Last month, HighJump issued a press release that really caught my eye. It wasn’t so much the headline (“HighJump Software Offers Promotion Including Complementary ROI Assessment for Its Labor Management System”), but a sentence buried deep in the press release: “This special offer for HighJump Labor Advantage allows companies with constrained capital budgets to realize the benefits of a labor management system before paying for the license fee.” The end of the sentence was not underlined in the press release, but it should have been.
I immediately called HighJump to see if I was reading the press release correctly, and I was. The deal works this way. Their labor standards practice partners have agreed to conduct a one-day free assessment. If the assessment shows a strong payback opportunity and the customer wants to move forward with an LMS implementation, HighJump will install the software and the customer does not have to pay the license fee upfront, they only have to pay for the implementation services. Afterwards, the customer and HighJump jointly negotiate a payment schedule for the software, assuming the project delivers strong labor efficiency savings.
There are a several different ways that LMS can be implemented. One way is to track how productive your workers are on average and then set goals, monitor workers on an ongoing basis, and provide them with feedback on their performance until everyone comes up to the warehouse average. This style of LMS does not have a particularly good payback. Not surprising, HighJump’s offer to defer license payments will not apply to this kind of implementation.
The other style of LMS is based on engineered labor standards. A few years ago, when we surveyed over 20 companies that had implemented LMS based on engineered labor standards, a majority of them achieved a payback period of less than a year. There are different styles of labor standards, and I won’t go into all the nuances, but to simplify, one style is based on previously published time and motion studies. These studies might show that to move both your arms from waist level to 6 inches above your head to pick a small, light package will take 3.8 seconds (I’m making up this number, I don’t know what the real standard for this motion is). Basically, an LMS calculates where a picker is in the warehouse, how long it will take him to move to the picking location, and how it will take to execute the pick. Based on all the tasks assigned to a given work in a day, the LMS can determine the total amount of time required to complete these tasks if the worker is 100 percent efficient. A worker that scores a 100 met their goals for the day.
The theory behind time standards is that they are not designed to make workers rush. An employee working at standard speeds, who doesn’t pause to chat with coworkers or dawdle in other ways, should meet the daily time goals without strain. Many companies that have implemented a LMS with engineered standards have found that their workers, on average, were only working at 60 to 65 percent effectiveness over the course of the day.
One of HighJump’s partners for providing the labor assessment is enVista. Al Gagnon, one of the two best know pros in engineered labor standards, recently joined enVista to head up their labor practice. Other HighJump partners for this deal include Cornerstone Solutions, ESYNC/Transystems, Fortna, Peach State, and CIBER.
It strikes me that this is a good idea for both HighJump and their customers. It is mighty tough to sell supply chain software during a recession, as many companies seek to conserve their cash. Therefore, software companies need to get creative. Solutions that offer a quick payback period (under a year) offer the greatest opportunity for these kinds of creative offers. I am sure we will see other logistics software vendors get inventive as well.
On the customer side of the equation, many companies are laying off workers in response to the recession. As a result, remaining workers will need to be much more productive for companies to perform well in this economic environment. In fact, maximizing labor productivity is one of the six attributes for success we’ve highlighted in previous postings (see “Technologies to Maximize Labor Productivity and Logistics” and “Labor and Logistics“), and that’s exactly what labor management systems are designed to do.