How do I know if Implementing Supply Chain Modules like Labor or Slotting will be worth the effort?
For nearly a decade, analysts and supply chain journalists have talked about the benefits of implementing a Labor Management (LMS) module. In the past few years, Slotting has been added to this discussion, primarily because many of the LMS vendors have started to integrate Slotting with LMS. Trying to figure out why a company would implement either – or both – is not a straightforward answer.
That’s not to say that an LMS module is a complicated implementation effort or that the justification is difficult to prove. In a sampling of approximately 40 clients, all showed an opportunity for improvement of over ten percent in labor costs, with paybacks routinely less than one year.
Now that most best-of-breed Warehouse Management System (WMS) vendors have an integrated WMS/LMS solution – the bigger question is whether or not to take advantage of the detailed engineered standards capabilities of LMS. This is sometime referred to as discrete engineered standards, which means that the standard is based on multiple variables with travel calculations (we could go on about these, but let’s save that for another post).
If you are considering a new WMS, or an even an upgrade of your current system, then it’s absolutely worth the effort to design and configure your WMS with an LMS keeping discrete standards in mind. The most obvious reason is for the reporting and planning capabilities that LMS brings to your WMS. The second reason – maybe even more important, but often overlooked – is that implementing an LMS will ensure that you do not cut corners in the configuration and setup of your WMS or in solid process engineering for the warehouse floor. Setting up a WMS while keeping the LMS in mind will ensure that locations, processes and even users are set up so that you can report productivity correctly.
Even if you don’t plan to have discrete engineered standards, reasonable expectancies or something in between; an LMS should be a part of your supply chain solutions if you want help managing labor costs and/or providing a foundation for continuous improvement initiatives.
Now let’s look at Slotting modules. We can debate whether Slotting should be put in before or after LMS but what is important to understand is which system it should be integrated with. At this time, not many software vendors have a fully integrated solution that is connected to both the LMS and WMS. Companies must choose whether to integrate LMS or WMS with Slotting. That’s a huge task – but not insurmountable. And, in the near future, Slotting should be an easy implementation between both products. The benefit to integrating Slotting to LMS is that it allows the LMS (as long as discrete engineered standards are set up) to analyze whether or not labor savings will be realized with a new Slotting plan. The benefit to integrating Slotting with WMS is that it facilitates the tasks of moving inventory based on re-slotting plans.
What’s most interesting about slot optimization and slotting programs is that companies generally look at Slotting programs to help layout a facility or determine slot sizes. This is actually something that consulting companies or other applications are designed to do while Slotting modules are designed to make sure the product you have in stock is located in the best spot in the facility based on the locations, pick paths, product families and zones that you have already configured.
So why would someone want to implement Slotting? Depending on your organization’s needs, Slotting may provide you with better space utilization through improved management of pick face and reserve storage. Companies that consider implementing Slotting are generally looking for data-driven slotting optimization that will lower labor costs by reducing travel and handling of product. It’s not uncommon for Slotting optimization tools to help yield 8-12% in savings.
When you consider that both Labor and Slotting modules can save as much as 10% or more individually, would that mean implementing both would yield +20% in savings? Yes and no. The key difference in the two modules is that Labor is designed to tell you how long a task should take and how long it took someone to do it. The reporting and monitoring of Labor data helps Operations manage labor better. As the same time, Slotting looks at order history and SKU movement to help determine if re-slotting of product would reduce travel and handling, which would lower the Labor standard for that activity. There are differing opinions of what should be first in the implementation road map, ours being that it’s important that Labor be implemented first to be able to understand and see the impact of the Slotting tool and optimizations.
So, is it worth it to implement either? In general, the evidence of payback is there for both Slotting and Labor Management – and if you have the modules already, there’s not much question that it’s worth the time and effort to implement them both. If you don’t already own the modules, there are other options to consider like SaaS (Software as a Service) that can lower the initial costs. Regardless of your licensing situation, it’s worth putting in these solutions to help you gain visibility into areas of improvement for product slotting and labor usage. If you are still unsure, an objective third party can help identify the opportunities for improvement based on the different implementation strategies.
Consider this also – you don’t have to dive deep into either product right off the bat. You can implement Slotting as a pilot or test program in just one pick area. As for Labor, you can begin to use it as a reporting tool for tracking and planning your staffing. As you gain experience with each module, then you can begin to expand the use and implement advanced functionality within each product suite.