Jim began his career at Kraft where he worked to develop labor standards. Based on that experience, he knew this was a big opportunity for DSC when he joined them. In 2005, DSC evaluated the major suppliers of LMS solutions. They selected RedPrairie’s solution because they viewed it as the most comprehensive product available in terms of its ability to capture and measure all of their employee’s time-related activities. DSC wanted to track 100 percent of their warehouse staff’s direct and indirect labor from clock-in to clock-out. Even if all they could achieve was a more efficient clock-in at the beginning of the day and clock-out at the end of the day, along with better shift changes, DSC felt that alone would justify the project.
In the fall of 2005, DSC piloted the program at their McDonough, Georgia facility, which was their best run facility. DSC uses a proprietary WMS, so a big part of the project involved developing interfaces between the WMS and LMS. From a training perspective, they used the “train the trainer” methodology. They began one function at a time, starting with the areas where labor productivity improvements would provide the best ROI. At McDonough, that was their case pickers.
A LMS sets standards for workers. These standards can be set in different ways. DSC used a predetermined time system, Master Standard Data, as their methodology because they felt it was the most objective and consistent. The goal in setting standards is not to make workers work fast, but rather to have them work efficiently and steadily all day long.
A worker who achieves a 100 percent rating for a day’s work has done everything expected of them. At their McDonough facility, before the LMS productivity gains were achieved, it was pretty typical to see floor personnel working at a 75 percent level. Some were as low as 50 percent. DSC’s expectation for their workers was that they would improve 5 percent a week until they were up to 100 percent. No disciplinary action was taken initially if a worker failed to improve. Instead, managers would work with their warehouse staff to make sure that best practices—those that would make them maximally efficient—were being employed. Jim stressed how important change management efforts were. There needs to be extensive training, coaching, and counseling in order to make a smooth transition to the new way of doing business. To be able to do the necessary coaching and counseling on an ongoing basis, DSC’s goal is to have one frontline manager for every 15-20 workers.
Once the great majority of their staff was regularly achieving their daily goals, DSC put in place an incentive program. They pay ten cents an hour above the base pay for every percentage point above 100 percent in direct labor that a worker achieves. This made the program self funding – both workers and DSC profited from higher productivity.
DSC caps the bonus at 125 percent for safety reasons. Also, they pay close attention to workers that consistently work at very high productivity levels to make sure they are not taking any shortcuts. The incentive program is gated. Workers don’t get bonuses if productivity is achieved at the expense of safety or quality. For example, if a worker had a safety incident in the last month, they are not eligible for incentives.
DSC did lose some workers because of this program. However, they felt the workers that left were the ones with the worst attendance and safety records, and so they were left with a lean and efficient work force. Today, turnover is as low as it has ever been, and most of that they attribute to this program.
Based on these results, it is not surprising that DSC decided to move forward with a network wide rollout. Before they would move to the next facility, the engineering team would stay until the warehouse was up to 100 percent on direct labor productivity and the percentage of indirect labor was down to an acceptable level. The engineering team is corporate based.
Because the implementation team worked side by side with the implementation folks from RedPrairie, they became comfortable with the solution. By the fourth site, the DSC folks were ready to move forward without RedPrairie’s help. The next 18 sites were done solely by DSC.
If I was selecting a third party logistics (3PL) partner, I would never select a 3PL that did not have a rigorous continuous improvement culture. LMS can be a key part of that culture. When the LMS was implemented at a new site, DSC made sure the site was using best practices and that travel paths were efficient. The system also generates data for understanding their business better. If labor is unproductive at a particular facility, they can do a root cause analysis to see what is causing it.
However, those kinds of improvements are what I would expect from any LMS project. One of the most interesting parts of the discussion for me was Jim’s description of how their coaching program helped improve their lean program. Managers do daily coaching observations. In addition to making sure best practices are being followed, part of their job is to keep their eyes open for barriers to worker productivity. Are there empty pallets in aisles? Do workers need to make extra key strokes to complete a task? At the end of the coaching session, the manager gets feedback from employees concerning the barriers they perceive and their ideas for making the job easier and more efficient. Jim believes this has helped improve employee and management relations, while the data from the LMS has been critical in creating a culture of accountability.
(Note: RedPrairie is an ARC client)