Six Ways LMS Can Help Ease the Labor Crunch

Long considered the go-to software platform for companies that wanted to use engineering standards to track workforce productivity, labor management systems (LMS) have found a new home in today’s tight labor market. Instead of asking industrial engineers to pore over the employee activity data and report on productivity levels generated by the LMS, the software helps companies better understand labor costs, evaluate work processes and make more informed staffing decisions.

Add advanced technologies like artificial intelligence (AI) and machine learning (ML) to the equation, and you get a software suite that helps with one of industry’s biggest challenges: balancing low labor availability with a booming e-commerce marketplace and ever-changing customer demands.

“Early on, the emphasis for LMS was labor measurement and engineered labor standards,” says Bob Hood, a Capgemini principal and lead for the group’s Move Domain practice. “It was really all about an absolute focus on gaining efficiencies and driving productivity, with a lot of companies seeing labor cost reductions as a result.”

Fast-forward to 2019 and companies that are dealing with the lowest national unemployment rate in nearly 50 years are now seeing LMS through a different lens. “A greater emphasis is being placed on labor forecasting and scheduling, versus drawing as much productivity as possible from an existing labor force,” says Hood, who sees the temporary labor movement that’s prevalent in many warehouses and DCs as a key driver of this shift. “A lot of DCs are staffed by agencies as opposed to full-time employees, and companies have to be able to provide reliable labor forecasts for those agencies.”

In the absence of that data—which LMS can track, assess and disseminate—companies can schedule the appropriate number of temp workers to show up on any given day. “This also ensures that companies aren’t overstaffed in terms of resources,” says Hood, “and that they’re not spending more money than needed on labor.”

Easing the labor managment crunch

Companies are beginning to catch on to the value of LMS, but there’s still room for this software segment to grow. According to Peerless Research Group’s 2019 Materials Handling Technology Study, 17% of companies are currently using LMS or workforce management systems in their warehousing and distribution environments, and 21% are planning to evaluate, purchase or upgrade these solutions within the next 24 months.

“LMS is mature technology; it’s not new,” Dwight Klappich, research vice president at Gartner, points out. “Historically, uptick was limited because the software was really designed for industrial engineers who wanted to bring labor analyzation capabilities in-house and manage them. That has changed over the last 18 months to 24 months, with Klappich pointing to what he calls a “fundamental change” in organizations’ attitudes toward operational labor.

“In the past, a lot of companies treated operational labor as a fungible asset,” he explains. “It was easily replaceable because companies knew that they could go out and get 10 new resumes for every open position. That’s just not the case anymore.” If economic indicators are on point, that situation isn’t going to change anytime soon.

As shippers are forced to pick from a smaller and smaller national labor pool, LMS is stepping in to help. Here’s how:

1.) Supporting and improving the labor planning process. 

In a world where customers want and expect their orders delivered next-day or same-day, effective warehouse and DC labor is simply a must-have. Seasonal business changes, for example, can quickly send warehouse and logistics managers into tailspins as they scramble to cover shifts. Hood says that LMS helps sooth some of these paint points by helping companies better understand and respond to those needs. In other words, shippers are leveraging the information from the software (and from their other supply chain management platforms) to get a longer-view of their fulfillment and distribution labor needs. “Then,” Hood says, “they’re using the tools to do a more effective job at scheduling labor.”

2.) Replacing the “employee report card” mindset. 

There was a time when LMS was primarily used to develop employee report cards and to help companies answer questions like: How did an employee perform versus her standard yesterday? Which employees are doing well and which ones do I need to talk to (or even fire)? “Companies didn’t really feel any responsibility for employee performance,” Klappich recalls. “They just wanted to get rid of the dead weight and bring new people in.” Today, the same organizations are using LMS not so much to single out unproductive workers, but rather to identify employees who may need more coaching, training and support to get up to speed. They’re asking themselves questions like: Are there things my supervisory work staff can be doing to make sure my employees have everything they need to be able to perform at the highest possible standards? This is a major shift, according to Klappich, and one that modern-day LMS supports well. “This is a complete 180,” he says, “that focuses on the intrinsic inefficiencies in the hiring/retaining process, and not necessarily the individual worker.”

3.) Helping companies deploy WMS and LMS at the same time. 

The combination of warehouse and labor management may be unraveling a bit as companies see the latter as more than just an adjunct for WMS. “Only three years ago, there was somewhat of a de-emphasis on LMS, which was basically being ‘baked into’ WMS,” says Hood. “A lot of companies would get their WMS in place and stabilized, and then come back and subsequently add labor to the mix.” That approach has changed, he says, mainly due to the advanced forecasting and scheduling capabilities provided by both WMS and LMS. “More and more we’re seeing the solutions being employed simultaneously,” says Hood. “That’s a pretty significant shift that I expect will continue.”

4.) Getting smaller companies on the LMS bandwagon. 

Once the domain of very large organizations, LMS has become affordable and attractive for a larger swath of companies—including smaller firms that may not have previously made the investment. “You still have the big dogs like TZA, Manhattan, West Monroe Partners and Manhattan in the space, but most of them are at the higher end of the market,” says Klappich. “Vendors like Easy Metrics are gaining traction because they offer a viable option for [shippers] that haven’t historically used LMS.” The Cloud has also opened up new possibilities for smaller users, says Klappich, with most of those companies seeking answers to questions like: I’ve have 50 employees and I don’t have the time or wherewithal to keep replacing 10% of that workforce every month. What can I do to keep the people I have, especially the good ones?

5.) Blurring the lines between LMS and workforce management. 

Knowing that today’s younger workers are more apt to pick up their mobile phones than they are to go in and talk to a supervisor to request a day off, companies are looking for solutions that help them meet those needs. “In retail, there’s a big emphasis on the ability to provide employees with visibility into their schedules, and the ability to easily swap shifts or call in sick,” says Hood, who adds that more warehouse and DC operators want the same workforce management tools. “That’s something we’ll probably see on the not-too-distant horizon,” says Hood, “in terms of additional expectations that shippers have from their labor management systems.” He expects the vendor community to respond accordingly, mainly because there’s an ongoing “push-pull” scenario that happens behind the scenes in the software development world. “When their clients start demanding more,” says Hood, “from a competitive perspective, new innovation just makes sense.”

6.) Putting advanced technologies to work. 

Advanced analytics, AI and ML are starting to play a larger role in labor management—a movement that’s also being driven by extremely low unemployment rates and the uptick in e-commerce. Like most supply chain execution systems, LMS is very data-rich,” says Hood. “That gives users a huge advantage when it comes to leveraging the latest in analytics and the progression towards using AI and ML.”

The latter two haven’t fully manifested themselves in the LMS space yet, Hood admits, but there is definite potential ahead for both. “As LMS providers [weave] more AI and ML capabilities into their solutions,” he adds, “companies will be able to take even bigger advantage of the rich data that’s being generated by these solutions.”

As the labor pool shrinks, and as the huge Baby Boomer population moves into retirement, expect to see more companies seeking ways to keep their existing workers in place and productive. To help them achieve that goal, LMS vendors will surely be there with new, savvy ways to support the fast-paced, high-velocity distribution and fulfillment environments.