What Is a Labor Management System (LMS)?

A labor management system (LMS) is a software solution designed to help organizations effectively manage their workforce. LMS solutions typically include tools for tracking employee time and attendance, scheduling and assigning work, managing labor costs, and reporting on labor-related metrics.

An LMS can help organizations optimize their workforce by automating many of the administrative tasks associated with managing employees. This can lead to increased productivity, reduced labor costs, and improved compliance with labor regulations.

Some common features of an LMS include:

• Time and attendance tracking: This feature allows employees to clock in and out of work through a physical time clock or an online system.
• Scheduling: This feature allows managers to create employee schedules based on business needs and employee availability.
  Labor cost tracking: This feature allows managers to track labor costs and ensure they are staying within budget.
• Performance management: This feature allows managers to track employee performance and provide feedback and coaching to improve performance.
  Compliance management: This feature helps organizations ensure compliance with labor laws and regulations, such as minimum wage and overtime requirements.

Overall, an LMS can help organizations improve workforce management, reduce labor costs, and improve compliance with labor regulations.

A labor management system is a supply chain execution (SCE) solution that calculates a task’s expected time, provides real-time feedback and measures and reports effectiveness. It is important to note that this is a people-based program, not merely an IT project. An LMS is geared toward determining the preferred work methods (PWM) in a warehouse, which describe how to conduct the steps to complete processes or standard operating procedures (SOP). The SOP is the “what,” while a PWM is the “how.” PWM are not meant to replace SOP.

In the creation of an LMS, past company performance and metrics are reviewed and expectations are established to form a baseline. An LMS is easy to implement and quick to provide a baseline of reporting; however, baselines can be extremely sensitive to seasonality (e.g., a high-volume peak season skews monthly averages throughout the rest of the year). An LMS does also not account for process improvement changes and cannot hold workers accountable.

An LMS provides an overview of an organization’s labor productivity planning and reporting. The planning capabilities of an LMS allow organizations to decide workforce requirements for a project requiring a certain amount of labor to be performed within a certain timeframe. Labor productivity planning capabilities allow an organization to analyze and report the productivity levels of groups, individuals, and facilities against predefined performance standards.

What does a labor management system do?

A labor management system provides real-time visibility into labor performance metrics to ensure profitability and productivity targets are attained. LMS systems provide distribution center managers and warehouses with labor forecasting/planning tools, performance visibility in real-time and labor standards. All of this helps organizations improve employee coaching, management decisions and productivity. Ultimately, a properly implemented LMS will lower costs and increase productivity across the entirety of an organization.

Why is a labor management system needed?

Facilities operate at 60-70 percent of their potential without an LMS. Often, this is because metrics are not in alignment with company expectations. Without this alignment, there is a lack of clear expectations or goals, formal processes in place, timely feedback to workers and training programs.

From a management perspective, an LMS is needed to accurately forecast, budget and plan for labor and material requirements, as well as to improve the overall efficiency of an operation. At the supervisor level, an LMS is needed to execute the work that is planned and to determine the performance of the facility, job or people. At the employee level, an LMS is needed to understand how to perform a task and the length of time a task should take.

Companies should consider an LMS because it is very low risk; it is a non-mission critical application with a rapid ROI. An LMS is also highly sustainable and require minimal maintenance compared to warehouse management system (WMS)/transportation management system (TMS).

What are the benefits of a labor management system?

A labor management system (LMS) can provide a variety of benefits for businesses and organizations. Some of the main benefits include:

• Understanding of labor forecasting and scheduling needs with workforce management tools ensure the existing labor resources are optimized to reduce overtime and labor costs
  Reduced onboarding and training ramp-up time through a proactive comprehensive training and change management program
• Easy access to real-time dashboards and reports with data from multiple sources to provide immediate feedback to supervisors and employees regarding task management and their teams, as well as individual performance
  Understanding of cost to serve requirements based on unique customer shipping and receiving in today’s omnichannel supply chain
• Ability to offer an incentive-based compensation program, leading to reduced turnover, lower cost per unit and increased productivity gain

An LMS delivers a strategic framework for Lean process improvement. These systems aid in the elimination of non-value-added tasks within your labor supply chain. There is increased individual and team performance – up to 30 percent productivity improvement. An LMS also leads to reduced labor costs and increased profitability. These benefits begin to accrue for some organizations in as little as 12 weeks from implementation.

An LMS also gives companies improved manpower planning and scheduling, reduced dependency on temporary labor, reduced overtime, improved customer service and optimized use of systems and equipment. Employees tend to be more motivated and have clearer goals, thanks to feedback offered by supervisors and the LMS. There is reduced variability of task performance, improved employee morale and retention and enhanced communication between employees and management.

Productivity tends to increase because people do not mind being measured. They are comfortable being measured against a work standard if they know it is fair and accurate. Employees like goals and feedback; they want to know how they are performing against their goals and against their peers.

What does a labor management system cost?

There are two components to labor management system costs: software and implementation services costs.

• Software Cost: The software cost is made up of 3 cost components: per user cost (floor associates and operations staff), hosting cost (servers/infrastructure/3rd party license costs), and Support & Maintenance Fees (typically a multi-year agreement)
  
  There are 2 ways the software can be purchased: either through a 1-time perpetual license fee with recurring support and maintenance or through a Software as a Service (SaaS) fee.
  
  A perpetual license fee can range anywhere from $300 to $1500+ per user with an annual Support & Maintenance Agreement ranging from 15 to 25% of the License fee depending on level of service; i.e. working hours vs 24 x 7 x 365 days/year.
  
  SaaS agreements can range from a 1 to 5 years agreement with 2 to 3 being the norm and are typically invoiced on a monthly basis. The fees range from $10-20 per user per month up to $40-50 per user per month.

• Implementation Services Costs: For a new implementation involving the implementation of discrete standards, training/change management, testing, and go-live support, cost estimates typically range from $12K to $14K/week, which can be applied to the week estimates to get overall costs.

How long does it take to implement a labor management system?

There are two common ways to implement a labor management system; either with or without engineered labor standards. Additionally, an incentive-based pay or pay-for-performance program could be layered into either approach.

The length it takes to implement a labor management system is dependent on scope and complexity, but can typically be done anywhere from 6 weeks to 26 weeks.

What are the best labor management systems?

One of the greatest challenges facing organizations today is workforce and labor management. Even with the advancement of automation and robotics, the need for employees won’t go away. Finding the right solution for your organization is challenging, but having the right labor management system in place can help significantly enhance your workforce’s overall performance. There are a number of labor management systems available for you to consider, but below are some of the most advanced systems that can be integrated into your supply chain today.

• Blue Yonder: Blue Yonder’s labor management system aims to give granular insight while still providing high level views to provide insight to users to fully understand their workforce. This scalable solution allows organizations to create best practices and define expectations, all while tracking warehouse and associate activity to enhance accountability.
• enCompass^TM: enVista’s own labor management system, enCompass^TM, offers quick time to value, a simple solution that provides robust results, clear visibility into real-time performance, all at an affordable price using a subscription-based model.

How will enVista’s labor management system help your organization?

Retail and supply chain leaders require real-time visibility into labor performance metrics to ensure productivity and profitability targets are attained in today’s competitive omnichannel environment. enVista’s implementation of preferred work methods, in conjunction with a comprehensive change management training program and accurate productivity goals based on industrial engineering principles, form the foundation of a labor management program that helps companies achieve increased performance and profitability. From warehouse labor management to shipping labor management, a good LMS can help you make the most of your workforce and drive down overall costs.

We will develop preferred work methods and train your staff and warehouse managers in how to perform the processes in a safe, efficient and quality-conscious manner. Using master standard dData (MSD) or time study technique, we will develop engineered labor standards or reasonable expectations to measure facility, shift, team, individual and/or task performance.

We will assist in the configuration, training and usage of internal or commercially based labor management systems. Our team will train your leaders in how to coach your employees and provide feedback that is positive in nature, meaningful and appropriate.

Our engineered standards associated with each function measure actual work completed against established benchmarks, making it easy to determine where resources need to be allocated for increased employee productivity and visibility, improved service levels and associate motivation and reduced overall labor costs.