How Omni-Channel Impacts Labor Management: Insights from Ian Hobkirk

Fulfilling omni-channel orders puts more complex demands on labor in stores and DCs than past operations. As part of our Expert Insights series, Supply Chain Nation asked Ian Hobkirk, Managing Director, Commonwealth Supply Chain Advisors, for his thoughts on what the impact is on labor management.

SCN: Why has omni-channel caused a sea-change for retail DC labor?

Hobkirk: There have been two waves of omni-channel. The first was multi-channel commerce, which was basically adding ecommerce as its own dedicated channel. The second is what is now commonly called omni-channel, where you have crossover between retail, wholesale and ecommerce channels. For example, you have ecommerce orders being picked, packed and shipped at the stores to take advantage of that inventory, or you have something bought online and returned to a store. There are all different levels of crossover.

What most companies are trying to move towards is keeping all of those channels under one roof in a common distribution center. Ten years or longer ago when ecommerce was relatively new and companies didn’t have much experience with it, they tended to operate dedicated ecommerce distribution centers or outsource fulfillment for this channel to a 3PL. The pendulum seems to be swinging back the other way now with companies bringing all channels under one roof to take advantage of common inventory for multiple channels. And importantly, they want to be able to use the same workforce for picking retail, wholesale and ecommerce orders.

This is one of the biggest changes omni-channel has brought to the distribution center. You no longer have someone who is picking retail orders all day, just grabbing cases and throwing them on a conveyer or on a pallet. That person may now be picking retail orders in the morning and then picking ecommerce orders in the afternoon. So you need a much more versatile labor force because the variety of tasks being done by any one worker is much greater.

SCN: You’ve said elsewhere that DCs now play a bigger role in developing and preserving a retailer’s brand. Why is that, and what is the impact on DC labor?

Hobkirk: In the past, consumers primarily interacted with the brand at the store level, and store employees were trained in customer service. Now, oftentimes the DC is the last touchpoint with the product before the consumer sees it. If the order isn’t picked correctly or the quantity is wrong, or even if the packing in the container is sloppy, it will impact the consumer’s impression of the brand. It is important not just to pick things more efficiently, but to pick them accurately to preserve the brand image. So it is important that the DC focus on both efficiency and service metrics when servicing ecommerce.

SCN: Has the increased focus on LMS also heightened the need for integration with WMS?

Hobkirk: Labor management and engineered labor standards become even more important in an omni-channel environment. If you’re only picking retail replenishment orders, you don’t need that much sophistication in labor standards. All the picks are basically the same. Somebody grabs a case and puts it on a pallet then drives to the next location and does the same thing. It is easy to use historical averages or some reasonable expectation of what someone should be able to pick, and then measure people against that.

In the omni-channel environment where you have different order profiles for ecommerce than you do for retail or wholesale, it is difficult to make rules of thumb work. If you tell an employee that he/she should be able to pick 125 lines per hour, the employee might say, “Well I had to do a lot more piece picking today than I did yesterday,” or “My picks were spaced further apart.” Complexity and the inconsistency of tasks make sophisticated labor management tools even more important.

Using a labor management system with the benefits of engineered labor standards is a great way to measure and hold people accountable for what they do. It doesn’t matter what range of tasks they may perform over an eight-hour shift, the system can calculate a standard for how long it should have taken to do each of them; it can measure how long it actually took, and then compare their performance.

For that scenario to work, there has to be a close interface with the WMS system. The WMS is keeping score of what actually happened—this person did this pick, then went to this bin and did this pick, and so on. You have a series of transactions with time stamps associated with particular operators. The WMS takes this information and passes it over to the labor management system so the labor management system can compare that to the standard and evaluate that person’s efficiency. That is really crucial. In an omni-channel environment, it is tough to do labor management without a WMS system involved.

SCN: Thanks, Ian. In Part II of this series, launching 6/23/15, Hobkirk will discuss omni-channel’s impact on store labor, and how other industries beyond retail are affected by omni-channel.

  22 Comments   Comment

  1. Good overview of “The second is what is now commonly called omni-channel, where you have crossover between retail, wholesale and ecommerce channels.”

    Agreed that in this new Omni-channel world “Labor management and engineered labor standards become even more important in an omni-channel”

    Thanks

    Thad

    Reply
  2. information and interesting to see and understand how consumers use to shop to how we shop today and lets see how this changes with the future and technology

    Reply
  3. Shai Garber

    Great interview, I agree that it is crucial to track performance on all levels, and LMS is a good tool that allows the business to get a clear picture of working capital efficiency.

    Thank you 🙂

    Reply
  4. Enjoyed Ian’s insights. Agree with the increasing visibility of the DC’s to the final consumer. I also agree with the importance of complete integration between WMS and LMS.

    Reply
  5. Murugan Thangarasu

    The interview rightly captures on how omni-channel impacts labor management in DCs

    Reply
  6. Chris Linde

    Having originated in operations management,there is an absolute truth in the need for awareness and integrity for the DC’s or stores employees selecting, packing, handling and shipping end-consumers demands properly, The brands reputation is being rated at all stages of fulfillment.

    Reply
  7. Ranganathan Nagarajan

    Is there any tools available other than LMS in the Market to get the clear picture on Working capital Efficiency.

    Reply
  8. Salil Sanghvi

    This articles gives a complete different dimension on how Omni Channel creates new challenges in Labor Management.

    Reply
  9. The vital importance of tightly synchronised Labour and Warehouse Management in the Omni Channell environment was expertly highlighted in this article. A great and informative read!

    Reply

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