages, but when the data entry is completed (most likely by the end of next year), IBM's computer system will contain a complete catalog of each of the nearly 200,000 consultants in its professional service division. Not only will it be able to instantly retrieve data on each employee's specialties and skills, but it will also be able to track workers' whereabouts so that it can automatically send the most suitable—and closest—consultant to meet its clients' requests. No longer will a logistics management specialist in Poughkeepsie be sent off to Sweden because no one was aware that an equally suitable candidate was just finishing up a job in Denmark.

Instant results
Buoyed by its success in recent years overhauling the various IBM divisions' supply chains (the corporation has reportedly shaved more than $20 billion in costs), IBM now hopes to achieve similar results in its growing service sector. (Just under half of IBM's $96 billion in 2004 sales came from its consulting organization.) "Much of what you see in a manufacturing supply chain, [such as] the value of aggregating inventory of parts so you don't have that extra cost ..., [also applies] in the people environment, and [the potential for savings is] very dramatic," says Forno. "This is a natural progression for us. We've been transforming our own physical supply chain for a number of years now. At this point, it's [a matter of taking what] we did with [the] regular supply chain and applying it to our labor force."

For this task, IBM has taken its cues from its inventory management experts. First, it created a uniform taxonomy for classifying consultants' expertise systemwide (in the past, each division had its own system for tracking employees' skills). Just as IBM's stock management system knows exactly which components are in stock in a specific location, its WMI system will have comparable types of information on employees once the WMI data entry work is completed. Employee profiles will contain such information as the person's primary area of expertise, secondary area of expertise and whether that employee's primary skills lie in technical expertise or leadership.

Automation has done wonders for the operation's efficiency, says Forno. "Prior to starting down this path, we could spend a month looking for a single resource and not find it until that requirement escalated all the way up to management. Now it's happening in minutes."

What's more, the company reports a noticeable improvement in its forecasting. "We're using statistical forecasting with complicated algorithms [to determine] the most efficient way to meet demand," Forno says. The complexities of managing a workforce that's in constant motion (and whose skills profiles are constantly in flux) might defeat a human being, he points out, but they're nothing to a computer. "[A]ll of this is being built into the algorithms that drive the demand forecasting for human resources," Forno says. "This helps us to keep our human resource inventory where we want it to be by using sophisticated science instead of guesstimating."

Of course, right now it's still a work in progress. The program began as a pilot concept in 2004. In the months since, IBM has entered the profiles of about 40,000 of its associates into its Professional Marketplace, the name given to the system that tracks employees and their skill sets. By the end of 2006, Forno expects that IBM will have accumulated close to 250,000 profiles, meaning that it will be able to identify service professionals for project assignments instantaneously.

Preserving the human capital
Though the program is still in its infancy, the company is already reaping the benefits. IBM reports that it has saved nearly $2.5 billion from the WMI so far, and it expects to save billions more once the program is fully up and running.

To begin with, IBM estimates that it has already reduced its reliance on expensive outside contractors by up to 7 percent. Furthermore, the utilization rate—the amount of time that consultants spend on billable tasks—has soared.

The program has also increased customer satisfaction. These days, the consultants dispatched to lead projects are more likely to have the exact qualifications requested by the client than might have been the case in the past. They also arrive at their assignments more quickly. The payoff can be measured in more than goodwill. According to Navi Radjou, a vice president at Forrester Research, IBM has discovered that for each point of improvement in its customers' satisfaction, it can expect annual revenue to grow by up to $3 billion.

Though it's impossible to quantify, employee morale and quality of life have soared, the company reports. Because the system closely monitors consultants' whereabouts, it knows which employees have been on the road and need a rest. "The system is smart enough to know that if an employee has flown from San Francisco to Paris to Hong Kong, it should put [him or her] on the bench and not fly the person anywhere for a couple of weeks," says Forno. "Instead, we can assign another resource who is just as skilled and just as qualified, so we don't wear out our consultants."

Despite the tremendous internal benefits, the labor management program's biggest payoff may lie in the eventual commercialization of the system for use by IBM's clients. Customers who have gotten word of the program are already inquiring about when it may become available. Eventually, IBM hopes to employ the system for use in government agencies like the Department of Defense and private-sector companies with large workforces. "We've been working all along with the idea that there is commercial value to what we're doing," says Forno. "At the end of the discussions that I've had with customers, they are prepared to buy what we're selling immediately."

One particular benefit down the road could be addressing the looming labor shortage. By the year 2025, 25 percent of the nation's workforce—nearly 86 million people—will reach retirement age, resulting in a potentially crippling corporate brain drain. IBM expects that its WMI program will help both IBM itself and its clients plan for the mass exodus.

With the labor management system in place, says Forno, "we'll know when [the shortage is going to hit] and we can plan our supply against demand and be proactive instead of reactive. You need to ... know what kinds of skills and talents are going to be walking out the door because of retirement [so that] you can replenish them and work with universities to recruit [new people]. You'll need to have a good handle on what your skills are ... to do that. Companies that don't have a good handle on supply and demand will be facing some significant difficulties."

About the Author

John R. Johnson
John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.

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