Human factor in LSP
How often is it that an executive from a logistics service provider (LSP) credits the success of an organization to people?
Actually, it's quite often. Industry news is full of chief executive officers praising their employees for accomplishments. But is this just lip service?
Those familiar with the logistics business will tell you that this is a 'people business.' Automation of information processes has helped to move shipments faster and more efficiently, but at the end of the day, the goods don't move themselves. Rather, people move the goods. In fact, it takes a lot of people to move the goods. According to UPS's Web site the company employs more than 425,000 people across the world. AP Moller – Maersk Group has more than 100,000 employees worldwide.
These are extreme examples of some of the largest companies in the segment, but consider for a moment how many transportation firms, such as motor carriers, brokers and freight forwarders, employ more than 50 people. There are too many to list in the phonebook let alone the pages of this magazine.
News about LSPs investing in technology to lower costs, increase efficiency, or offer new services never ends. But where is the focus on the people who really run the business and the technologies that enable them to improve?
LSPs deal with many of the same staffing challenges. Specifically LSPs have high turnover and a large hourly workforce to manage. Include the certification requirements needed for many positions in logistics and this becomes a complex situation requiring a sophisticated answer. It's a pretty safe assumption that LSPs in general are not leveraging all ' or in worst cases, any ' of the technologies available to them.
High employee turnover creates a very real and meaningful loss for LSPs. Time and money are expended to train new employees. Turnover also causes LSP service levels to slip, and business is easily lost in an environment where capacity is abundant and competition is vicious.
LSPs for the most part aim to grow their networks by adding services that almost inevitably include adding facilities and workforce. As the hourly workforce increases in size it becomes harder to manually manage the variable costs, even if the process is well organized. A warehouse operation employing less than 100 hourly workers can still bleed thousands of dollars a month if those workers are accumulating unwarranted overtime by punching in a few minutes early and punching out a little late. The risk to larger operations is even greater.
In addition, the LSP market is multinational by nature, which can cause serious headaches ' and real costs ' when it comes to managing a workforce overseas. Each country can have very different regulations such as tax codes, benefits requirements and more.
|
|
|
| 'Worldwide spending on human capital management software will be roughly $6 billion to $7 billion in 2009.' | |
|
|
Often human resources, or human capital management (HCM), systems are seen as a piece of enterprise resource planning (ERP) systems, which manage an organization's resources, data and activities across departments. ERP software vendors, such as Oracle, SAP and Lawson Software, offer HCM applications in addition to vendors focused more on this specific market, such as Taleo and Kronos.
'Fifty percent of U.S.-based firms with less than 50 employees have software of some form to manage human resources,' said Lisa Rowan, program director for HR, learning and talent strategies at IDC, a Boston-based information technology research firm.
Rowan estimates that worldwide spending on human capital management software will be roughly $6 billion to $7 billion in 2009. 'And that doesn't include $30 billion per year U.S. firms spend on outsourcing,' she said.
Outsourcing in the human resources field has many meanings. In this context, Rowan is referring to the handling of functions like payroll performed by an outside firm. Certainly many of our readers are familiar with services provided by payroll giant ADP.
Rowan also points to candidate screening, training, and time and attendance tracking as functions that would benefit the logistics business specifically. 'If done correctly, these functions could save (LSPs) a lot of time and money,' she said.
A focus on recruiting functionality helps cut down the cost of recruiting by screening out the right staff to do the job. Further, it decreases turnover, which delivers bottom-line benefits, in addition to increased levels of safety and performance in the workplace.
Keeping close tabs on the hourly workforce is a critical expense management exercise for any organization employing blue-collar labor. Time and attendance systems have graduated from punch clocks into sophisticated pieces of the HCM application suite. Today the most basic functions of these systems provide an expense management function while more sophisticated users are able to leverage these systems to optimize the workforce.
The human resources department of Jacksonville, Fla.-based Ceva Logistics launched a study in 2007 to understand who the company should hire based on background. This helped the company identify the profile for model employees that it now uses to measure candidates in an effort to hire the right people with the right skills, both for management and frontline positions.
'We've found a dramatic correlation between lowering turnover and improving safety and quality,' said Mike Nicoletti, Ceva's human resources director.
With respect to time and attendance, Ceva leverages technologies provided by Kronos to manage the 'swipe-in, swipe-out' process for hourly employees in the warehouse. Nicoletti said this critical piece of Ceva's HCM strategy allows the company to reward good attendance in addition to just punishing bad.
Nicoletti admits the HR improvements are far from done. 'We are still a work in progress and we intend to get better,' he said.
HCM, in particular recruiting and retaining talent, remains one of the biggest challenges facing the logistics industry. And it's not going to get any better until LSPs address their capacity to effectively recruit, manage, educate, compensate and retain people. While technology will never be the final answer to a problem, it's an essential part of the answer that will allow leading LSPs to find talent when the market ultimately improves and labor becomes scarce once again.