Offset Labor Costs and Increase Productivity With Labor Management Software
April 15, 2021
It’s generally accepted that roughly 50 percent of a company’s operating costs can be attributed to labor. When considering material handling warehouse labor costs, however, the percentage is estimated to be even higher, at approximately 70 percent. With the increased demands of e-commerce order fulfillment, that’s unlikely to be an overestimation.
The reasons are multifold. First, wages have been rising steadily over the past few years. Pandemic-driven upticks in online shopping and order volumes are putting even more strains on distribution centers (DCs), including those already handling e-commerce, as well as those in other markets — such as grocery and pharmaceuticals — that are relative newcomers to direct-to-consumer order fulfillment. Further, skilled labor with experience using the latest warehousing technologies is increasingly difficult to find, particularly in areas where multiple facilities are competing for the same limited labor pool.
In our most recent On The Move webinar, I described how labor management software (LMS) can be used to offset rising wages and overall labor costs. With an LMS, it’s possible to increase warehouse productivity while still offering competitive wages. In fact, an LMS can increase productivity levels to the point that the gap between cost and throughput increases significantly, creating labor cost savings.
Let’s look more closely at how this is possible.
How an LMS Delivers Productivity, Cost Savings
Coaching: An LMS improves coaching by applying metrics to the training and engagement of employees. The software tracks all personnel, their performances, and the areas in which they need additional support. It also records who provided the coaching and when, giving operations managers a view into where each associate is on the performance improvement continuum. Because employees who need the most help in a particular area are automatically highlighted by the software, supervisors can focus their coaching efforts most effectively.
Incentives: An LMS enhances incentive programs that are designed to help associates reach certain performance milestones. The software tracks individual and team performances (e.g., by shift, process area or facility), encouraging healthy competition pertaining to a certain metric, such as accuracy or throughput. Analysis of this data can highlight individuals, teams or departments in need of improvement. It can also prompt a closer assessment of bottlenecks that are impeding overall productivity.
Labor Planning: With most DCs over-scheduling each shift by 20 percent to proactively account for absenteeism, utilizing the productivity data housed in the LMS helps to define a more accurate plan for each day. In a given area, the number of people required to handle a typical shift workload can be determined via past performance assessments and other LMS data. It can also show, in real time, estimated order completion rates. If a certain area is behind schedule, managers can reallocate employees accordingly to meet deadlines.
Insights: An LMS provides a wide range of labor insights, helping operations managers to make more accurate predictions about capacity planning, hiring and training needs — as well as attrition and retention. Based on a variety of facility-specific historical factors, an LMS can pinpoint which employees are most likely to quit — with an accuracy rate up to 95 percent. This provides managers with two options: intervene and engage that employee in an effort to resolve the problem (wage dissatisfaction, childcare challenges, no room for advancement), or be proactive in hiring replacements before separation occurs. Both approaches will alleviate productivity strains.
To learn more about how an LMS can boost your facility’s productivity while reducing your overall labor costs, please view this webinar.
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