January 1, 2007
technology review | Labor Management Systems

Managing by the numbers

managing by the numbers

At the Container Store's DC, there's no need for bosses to ride herd over work crews. Performance scores displayed on a giant electronic scoreboard let workers pace themselves throughout the day.

By James A. Cooke

Though they work deep in the heart of Texas Rangers and Dallas Cowboys territory, workers won't find the latest game results on the giant scoreboards in the Container Store's Dallas-area DC. But they will find something very nearly as compelling. With its displays refreshed throughout the day, the four-foot electronic LED scoreboards delivers continuous updates on a topic of almost limitless (and universal) fascination to workers: their own performance.

Drawing on real-time data from the DC's labor management and warehouse management systems, the giant scoreboards system from Symon Communications tells workers exactly where they stand—how many tasks they've completed, how many assignments are left in the queue, and how their performance is stacking up against the facility's standards. The scoreboards itself represents something of a productivity breakthrough. When the company first installed its labor management system, supervisors found themselves constantly stopping to run performance reports for workers eager to know how they were doing. Now, key performance numbers are displayed on a screen mounted near the ceiling for all to see.

It's important to note that this is not management by intimidation (or public humiliation). The Container Store, which has earned a spot on Fortune magazine's "100 best companies to work for" list for seven consecutive years, is not that kind of place. The performance scores shown on the big boards aren't for individual workers but for work areas, explains John Murphy, a vice president for work-force management at Waukesha, Wis.-based RedPrairie, which provided the labor management software used at the facility. The idea is to make workers responsible for getting the work done without bosses riding herd over them, he says. "You want to make the associates self-accountable to get the work done in an appropriate amount of time with safety and quality."

Stuart M. Smith, senior supply chain specialist at Symon Communications, says that his company has found that real-time measures clearly visible to workers helps drive workers to perform at higher levels.

So far, the scoreboards system appears to be having the desired effect. "It has been very successful [in] giving our employees visibility about their performance throughout the day," says Christy Parra, director of logistics systems for the national retailer. "It's neat to see an employee come up at the dock and say,'88 [percent], I've got to get a move on,' and you can watch it go to 90 percent within the next 15 minutes."

The push for labor standards
Like the Container Store, DCs across the country have been implementing labor management systems (LMS) in an effort to boost labor productivity. The reason is no mystery. "You've got more competition from outsourcing or offshoring for labor," says Richard Sherman, an industry solutions manager for Microsoft's World Wide Enterprise Partner Group at the company's Austin, Texas, office. "You've got to find a way to dramatically increase the productivity of your workers."

Labor management systems are relatively new. A decade or so ago, reliable data on how long it took workers to complete various warehouse tasks were hard to come by. Most DCs didn't even try to keep tabs on the activities of their order selectors, receivers and forklift drivers. The few that did relied on the recollections of supervisors.

The advent of warehouse management systems (WMS)—coupled with radio-frequency (RF) systems— changed all that. Warehousing software offers a simple— and automated—method of monitoring a worker's performance through "time-stamping." When an employee takes a pallet off the loading dock and scans its bar code with an RF reader, for example, the WMS records the action and logs it into a database. Then when the worker deposits the pallet into a storage rack and scans the bin location, another time-stamp is created to indicate that the task has been completed. The WMS can keep a log for each task performed by each individual worker.

"The advent and universality of WMS has opened the door to these labor packages," says Geoff Sisko, a senior vice president with the consulting firm Gross & Associates in Woodbridge, N.J. "The warehouse management systems capture time information to create baselines."

Today's labor management systems can do much more than simply compile records of how many time-stamped tasks have been completed, however. They can also analyze the data, comparing an individual's performance against an established labor standard, for example. To establish labor standards, companies often hire an industrial engineer to come in and analyze workplace activities, conducting ergonomic, labor and time-andmotion studies of the various operations. Once the standards are fed into the application, the LMS can then benchmark activity against those standards and generate performance reports for both individuals and the operation as a whole.

Quick results
Among the first industries to embrace the use of DC labor management software was the grocery industry, which is still a largely manual operation. "Although some grocery chains have tried to automate, the most efficient method is still guys walking around with pallet jacks," says Sisko. Given the manual nature of the work and the industry's notoriously low margins, it's not hard to see the appeal of a tool that promises to optimize their DC labor and cut costs.

As word has spread about the benefits of LMS, other industries that rely heavily on manual labor—retail and consumer goods manufacturing, for instance—have begun to follow suit. "In the last six months, we've seen a surge of interest in labor packages," says Peter Schnorbach, senior director of product management for Atlanta-based Manhattan Associates, a supply chain software vendor whose offerings include a labor package. "We've seen this surge because wages are up and productivity is low, and everybody is looking to cut their costs."

Companies that install labor management software can expect to see productivity improvements of as much as 20 percent, reports Greg Aimi, a research director with AMR Research Inc. in Boston. And it doesn't take years to get these applications up and running, he adds. Most companies find they can implement a labor management package in 15 to 30 weeks.

The buzz appears to be translating into increased sales. Aimi reports that software vendors earned between $40 million and $50 million in revenue from labor systems last year. Key players in this market include such well-known names as RedPrairie, Manhattan Associates, Catalyst, Retalix, Provia and SSA Global, which sell either stand-alone packages or modules that can be added to their warehouse management systems. Aimi notes that some warehouse consulting firms have begun marketing their own labor software as well.

Container Store gets its DC in order
In the Container Store's case, the decision to install labor management software was prompted by double-digit growth. In recent years, business has been expanding at a rate of 20 to 25 percent for the retailer, which sells totes, bins, stacking units, garbage cans, shelving and baskets—just about everything needed to organize the home or office.

Though it's been steadily adding stores in the past few years (the company now operates 38 stores nationwide), the retailer has not added DCs. Everything sold by the Container Store is received, processed and shipped by a single DC located in the Dallas suburb of Coppell, Texas. And as the DC's workload swelled, the company began looking for ways to manage the growth without hiring battalions of new workers.

The Coppell DC, which serves both stores and individual customers, employs between 250 and 325 non-union workers and houses about 8,000 stock-keeping units (SKUs). As trucks roll into the facility, workers use forklifts to offload the merchandise and move pallets of product into storage. In most cases, the workers who handle pallet putaway are also responsible for replenishing the case- and item-picking areas.

At the same time, other workers are busy filling replenishment orders from stores. The average replenishment order consists of about 1,000 SKUs, which means items have to be picked from storage locations throughout the 735,000square-foot DC. To keep travel to a minimum, order pickers are generally assigned to specific zones. In the case pulling areas, workers pull cartons onto pallets with pallet jacks. In the less-than-case areas, they pull loose products into totes for their journey to stores. Once picking is completed, workers build full pallets loads to take to the shipping dock, where they floor-load the store-bound trailers.

Along with filling store replenishment orders, workers at the Coppell DC also fill orders placed by individual consumers online or over the phone. These orders are handled separately in a special section of the DC.

When it came to setting performance goals for all these activities, the process used in the past was haphazard at best. Managers had no real way of knowing how much time should be allotted to each task, says Parra. "What we found ourselves doing was setting our goals based on what we did," she says. "So if history said we could do 92 picks per hour, our goal might be 95."

As the DC prepared to launch the labor management program, however, it became clear that it would need a more rigorous approach. So once the Container Store had chosen a software package (a labor management system from RedPrairie that's tied to its Catalyst WMS), the vendor sent an engineer to the Texas facility for three months of observation. "The engineer optimized the process by writing down the flow, step by step," says Parra. "We did the observations to make sure what we defined as standard was exactly what we were performing in real life."

Among other benefits, the detailed workflow analysis allowed the DC to set better calibrated standards for order picking, a task whose demands vary wildly according to a product's weight, its accessibility, and the distance the worker must travel. "Engineered labor standards take all those variables into consideration," says Parra. "The standards take into account how much an item weighs, if it's a hefty box as opposed to a skimpy one."

From those observations, the engineer developed metrics for key activities, including store replenishment and fulfillment. (See accompanying box for a complete list of metrics.) Implementation of the software began in the spring of 2005 and took six months to complete. The DC currently uses the labor software to measure performance in its outbound operations. It plans to introduce the program to its inbound operations this spring.

Bringing order to chaos
Asked how the new system is working out, Parra responds—fittingly enough—with an organizational analogy. "It's like reorganizing your closets or redoing your room to become more productive," she says. "You've cleared out the chaos. Managers can manage better because they have better visibility and can see what's happening from an operations standpoint."

That improved visibility has also given the retailer a better handle on its work-force needs, she adds. "We can better plan labor if we know what our current labor can do."

But perhaps more importantly, the labor management system has allowed the workers to take responsibility for getting the job done. They no longer have to rely on progress reports from supervisors. A glance at the scoreboards gives them the information they need to calibrate their own performance throughout the day. "It's not a management tool to figure out what people aren't doing their part," Parra emphasizes. "It's a tool for our employees."

So far, at least, workers seem to be making good use of that tool. The Container Store has seen improvements in performance against three of its metrics: direct labor hours per truck (a metric used for store replenishment), completed tasks per working hour (a measure of putaway performance), and payroll dollars per order requisition (a metric tied to the fulfillment of online and phone orders).

Better yet, at a time when U.S. Labor Department figures show that productivity growth has stalled among non-farm businesses, the retailer's DC is bucking the trend. Since deploying the labor management software, the company has seen its direct labor productivity jump by 7 percent.

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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