Data Integration: The Future of Labor Tracking and Management (Part 2)
Labor costs are continually on the rise and every minute of every day is affecting your bottom line.
As managers, you’re responsible for an overabundance of labor management processes, from recruiting and hiring to monitoring performance and progress. All the while, customer service requirements continue to accelerate, with shorter cycle times and more challenging value-added service requirements.
The good news is that most of the information you need to effectively track and manage your labor force is available. However, the unfortunate reality that many companies face is that this information is not easily accessible and if it is, it resides in multiple systems—making it virtually impossible to do anything with it. Fortunately, in today’s world there is technology available to help you combine and access this information.
In this second installment of our four-part series we are going to examine the different approaches to pulling in data, and how creating a labor management system with multiple data sources is the way.
WMS Data – A Limited View
Traditionally, many companies begin tracking labor metrics through the use of a WMS system. Although WMS is a great place to start it only gives you part of the picture as it relates to your labor force. For example, your pickers are not always scanning, so you are only capturing what they’re doing when they pull the trigger on that RF device. Labor is happening all over the facility, whether it be in the four walls of your facility, or just outside of it.
The diagram above is representative of we typically see in the industry. This is the total number of labor hours you are paying for, based on the time clock: who is clocked in and for how long, regardless of what they are doing.
In the second box, the blue box, we see productive labor hours. In most facilities we see that anywhere between 65% and 75% of total paid hours are productive. What that’s telling us is that there’s 25%-35% of paid hours that are non-productive. These non-value-added hours, during which you are not able to track what the employee is doing are essentially what we call a dark area or lost time.
In the third box, the red box, we see activity scanned into WMS. This red box comprises only about 40% of the actual paid labor hours. This means that with WMS alone, you are missing visibility to around 60% of the labor hours you are paying for.
So, adding data. What’s the point? The more data you add, the more you understand your operation. The real goal in moving forward is to have 100% visibility, in terms of what your employees are doing, as part of the overarching system that you’re running. Optimizing labor is critical prior to adding systems, because if you can’t track your labor you can’t understand where your status quo is, in terms of performance, and if you don’t know what your status quo is in terms of performance, how do you know when you’ve gained productivity or gained value out of adding systems?
When you optimize your labor tracking by using a Labor Management System, you gain such benefits as increased margin and cost control, and increased productivity and utilization. You also gain the opportunity to incentivize and recognize your employees through various programs. With LMS you can really optimize your labor planning based on true productivity. Tracking and understanding how people are actually performing allows you to develop realistic standards, optimize your systems and put incentive programs in place. Now you have a true idea of what your productivity is based on labor alone.
At that point you can evaluate whether or not you are going to use people to perform a task, whether you are going to evaluate new hardware, or potentially evaluate automation. With automation the question is often, how do I make sure I’m making the right choice? And how am I sure that I’m not following a fad? Will the investment today give me a leg up on the future? Or can I wait? The end goal for everyone is to create better service for your end customer, whether it be faster fulfillment, automation or data management you can provide versus asking them to provide it for you. Ultimately, maximizing productivity and adding technology is driving better pricing, so that you can remain competitive.
The key point is, that before you do any of that you have to make sure that you understand where you are today. A labor management system is critical in making sure you understand what your labor force is doing today, so that you can figure out whether or not you need to invest in technology, or people, or both.
Stay tuned for our next article that will look at integrating technology and labor analytics to tell a more complete story to get more value out of your system, and to understand opportunity moving forward.