IDII Software Newsletter
 To assist the professional dealing with software in Warehousing Distribution, Logistics, and the Supply Chain.
September 2, 2001 - Vol 2 No 13
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Techniques, Vision, & Educational Thoughts

"The Top 10 Fallacies of Logistics Labor Management - Part 2"

Fallacy #4: Labor management benefits are primarily for the DC manager.

While the DC manager and his/her operation will benefit significantly from LMS through improved productivity, lower costs, improved quality and better employee retention, labor management can provide a broad set of benefits that support many organizational objectives. The entire logistics and supply chain organization benefits from lower operating costs and improved quality, which drives shareholder value. Many companies are identifying improved labor management as the next area for logistics to make a significant "contribution" to the company's bottom line. Customers benefit from improved quality and more consistent delivery. The CFO benefits not only from higher profitability, but also from an improved return on assets through greater throughput at individual facilities. Both finance and marketing benefit from the ability of LMS to support activity-based costing and calculation of logistics "cost to serve" for different customers, markets and value-added processes.


Fallacy #5: Adding Labor Management to a WMS implementation will increase complexity, and therefore risk.

Actually, the reverse is generally true. Almost invariably, companies that implement warehouse management systems wish they had invested more in training. Labor management's focus on development of preferred methods for warehouse activities and reporting mechanisms to ensure operators are adhering to these methods, improves overall training dramatically and reduces variability in operator approach to the job. This removes a major hurdle to overall WMS implementation success, thus reducing risk.


Fallacy #6: LMS software doesn't add a lot of value - developing and implementing engineered standards actually drives most of the benefits.

Many companies have embarked on engineered standards for distribution, only to find that there investment in this process delivered less than expected results. Those that do achieve benefits from the standards process often find the momentum and results realized deteriorate over time, through gradual neglect of the key standards or their champion moving to a new position. To maximize benefits, companies must adopt a comprehensive labor management system that incorporates preferred methods for specific tasks, engineered standards, and LMS software to support dynamic goal calculation, labor planning, and robust reporting. The results achieved will be more substantial and sustainable than those from standards work alone.


Fallacy #7: We have high quality DC supervision - a new "system" won't provide much incremental benefit.

Even the most well managed distribution facilities can benefit substantially from an LMS. The foundation of labor management is precise, discrete goal time calculation and detailed feedback and reporting, capabilities that require robust technology support. These capabilities will drive significant productivity, quality and employee retention gains even for the most well supervised crew. The reality is that an LMS leverages quality supervision and allows supervisors to concentrate on critical management issues due to the order and consistency found in LMS environments. An LMS also provides supervisors with a set of technology tools that make their jobs easier, gives them greater management control, and the information they need to improve their areas or departments.


Fallacy #8: Labor management requires too much time for data collection and administration.

Companies that have implemented warehouse management and/or radio frequency (RF) systems already have the data collection infrastructure required to support an LMS. Those without these systems can still benefit from LMS though a variety of collection methods, such as PC-based data entry, that impose minimal new overhead burden that is more than offset by the significant improvement in overall productivity. Likewise, the minimal additional administrative requirements are more than offset by both the reduction in management time required to collect and analyze labor statistics and the benefits of real-time access to information on productivity barriers and incipient problems that can quickly degrade productivity.


Fallacy #9: Labor management is unnecessary in an incentive environment

The distribution incentive systems of most companies are built on unit-based productivity measures (picks, lines, cases, etc.) that are based on historical averages. Much less often, they include travel distance as a factor in the incentive calculations. This approach is inherently unfair to employees and reduces the pay-for-performance benefits of incentive systems. Advanced labor management offers many critical benefits beyond what can be accomplished with the majority of these incentive systems. Discrete standards precisely determine the specific goal times of each task based on its actual work characteristics (distance, weight, equipment, etc.) thus ensuring fair and accurate incentive calculation for both the company and employee. Furthermore, development of preferred methods ensures standards are based on the correct way to perform the "incentivized" work. Advanced labor management is essential for those companies considering an incentive program. Even those companies that have implemented incentives will make significant productivity gains and achieve a more fair and manageable system through LMS.


Fallacy #10: Labor management won't work in a union environment

Labor management systems have a long and successful history of implementation in union distribution shops across many different union organizations. Unions have accepted the fundamental basis of preferred methods for warehouse tasks, and desire the fair and accurate reporting labor management software provides. In disciplinary cases, unions often will not even contest the basis of the standards or employee productivity reporting, instead focusing on perceived company-imposed barriers to achieving the standards, such as lack of training. Many unions have actively participated in successful LMS implementations.

White Paper is provided by McHugh Software International (WMS, LMS, TMS). IDII thanks McHugh for use of their white paper.

See full version of the Top 10 Logistics Labor Management Fallacies white paper (PDF).
See brief version of the Top 10 Logistics Labor Management Fallacies (PDF)


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Software Company News


  • Chess Logistics Technology Ltd (WMS, TMS, 1979, NT, Unix, Linux) Releases Empirica WMS Release 2.

    This month sees the first major upgrade to Empirica since release in 1999. As well as enhancements to the Empirica Interface module, 47 additional features have been added to increase the already extensive functionality available across the three levels of Empirica. A further interim release is planned for Autumn 2001.


  • i2 Technologies (Nasdaq: ITWO, TMS) and diCarta (1998, TMS, USA)Enter Strategic Partnership To Deliver A Collaborative Contract Solution For i2 SRM. Companies plan to integrate diCarta's contract management software, diCarta Contracts, with the i2 Supplier Relationship Management (SRM). SRM is designed to enable companies to optimize their sourcing and procurement processes through the creation, execution, and management of global sourcing strategies. diCarta Contracts provides a contract authoring solution that extends the current SRM contract management solution capabilities for managing contract price and business terms to address interactive negotiation of the contract legal terms and conditions. The combined solutions are designed to enhance supplier performance monitoring, increase the speed with which buyers and suppliers negotiate spend, and drive down costs and inventory.

    I2 will resell diCarta Contracts to both current and potential customers as part of its SRM solution. The partnership is designed to increase i2's competitive advantage in the SRM market by providing a more complete contract management solution, which is a critical element of the value chain for both direct and indirect purchasing.

    About diCarta - - - diCarta is the market leader in enterprise contract management solutions that automate and manage the entire contract lifecycle - across the enterprise, across all contracts, and among all trading partners. Using diCarta Contracts, companies gain control over their contract management procedures, increase visibility into contractual obligations, manage the business terms of their agreements, and integrate contract processes and data with all other enterprise systems. This results in reduced legal and financial risks, decreased operational costs, and optimized business relationships. Built for delivery over the Internet, it allows multiple parties within, as well as outside the enterprise, to collaborate via a secure web site with the efficiency of role-based workflow and security. Contract management best practices can be achieved through enforceable standards and defined business processes.


    Savi Technology (TMS) introduces three new modules that enhance its SmartChain® platform, which enables shippers and logistics service providers to manage their own Private Logistics Networks through the Internet.

    SmartChain Logistics Portal. Savi helps design the "look and feel" and integrates the back-end applications its customers want on this Web interface. Acting like a "logistics dashboard," this Web interface enables customers to collaborate in one place with their trading partners on selected functions, such as management of warehouse inventory, shipments, assets, and nodes as well as order fulfillment; and, to gain integrated views into certain modes, such as air freight and ocean freight.
    The customer assigns the roles and functional parameters each user can have based on the company's own business rules. The real-time views into the various logistics functions are made possible by Savi's Web-Enabling Engine, which uses XML-based standard language to provide two-way communication between traditional client-server and other legacy applications and the Web interface.

    Using a standard Web browser, SmartChain users can not only view different logistics functions but also perform tasks such as generating advance shipment notices or routing changes. As a result, customers reduce operational delays, clerical errors, administrative costs and the generation of paperwork and faxes.

    SmartChain Event. Packaged with every Savi application, SmartChain Event automatically collects key supply chain events, such as the scanning of a bar code or hand-off of a shipment from facility to a carrier. SmartChain Event then translates the data into useful, actionable information that's automatically transmitted to users and can be managed from the SmartChain Logistics Portal. This enables users to manage by exception, whether it involves a late or misrouted shipment, low inventory, delivery problems, and much more.

    SmartChain Site Manager. This on-site server runs Savi applications and processes data generated in the field. For example, a Site Manager placed in a warehouse or used for an equipment yard can interpret data from Savi or other local logistics applications, and automatically initiate actions, such as workflow processes or exception alerts. This feature allows customers to leverage existing applications and run local operations more efficiently. When linked to data from
    Site Managers at other locations, the servers provide end-to-end visibility throughout the supply chain.


    Supply-Chain Council (www.supply-chain.org) has released Supply-Chain Operations Reference-model (SCOR) in Version 5.0, now downloadable from the SCC web site for member organizations. SCOR 5.0 reflects a number of major changes from the previous issue in the areas of Metrics, Performance Attributes, process specific changes, and the development of RETURN, the process just introduced in Version 4.0. Performance attributes were expanded from four to five by separating Flexibility and Responsiveness. As a result, accompanying Metrics were reconciled throughout the Model to ensure that they are measuring what they are intended to measure.

    Companies worldwide are using SCOR to examine the configuration of their supply chains, identify and measure metrics, determine weak links, and achieve best practices in order to increase the efficiency of their operations. The Model is more than a tool for charting supply processes or activities. It is a business process reference model that links process description and definition with metrics, best practice, and technology. While remarkably simple, it has proven to be a powerful and robust tool set for describing, analyzing, and improving the supply chain.

    "Perhaps the most significant change introduced in Version 4.0 and detailed in 5.0 was the inclusion of a new Level 1 Process element," said Scott Stephens, SCC Chief Technology Officer, "The addition of Return extended the scope of the Model into the area of post-delivery customer support. The expansion of the Model to include return activities was originally proposed by a Maintenance, Repair and Overhaul task force associated with the Aerospace and Defense Special Industry Group. This change reflects

    the overwhelming response by Council members outside that specific community to recognize the requirement for all organizations within a supply chain to put in place activities associated with the return of products for any reason."

    For more information on the Supply-Chain Council, the SCOR-model, its members, and its activities, please contact the SCC offices. Voice: 412 781 4101 email: info@supply-chain.org


    Syspro Impact Software, Inc. (ERP, MRP, SQL Server, I-SAM) www.sysprousa.com release NEW VERSION 5.1 of Encore(tm) Enterprise software. This version offers new functionality, new e-business-centric capabilities and added support for multi-site facilities with a new module and numerous enhancements to existing modules. The new module encompasses Engineering Change Control. Enhancements include Goods in Transit and Blanket Purchase Orders functionalities.

    The new Engineering Change Control module enables IMPACT Encore users to manage more efficiently product engineering changes and/or associated data. This is achieved through various features, processes and a user-defined workflow type sub-system designed to replace the paper trail that usually accompanies any changes to product design data. A history of product changes enables the viewing of archived bills to ease the manufacture of products based on earlier versions. With a complete record of all product modifications, a company can be more responsive to customer requests.

    The added Goods in Transit functionality, as the name implies, allows visibility of all goods in transit. It facilitates Supply Chain Transfers between warehouses and enables transfers to be reviewed and receipted in the same manner as purchase orders. When the stock in one warehouse is inadequate to satisfy demand, it suggests inter-warehouse transfers as an alternative to issuing a new purchase order.

    The added Blanket Purchase Orders functionality allows the entry and management of contract purchase orders for specific suppliers. It creates, maintains and tracks the use of purchase orders against a supplier's contract.

    IMPACT Encore 5.1 also features other numerous module enhancements. For example, General Ledger financial reports can now be published as XML documents for viewing on the Internet or an intranet. The documents have drill down capability from the general ledger codes to the source documents as well as full report editing and journal posting capabilities.

    Accounts Payable, Accounts Receivable, Cash Book, Sales Orders, Purchase Orders, Bill of Materials, Work in Progress, Net Requirements, Quotations and Inventory modules all offer expanded functionality in Version 5.1. For example, the Bill of Materials module incorporates a new feature desired by industries, such as food, pharmaceutical and chemicals. It allows component elements of a bill of material to be entered as a percentage of the finished product.

    IMPACT Encore 5.1 stores archived sales orders and work orders as XML documents which can be recreated as HTML pages using a Web browser. The archived data is accessible using any XML-aware tool. Archiving in this manner allows the user to store files off-line for security or practical reasons. Archived data can also be easily retrieved for the purpose of creating new items, such as a new work order.

    Business-to-business trading has been enhanced with the optional use of XML documents with published schemas for transferring purchase orders and sales orders.


  • Vertex Interactive, Inc (WMS, SCE, USA, Nasdaq: VETX). and Plus Integration Supply Chain Solutions (SCE, Netherlands) Sign Definitive Agreement to Combine. Combined revenues expected to be at least $120 million for calendar 2002, making the company the fourth largest in the industry by revenues. Vertex will purchase all of the issued and outstanding capital stock of Plus Integration in exchange for 40 million newly issued shares of Vertex common stock in a transaction intended to be a combination of equals.

    The transaction is expected to close by December 31, 2001. Completion of the transaction is subject to certain conditions. The combined entity will retain the Vertex Interactive name and will continue to be headquartered in Fairfield, New Jersey. The companies estimate that they should realize operational efficiencies of at least $4 million in expense savings in the first full year of unified operations.

    Adrie Reinders, Plus Integration founder stated, ``At the beginning of this year, we determined we needed to add order fulfillment and supply chain execution capabilities to enhance our product suite. At about the same time Vertex was seeking to expand its product portfolio with software to connect their customers' customers to each other and the enable their customers to mine their own supply chain data and thereby to manage their procurement and delivery of product dynamically in real time. Having looked at a number of SCM-execution vendors, we concluded Vertex had the most advanced and best suite of execution technologies for our needs and is the best cultural fit for us. We look forward to combining our assets, customers, geographies; expertise and staff, joining our strengths to deliver long-term value to our shareholders and powerful ROI to our customers.''


NextCard Visa

Scripture to Ponder - List of Scripture to Ponder from prior issues.

  • "Most men will proclaim every one his own goodness
    but a faithful man who can find?"
    -- Proverbs 20:6

Quotes to Ponder - List of Quotes to Ponder from prior issues.
  • "Everything should be made as simple as possible, but not simpler." --Albert Einstein


Websites to Check Out

http://www.nrf-arts.org/IXRetailDictionary-Vn2.1-Build01.html - National Retail Federation - Association for Retail Technology Standards (ARTS) - Dictionary of common data formats for retail data entities to transfer.


Good Book


"What To Look For In Warehouse Management System Software"
Obal, Philip See reviews and more information on this book at Amazon.com

New Software Directory

"Warehouse & Logistics Software Directory"
Obal, Philip See reviews and more information on this book at Amazon.com


Valuable Future Events

LogicTools will be holding its 2nd Annual Symposium: Improving Supply Chain Performance with Tactical Planning on Thursday, September 13th 2001. The symposium is being held in conjunction with the first annual LogicTools User Conference on Friday, September 14th, 2001. See http://www.logic-tools.com/symposium2001/

Frontline Solutions Expo 2001 -- November 12-November 15, 2001 Chicago, IL, USA


About This Newsletter - ISSN 1533-435X

We educate and share news on software for warehousing, transportation, shipping, packing, slotting, loading, optimization, and enterprise wide software solutions. This free newsletter is published twice a month. Feel free to forward this newsletter to others that you know. One may quickly subscribe by accessing our website at www.idii.com/esn/index.htm.

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