It's a routine repeated daily in distribution centers across the country: A worker runs out of packaging tape (or some other item) and heads off to the supply room. Along the way he stops to discuss last night's Cubs game with a buddy. He visits the restroom, then makes a detour to the vending machine. When he finally reports back to his station, tape in hand, it's time for his mid-morning coffee break.
It may not sound like a big deal, but that lost time adds up. One major North American retailer figures it lost 30 minutes of production time on each shift due to employees' leaving their assignments early and coming back late. Before it took corrective action, the retailer estimates it lost the time it would take to process about 3,000 case shipments a day.
And that retailer may well have underestimated the problem. Time off task has proved notoriously tough to quantify. Just ask John Guy. When his company, engine-maker Briggs & Stratton, commissioned a labor analysis a couple years back, Guy, who's vice president of distribution supply and supply chain management, figured workers at the parts DC near Milwaukee were operating at about 80 to 85 percent efficiency. But he was in for a shock. When results of the study (performed by software vendor RedPrairie) came back, he learned the actual figure was closer to 67 percent.
When managers realized workers were wasting about one-third of their time on the clock, they moved swiftly. But not in the ways you might expect. The Briggs & Stratton executives rejected the more conventional remedies—replacing staff or hiring more supervisors. Instead, they installed software.
Software? Yes, indeed. Though software may seem an unlikely tool for boosting productivity and motivating workers, this wasn't just any software. What Briggs & Stratton installed was a labor productivity system that tracks individual employees' work performance in real time, providing both immediate feedback and daily reports that supervisors can scan at the end of a shift.
The move paid off: Today, just 18 months after the software was rolled out, Briggs & Stratton ships 30 percent more product each day than it did in the presoftware era. And it does so with seven fewer fulfillment department employees.
Briggs & Stratton's experience isn't an isolated case. A survey conducted last summer by ARC Advisory Group (which, we should note, was co-sponsored by RedPrairie) showed that four out of 10 respondents using labor management systems (LMS) enhanced productivity by 15 percent or more. At the same time, 62 percent reduced labor costs by up to 15 percent. What's more, they found the software to be surprisingly affordable. Half of the respondents said they achieved payback on their labor management system within one year of implementation.
It goes without saying that those companies didn't achieve those kinds of results simply by buying a software package and sitting back to watch the savings roll in. As with any change, this type of initiative needs to be driven from the top down. Any effort that lacks top-level support is doomed to failure.
"It's a big culture change," says Dara Gault, business development leader at RedPrairie. "If you don't incorporate this into the way you manage your people, you won't see the savings. It requires commitment all the way down the management chain."
If getting senior management's support is important, getting buy-in at the supervisor level is crucial. It's almost a given that workers will resist change because it disrupts their routines and raises fears of job loss. The burden of alleviating their concerns will fall to the supervisors within the DC. And that means those supervisors must be both well trained and motivated.
How do you get employees to buy into the program? First, you have to make sure there's something in it for them, that they will share whatever benefits the new technology brings. That can be as simple as creating an employee incentive program that rewards workers for high performance. For example, employees who perform at 105 to 109 percent of standard performance levels might qualify for a wage increase of 50 cents an hour.
It also means keeping the communication channels open. "Management and their supervisors must set up a line of communication that encourages the labor force to make suggestions that can be discussed in an open forum," says Don Jacobson, a senior partner at LogiPros, a firm that specializes in the placement of logistics management personnel. "Some of the best ideas will come from the floor. If the workers see that management is involved, you'll have a much better chance to succeed."
The productivity benefits notwithstanding, labor software has yet to become a fixture in America's DCs. Many companies still hesitate to broach the subject with their staffs for fear it will erode morale—and increase turnover—at a time when DC labor is already in short supply.
However, the evidence suggests their fears are unfounded. To be sure, introducing LMS may hasten the departure of a few employees who feel threatened by the new system. But that's not necessarily a bad thing. The attrition at Briggs & Stratton, for example, turned out to be concentrated among several former manufacturing workers who were unhappy working in a DC environment. "Some of them weren't real enthusiastic, and a lot of those people transferred out," reports Guy. "They didn't want to work where there was a way people could measure what they were doing." With the complainers gone, the atmosphere lightened up noticeably. "The [remaining] workers were thrilled when those people left," says Guy. "That was a benefit we hadn't even thought about."
Another unforeseen benefit can be the labor management systems' ability to improve planning and scheduling. Once a system is in place, managers can use it to set target completion times for an activity such as a pick wave and to calculate the labor resources required. The system becomes even more valuable if the company has forward visibility into orders scheduled to drop into the distribution center, which allows managers to calculate how many workers will be needed to complete a day's work.
Though many users have yet to avail themselves of this feature—the ARC survey shows that only 43 percent of companies using labor software use it to facilitate planning —Briggs & Stratton has gone ahead and incorporated the capability into its workforce scheduling with great success. "We can move workers from the order fulfillment side into our parts kitting operation and then vice-versa," says Guy. "If we see a big spike in orders coming up, we can adjust our work staff accordingly." In fact, the company no longer has to hire temp workers during peak periods.
Guy notes that on-time shipping rates improved from 97 percent to 99.8 percent, and that customers are benefiting from better service. Company policy dictates that emergency orders received at the DC by 5 p.m. must be shipped from the DC by 7: 30 p.m. The DC receives emergency orders every day, and in the past that deadline often presented problems: "Sometimes we struggled to get that done,"Guy admits. "But now that we've increased throughput and picks get done faster, emergency orders aren't such a big issue anymore."
Any logistics manager who oversees a union operation will tell you the same thing: If you're going to walk into a union meeting with a proposal to, say, introduce labor management software, you'd better be prepared for a big show of resistance. You could hardly expect any selfrespecting labor union to accept a program that asks members to lift more boxes in less time than they currently do without a struggle, right?
Actually, managers who think that way may be gearing up for a fight that never comes. In reality, most unions embrace labor productivity software and engineered labor standards once they're fully educated about the goals of the program.
"The union actually likes it now," reports John Guy, vice president of distribution supply and supply chain management at Briggs & Stratton, which installed labor productivity software in 2003. "They … perceive it as a fair measurement. None of our employees feel [they're expected to meet] an unattainable goal."
That's not to say that Guy didn't encounter a few speed bumps early on. "We ran into an issue with the union because they didn't understand what engineered standards really meant," he admits. But even that didn't turn out to be a deal-breaker. As Guy learned, gaining union acceptance can be a fairly straightforward process if you keep some dos and don'ts in mind: