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Fairly or not, the use of engineered labor standards in the warehouse is often viewed solely as a means of squeezing more productivity out of a workforce. But DSC Logistics doesn't see it that way. The third-party logistics provider has embraced the sometimes controversial tool as a key to ensuring competitive advantage.
Jim Chamberlain, director of industrial engineering with DSC, was first exposed to labor-management programs when he joined Kraft Foodservice right out of college. The food and grocery sector, with its razor-thin margins, was among the earliest adopters of the concept. When Chamberlain came to DSC in 1996, he brought the idea with him.
The atmosphere was ripe for a rigorous evaluation of the way DSC was deploying its labor force. The company was experiencing an unacceptable "hit-to-miss ratio" in its bids for new business, Chamberlain says. And the financial performance of its facilities left something to be desired.
"We realized that, being in the 3PL market, labor is our single biggest cost, and in some operations almost all of our costs," Chamberlain recalls. "We needed to change our way of thinking."
Fashioning an in-house tool for labor management was an option, but Chamberlain quickly discarded it. "I started to realize that this isn't our core competency," he says. "I decided it could take us years and years to put something together that equated to what's already out there."
DSC narrowed down the search to four software vendors with extensive labor-management modules. The winner was RedPrairie Corp., a provider of multiple logistics applications whose roots are in warehouse software.
DSC's distribution sites are a mix of dedicated and shared facilities. The company's aim, says Chamberlain, was to come up with a standard process for managing a nationwide labor force, regardless of customer or location. "We weren't developing best practices for an account," he says. "We were doing it for a function."
RedPrairie's Workforce Management application zeroes in on every detail involved in moving items within the warehouse. DSC can map out processes not just for basic putaway and picking, but for every step taken by a worker. Based on the characteristics of a given facility and its workforce, the RedPrairie system generates engineered labor standards for operating at maximum efficiency.
It's an idea that has found favor with parcel giant UPS, but few other logistics-oriented providers. Tom Kozenski, vice president of product strategy with RedPrairie Corp., says engineered labor systems have been slow to catch on in industries outside of food service and grocery. Labor unions have resisted the technology, and employers haven't pushed for it. In years past, Kozenski says, "manufacturers treated warehousing as the cost of doing business.... People didn't understand the value of engineering."
The latest recession has brought about a new focus on cost control, and given a shot in the arm to labor-management software in additional industries, including high-tech, consumer packaged goods, pharmaceuticals and automotive. 3PLs like DSC are also embracing the technology. They are either acquiring it directly, or through licenses purchased by manufacturing customers, Kozenski says.
Workforce-management apps are of particular value to 3PLs because they allow the user to track costs that can be charged back to each client. They can also help the logistics provider to sort out expenses in a multi-client facility, where employees might be dedicated to certain customers.
DSC wasn't a user of RedPrairie's full WMS suite when it acquired Workforce Management. The company saw no point in replacing legacy systems at its various sites unless there was a proven return on investment, says Kozenski. That said, DSC has been gradually rolling out the RedPrairie WMS at selected locations.
In addition to tracking labor performance, Workforce Management supports incentive programs for employees who perform above set benchmarks. That feature has been key to winning acceptance by workers who want to be recognized for their individual efforts. "[Some] employees said it's about time that everyone was held accountable at the same consistent way of doing work," Chamberlain says. Others were more skeptical at the outset, preferring to take a "wait-and-see" attitude.
DSC worked hard to gain acceptance from its workers, soliciting their views at every turn and transforming them into "vocal supporters" of the program. Best practices were developed through close consultation with those to whom they would apply. DSC presented the program as something to be "owned" by each site, not imposed from without by executive fiat. RedPrairie advised the company on the do's and don'ts of implementing labor standards, Chamberlain says.
Other advantages of the system include the ability to run "what-if" scenarios on the impact of new business or material-handling strategies. A DSC site looking to re-slot a pick face, for example, can determine the amount of labor it needs to make the change, and the precise savings that will result. The tool "saves someone from over-engineering slot moves, or just moving things without providing benefit," says Chamberlain.
DSC took its time installing the software. It began with a single site, on the theory that one success would engender others. And it made no promises to RedPrairie about adopting the tool anywhere else. Says Chamberlain: "It was a make-or-break rollout."
The pilot phase, from fully integrating the system to ramping up standards, took about six months, but the company's cautious approach paid off. "We had great results at our best site," Chamberlain says. "Everybody looked at each other and said this is a complete go."
The pilot was wrapped up in the first quarter of 2006. Rollouts at subsequent locations took between 10 and 12 weeks, depending on whether the site in question was serving one or multiple customers. DSC aimed for about eight implementations a year, a schedule Chamberlain calls "pretty aggressive." Today, RedPrairie's Workforce Management is in place at some 22 DSC logistics centers in the U.S., out of a total of 35.
DSC intends to use the increased efficiencies from Workforce Management as a selling point for attracting new business. Chamberlain believes the company's timing in acquiring the system was fortuitous.
"If we had waited until the recession, we would have been in trouble, to be honest with you," he says. Instead, "we've probably had our best two years of the company over this period."
RedPrairie Corp., www.redprairie.com
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