Steve Lewis, the president of GXO Direct, the shared services division of GXO Logistics, spoke at Blue Yonder’s ICON user conference. Blue Yonder is one of the world’s largest providers of supply chain software solutions. GXO is the world’s largest contract warehousing provider. Afterwards, Mr. Lewis spoke in more detail to industry analysts. Mr. Lewis announced that Blue Yonder’s warehouse management system (WMS) – with the attached modules for labor management, automation, and order management – would become the preferred solution offered to customers in the Direct division.
GXO Direct operates warehouses across major markets in the U.S. and Canada. The network of warehouses enables one day delivery for brands anywhere nationwide. Since its introduction in 2018, GXO Direct has grown exponentially, adding millions of square feet each year. They offer multiple customers across different verticals access to warehouse space, technology, and value-added services that includes e-commerce shipping and returns. The Direct division serves multiple customers out of the same warehouses. In Southern California, for example, they have a 670,000 square foot warehouse that serves eight different fast-growing ecommerce retailers. By operating hubs comprised of several warehouses located in a campus, GXO is able to increase operational agility, reduce reducing transportation costs, and speed up delivery times.
GXO (NYSE: GXO) is a publicly traded company headquartered in Greenwich, Connecticut with nearly 1,000 warehouses and more than 130,000 employees globally. The company generates $9 billion annually and serves customers across a breadth of industries. In GXO’s annual report it states that roughly 30 percent of its revenue is from automated sites. This is substantially higher than the industry average of 8 percent. This is because the company bet early and big on technology. Their selection of Blue Yonder is another example of this.
The Need for Speed
GXO chose Blue Yonder as one of their warehouse software partners for its Direct network because the rapid implementation of a warehouse management system (WMS) is critical in supporting Direct’s fast, flexible model. They recognized that with the right Cloud solution, they could make implementation two times faster than traditional on-premise solutions.
That is quite a feat since GXO’s approach to implementations was already being done in 16 weeks. 16 week implementations were possible because Direct looked at how the last 40 warehouse start-ups had been configured and used that data to create a new template that would allow for fast implementations. This allowed them to know before an implementation even began which configuration switches to turn on. Not so many years ago, it was not unusual to hear of WMS implementations taking up to 9 months. It is breathtaking to think that they plan to take the implementations down to 8 weeks.
Speedy implementations cut the costs of implementations and allow them to onboard new customers more quickly. Additionally, they were looking for labor savings of 5% based on the labor management solution. The savings from labor management will dwarf the savings that stem from speedy implementations.
Additionally, they were looking for a solution so simple that if a change to a process needed to be made, an operations manager, rather than an IT analyst, could make the change. Mr. Campbell visited the customer sites of many of the leading providers of WMS. At one Blue Yonder site he asked a manager, “what if I wanted to receive not by ASNs (advanced ship notices) but by PO (purchase order) with serial capture?” The manager said it was not a problem. In a few minutes, he located the right configuration switch, clicked it, and BOOM, the new process was enabled. This enables changes to be made as needed in real-time.
GXO is known for being customer-centric, providing customized solutions based on the unique needs of its blue-chip customer base. If a potential customer has a preference for a different WMS, and it is one of the 10 WMS solutions that GXO supports, they can implement the preferred solution. However, they plan to lead with Blue Yonder as the solution for GXO Direct. Furthermore, even if another vendor’s WMS is used, GXO Direct believes they can seamlessly layer the Blue Yonder labor management solution over the other vendor’s WMS solution.
A Different Approach to Labor Management
In order to layer in workforce management capabilities, GXO will start by documenting standard operating procedures to optimize operations. But then, instead of using industrial engineers with stop watches or other work measurement techniques to determine what the labor standards should be, machine learning will be used.
Historically, when a labor management system (LMS) was implemented, engineered work-measurement techniques were used to determine how long it took to complete a task to determine where to position employees within the warehouse at a given time and help them operate more efficiently. A traditional LMS considers the distance traveled, whether a pick is in the golden zone or requires stooping or stretching, the equipment used, and many other variables to create labor standards. Because processes change, industrial engineers needed to continue to update the standards.
The trouble is that industrial engineers have become a scarce commodity. This is making it difficult for companies to establish labor standards or even to keep existing standards up to date. Fortunately, machine learning can be used to solve this problem.
With the new Blue Yonder solution, GXO will be able to apply machine learning to the data generated across their network of warehouses to establish standards, have the proper number of workers in the warehouse, and properly position and reposition those workers. With a machine learning approach to driving labor standards, data is acquired over time. This data shows that when Steve moves from location X to location Y it takes on average 29 seconds. When Dave moves from the same origin to the same destination, it takes 36 seconds. On average, across the work force, the average time is 33 seconds. That 33 seconds can be made the standard. This is then done across all tasks in the warehouse. These standards can then be used to forecast how many workers are needed and where in the warehouse they will be needed.
The Blue Yonder WMS product manager I talked to says that the labor standards generated by machine learning will not be the same as those generated by engineered labor standards. They are likely to be lower. That is a good thing. You would not want the new standards to be higher than what would be produced by industrial engineers. If the standards turned out to be higher, you would be pushing your workers too hard. In time, as Blue Yonder acquires data from multiple machine learning LMS implementations and then compares the results to traditional industrial engineering standards, they may be able to shrink the divergence between the standards generated by machine learning and what would be created by industrial engineers.
Will Labor Management Increase Turnover?
Mr. Lewis does not believe that the new labor management solution will increase turnover. Investments in robotics mean that workers are not walking or lifting as much. The optimization associated with cobots shrinks the distances traveled. In goods-to-person (GTP) automation, GPT robots bring the goods to workers at their stations. These investments, Mr. Lewis believes, have increased employee satisfaction, safety and retention.
Further, having the right warehouse leadership in place is key to employee satisfaction and retention. GXO has comprehensive leadership training for shift managers all the way up to the site managers. They have meetings at the beginning of each shift where team members reinforce the importance of safety, give suggestions on how to improve processes and debrief on operations at the site. Employees get to participate in continuous improvement projects and team members’ suggestions and feedback are valued and encouraged.
The use of robotics reduces training times and helps workers become highly productive much faster. In some cases, new hires working with cobots can reach standard levels of productivity by the end of the first day. It is always the goal of GXO to develop temporary workers into full time employees and give them career paths that can lead to management.
Historically, contract logistics companies made minimal investments in technology. Those days, for GXO at least, are gone. In the strategy section of GXO’s annual report, the company claims, “We deliver value to customers in the form of technological innovations, process efficiencies, cost efficiencies and reliable outcomes.” After talking to Mr. Lewis about their investments in technology and training, this did not sound like empty rhetoric.