Putting LMS to work

Labor shortages are exacerbating issues across the supply chain. To stay relevant in a highly competitive labor market, successful logistics operations are leveraging technology solutions that can help them maximize worker productivity. 


With no end in sight to the labor shortage, companies are turning to labor management system technology for help optimizing their current labor resources.

We’re in an era where any tool proven to help an organization get more out of its labor force is in high demand. As organizations fight over a shrinking pool of available workers, the need for such tools has only grown.

The labor issue is especially acute in the warehousing, distribution and transportation sectors, where the entry-level order picking professional to the seasoned warehouse manager- and everyone in between-is in high demand right now.

Credit the uptick in e-commerce plus the ongoing supply chain disruptions with creating this “perfect storm” of factors that are making recruiting and retention difficult right now. For help utilizing their valuable human labor forces, companies are assessing and implementing labor management systems (LMS).

These solutions provide labor productivity reporting and planning capabilities, the latter of which help companies analyze workforce requirements based on a certain amount of work to be performed and a standard unit of time to perform each element of work, according to Gartner, Inc. Using labor productivity planning, companies can effectively measure and report the performance of individuals, groups or facilities (versus a predefined standard for performing each specific work element).

While there is no substitute for excellent recruiting, hiring and retention strategies, LMS picks up where the hiring manager leaves off and helps companies better manage their existing workforces, identify areas of improvement and work to fill in those gaps. By gathering and assessing worker data, LMS provides accurate productivity level information for individual workers and/or groups of employees. Equipped with these insights, executives and managers can see exactly where their labor dollars are going and use the information to optimize their existing workforces.

The democratization of LMS

Sophisticated labor management tools have been around for some time, and their adoption in complex distribution environments is mature, says Dwight Klappich, research VP at Gartner, Inc.

Historically, for example, the highest LMS adoption levels have been in complex facilities that have a lot of employees. In these settings, Klappich says in-house industrial engineers are known for their ability to “pull all of the levers” in labor management. “It’s been a fairly select marketplace,” he adds.

Fast-forward to 2022 and the current labor market situation is giving LMS a “new kind of energy,” says Klappich. That energy just happens to be swirling around distribution environments that may not have historically adopted labor management software, as in those that are less complex, don’t have full-time industrial engineers on staff and/or use distributed logistics networks (e.g., multiple warehouses with minimal staff).

Changes in the software itself may also be driving higher LMS adoption rates and interest in the solutions right now. Rather than focusing solely on engineered labor standards, for example, the platforms are being integrated into time, attendance, fleet management and warehouse management systems (WMS). These integrations help shippers get a holistic view of labor management that goes beyond just establishing and adhering to granular rules.

For example, Klappich says he recently worked with a retailer that has 14 warehouses operating on different WMS platforms plus various other unintegrated applications. The company isn’t currently using an LMS, but in light of current labor conditions it does want to know which warehouses are performing better or posting less gap time (the “gap” between hours paid by an employer and non-overtime hours worked) than the next.

The company wants a solution that a logistics manager can use to view business performance across locations and dig into those numbers and make decisions based on the results. The combination of LMS and WMS can fulfill these and other requirements.

Klappich says the elevated interest in LMS is being driven by companies that are trying to figure out how to increase productivity in a labor-constrained environment. The retailer that knows gap time can consume 30% to 40% of an employee’s day- and that can use an LMS identity and then reduce that gap time by 50%-may be able to reap some major productivity improvements.

Going a step further, companies are also increasingly viewing labor through a financial lens and asking themselves questions like: How has our labor approach influenced the cost of performing certain tasks’?

A distribution center manager in Los Angeles that is paying $3 more per order than a facility in Cleveland, for instance, can use LMS to drill down into whether local labor rates, productivity issues, or another factor is at play. Then, the company can determine the overall financial impact of that differential (between the two DCs) and adjust accordingly.

“I’m getting a lot of customers very interested in this,” says Klappich, who points to Easy Metrics as one vendor that’s “pretty far out in front” in this area.

Spikes due to shortages

Victor Chen, supply chain management principal at Capgemini, says he’s also seeing a bigger interest in LMS right now.

“We’re definitely seeing spikes due to the shortages,” says Chen, who also sees developments like the use of gamification and availability of deeper, richer analytics as key market drivers for this type of software in 2022. “People are using LMS differently than they did, say, 20 years ago,” he says, “when it was primarily used to track and benchmark against engineered labor standards.”

The fact that LMS is being made available in the Cloud is also pushing more shippers to invest in the software, much of which also includes mobile functionalities (e.g., managers can access it and use it on their tablets and mobile phones). Cloud applications are usually available on a subscription basis, require little or no CapEx investment or IT infrastructure, and can be accessed from anywhere. With more people working remotely, the labor constraints continuing and more customers shopping online, Chen says Cloud-based LMS can complement a warehouse’s or DCs overall automation strategy.

Companies shopping for LMS in 2022 should factor the current challenges and their evolving business models into the buying decision. “Companies should look for LMS that really aligns well with their automation and labor strategies,” Chen advises. “For example, anyone who can take an LMS and tie it back into the reduction of manual, repetitive work will be able to effectively free up time for their employees to let those workers spend more time on higher-value projects.”

Maximizing the effectiveness of labor

Labor has become harder to get and harder to keep; turnover is high; and the cost of labor has increased significantly. Many companies are now finding that, to get the people they really want to keep onboard, they have to pay more for them. These realities are putting LMS within reach of a larger pool of companies.

“Anytime you’re paying more for labor it makes it easier to justify tools to help you maximize the effectiveness of the labor that you do have,” says Donald Derewecki, senior consultant at St. Onge Company. The pace of change on the automation, digitalization and mechanization fronts combined with constant demand fluctuations make the business case for LMS even clearer for a wider swath of companies, many of which wouldn’t have considered the software just a few years ago.

“LMS gives companies a tool to plan with during a time of great volume fluctuations, which make it all the more important to plan and properly accommodate those fluctuations in the volatility,” says Derewecki.

Other key drivers include the uptick in multi-channel selling and the very high volume of smaller orders that companies are dealing with. These factors have put new stresses on the warehouse and DC, where good management decisions around employee scheduling can make or break a company that’s dealing with varying workload requirements.

These are important considerations in a world where you can’t just turn up the speed on a machine and hope to get more production out of it. “Sometimes when you speed up the machine, all you wind up with is more scrap, waste, errors or lost time,” says Derewecki. “When properly designed, implemented and administered, LMS helps companies avoid those issues and balance out their [labor resources].”

More metrics and analytics, please

The best LMS platforms also allow you to do predictive analytics to delve into real problems, identify choke points and/or ferret out the inefficiencies in your systems.

As technology continues to advance, LMS will also move further away from the stopwatches and clipboards once used by industrial engineers and over to more streamlined, digital solutions. And as mentioned earlier, many of those solutions will also integrate with other applications in the warehouse and DC setting.

Also expect to see more gamification being used in LMS, where Klappich sees much potential for platforms that help keep employees engaged, on task and productive. He points to Manhattan and Korber as two firms that are expanding their capabilities in these areas.

Klappich also expects to see more LMS platforms incorporate metrics and analytics into their functionalities, with Rebus Intelligent Labor Management and Easy Metrics being two of the current frontrunners in this area. “Warehouse managers can then use those analytics to run their operations better,” Klappich concludes, “versus just getting a scorecard showing ‘how Dwight did yesterday”‘

Bridget Mccrea is a contributing editor for Logistics Management


This article was written by Bridget Mccrea from Logistics Management and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.