How Advanced Labor Management Systems Boost Warehouse Productivity and Workforce Efficiency

In the beginning, labor management meant punching into a time clock. A manager crunched the numbers from a timesheet on a calculator, and from there, processed payroll. Which makes it easy to see how the earliest versions of labor management software (LMS)—emerging in the 1980s—seemed revolutionary.

These early versions of LMS still leaned into the time clock, but they also began the first wave of digitation of the process. Managers began replacing paper logs with digital versions, and the wave of improved reporting and tracking was underway.

As promising as the early versions of LMS were, many companies found they didn’t deliver as hoped. “Over the years, most companies found that the engineered standards were a pipe dream,” says Lee Rector, CEO at LaborAI. “Most companies were spending their money on software that delivered much less than they expected.”

And that’s a shame when you look back on how complicated and expensive it was to integrate LMS in those early days. Rector says that essentially, old versions of LMS delivered “monitoring built on monitoring.” That model is a thing of the past.

Today, it’s AI that is revolutionizing LMS. Gone are the days when LMS simply tracked and reported on employee productivity. The current versions are robust and sophisticated, and a manager can do more than ever with the tools. And since the AI revolution is new, the sky is seemingly the limit on where LMS could go next.

“Today you can dive into the insights you get out of an LMS to ensure your operations are effective,” says Bo Thomson, vice president of consulting at enVista. “Because you can be at 100% performance and still have room to improve. AI can help you drill down, and we’re just starting to see where those capabilities are headed.”

According to Peter Schnorbach, senior director of product development at Manhattan Associates, “We’ve seen a monumental shift in the role of labor management over the past 20 years. It’s moved from a glorified reporting system to becoming an operational execution system.”

The reports on which LMS built its foundation are still there when managers want them, but increasingly, they aren’t in great demand. The focus of today’s LMS is instead on the user experience, giving managers all the details they want—with the push of a button.

Today’s LMS is smarter, faster and truly on a different playing field than its predecessors.

Improving on a good thing

Just as LMS is changing with the times and offering ever-sophisticated feedback to users, it also comes in many different flavors today. But most systems are designed to balance out the two chief goals of a distribution center: maximize service and minimize costs—with as little tradeoff between them as possible.

“Everyone operates on some measure of the spectrum,” says Keith Moore, CEO at AutoScheduler. “LMS is all about working harder—tracking performance against a set goal and determining the financial impact of your work.”

AutoScheduler goes above and beyond traditional LMS, according to Moore, and falls into the category of orchestration software. This “LMS adjacent” software accomplishes LMS tasks, but does the work smarter, says Moore. Here, the LMS, the warehouse management system (WMS), the enterprise resource planning (ERP) system and any other software feeds into the orchestration platform. “We plan according to the inputs and deliver a tangible output,” says Moore. “We determine who needs to work when, based off your projected needs and what the optimal scenario is for running your facility.”

This “future state” labor visibility allows managers to schedule labor on the fly, says Moore. You may have 10 people scheduled to clock in at 3 p.m., for instance, but if your team gets caught up, you can tell those employees not to come in. Or you can shift them to another area of the warehouse, optimizing your investment in labor.

Other systems deliver beyond traditional reporting in other manners. Blue Yonder, by OpenSky, starts with the basic labor management features, but stays engaged well beyond the early phases, according to Jason Milbrandt, senior director of client services at Open Sky. “What sets us apart is that we assist customers beyond implementation,” he says. “Historically, LMS providers engaged with customers to get them set up and trained, and then turned over the keys.”

This approach could be successful, says Milbrandt, but just as often, it was a set up for failure. “We help customers with problem areas, and point out opportunities,” he adds. “We do quarterly site visits and look at any standards or reports that don’t make sense. We give white glove treatment beyond the implementation phase.”

Blue Yonder also focuses on customization through its dashboards. “We can build custom extensions, and we’ve done a good deal of that lately,” Milbrandt explains. “The supervisors can monitor them and use them with the reporting metrics they want.”

Of course, for high levels of customization, it pays to have a large-scale operation. Milbrandt says Blue Yonder is best suited for operations with payrolls in the range of $2.5 million per year or more, which justifies the investment.

Tools for today’s labor pool

Recognizing that today’s workforce is different also plays a role in today’s LMS. When the pandemic hit, so too did loyalty to a company. And the younger generations are different, jumping from one company to the next more frequently than Gen X or the Boomers.

Plus, many would prefer not to work manual labor jobs, and most typically don’t stick around long. One antidote is providing incentives, which LMS makes easier through its accountability features.

“LMS can now capture metrics beyond productivity, like attendance, quality of work and adherence to safety,” says Thomson. “When you add that into productivity, you can offer higher pay incentives if you’re beating the standards.”

This is where AI can prove useful, too. “Rather than simply pulling reports, you can ask AI to drill down into specific details,” adds Thomson. “This is an evolving feature, but it gives supervisors the ability to query the entire database.”

Likewise, Easy Metrics LMS has optimized the pay for performance model. Targeted to large customers, CEO Dean Dorcas says the newcomer on the block is delivering results. “If done well, pay for performance is like dynamite,” he says. “Walmart has used our product and doubled its productivity. The feature drives down costs and rewards employees well.”

In a nod to incentivizing the changing generation of employees, Manhattan has added gamification to its LMS. “Instead of having a goal, our software gives employees a challenge,” says Schnorbach. “Employees can compete for points, for example, and use those earned points for rewards. This has been an effective tool for our customers—some have seen significant productivity gains as a result.”

The future looks smarter

As quickly as AI is infiltrating every aspect of living, predicting how much it might advance labor management in the next couple of years is difficult. But there are plenty of signs on where the category might head.

“The value of AI is that there’s so much information out there, and it can help us find the golden nuggets,” says Dorcas. “How do you go through all those data points and pull out the top opportunities to use them? In the future, customers will be able to leverage that advanced knowledge.”

Schnorbach sees a great deal of promise in AI tools for labor management. “We see it providing information on standard operation procedures, providing information on how to write an extension, and more,” he says. “The possibilities are significant.”

In addition to added features and benefits from LMS, expect faster start-up times in the future, too. According to LaborAI’s Rector, their product represents the next generation of the tool. “We use a synthetic model, which allows for a new way to create standards,” he explains. “AI helps us generate unique KPIs, and we can get our product up and running in about a week, at a fraction of the cost.”

Right now, LaborAI has more than 100 customers in 16 countries running its product, which Rector describes as “more accessible than LMS and more accurate than WMS.” He added that its AI labor retail model is affordable because any company can add it, without the need for an underlying application like WMS.

Increasing use of automation will also increase demand for advanced LMS tools. “Automation only hits a component of operations,” says Thomson. “You need a specific order set and the ability to utilize labor to understand and hit your expected rates.”

While a mature category, LMS isn’t going anywhere soon. Look for it to shift and improve as it moves forward, providing a more modern user experience. “The industry has seen many changes,” says Schnorbach, “and we will see more in the future. Labor management is no longer just a reporting tool, nor should it be treated as a separate application.”