8 Things An ELS Vendor Will Never Tell You

Feb 05, 2008 11:29 PM  By

A daily battle goes on in distribution centers and manufacturing plants all across the country between unmotivated workers and the supervisors that lead them. The supervisor wants them to work harder but typically isn’t sure how to make that happen.

The workers want to work slower–even to the point of forcing an overtime situation–so they can make more money. This, of course, is unacceptable to the company.

At this point, a consultant firm gets the nod to create engineered labor standards (ELS) so the company can fairly and equitably hold people to a proven, repeatable performance target, and, if necessary, reduce headcount by eliminating excess personnel.

Sounds good, right? Well, it isn’t that simple. Many companies lack experience working with ELS vendors, and the outcome is often a painful experience.

Here are some things you must consider as you choose an ELS vendor:

1) If a vendor isn’t regularly talking about change management from the first moments of its formal presentation until the very end, they aren’t prepared to help you. Change management is absolutely crucial. If your employees or supervisors resist the change, it will almost certainly fail.

You should ask the ELS vendor for specific information about what they offer in terms of change management assistance. If all you get from them is buzz words and models, you should keep looking to find a vendor that can really help you.

Change management is a process. It doesn’t always fit into a model, and fancy terms won’t inspire your supervisors and managers to overcome the resistance they receive. It must be proactive, and it must affect the very culture of the organization in such a way that doesn’t rub people the wrong way. Your ELS vendor’s change management program should be wrapped around the entire project from beginning to end.

2) If the vendor is offering to provide a warehouse management system (WMS) or labor reporting system (LRS) software, they sometimes offer to “throw in” the engineering for free. While this might seem like a great cost-cutting perk, you need to carefully determine the quality of the engineering they are offering.

Poor engineering leads to inaccurate standards, and inaccurate standards lead to a waste of your money. Good engineering is not cheap, so you might want to ask yourself if you are being quoted too much for the technology.

Even though the technology is definitely the more expensive of the two, no vendor should be able to “throw in” engineering for free. You are paying for it somewhere, and it might not be the best.

3) Vendors often change out the members of their engineering team right in the middle of the project, and that can bring your project to a stand-still. That said, don’t be too concerned if a junior-level engineer gets changed out; this is typically not a big problem. Most engineers at consultant companies are right out of college, and the heavy travel commitments overwhelm them pretty quickly.

If an engineer leaves in the middle of the project, it will take another engineer a few days to ramp up on-site to get to the effective level of the previous engineer. Your contract should include a clause that relieves you of the responsibility to pay for that engineer while he/she is getting acclimated to your organization. Companies are always paying big money for these disruptions to their ELS projects, and it isn’t their bill to pay.

Speaking of adding clauses, you should include one about the vendor’s project manager. You MUST insist on stability at this position because this person typically has full responsibility to get you the results promised. The contract should provide you a steep discount if someone at this vital position is changed for any reason.

4) If a vendor is telling you about how great their warehouse management or labor-reporting software is, have them prove it to you BEFORE you sign the contract. Take some site visits and talk to their customers, past and present. This is a time when you need to pull out a microscope and seriously evaluate what you see and hear. You can’t imagine how much time and money is wasted by companies when they find out they are actually beta testing the software for the vendor.

Even if you know that you’d be the guinea pig, it is not advisable to press forward as the test-bed for such software because there are so many failure points early on. You don’t want a two-year ELS project.

5) Your ELS program should include a “performance management” segment–typically executed in the latter stages of the project. Performance management is not just a study of the data being generated.

At this point in the project, it is all about getting the results from the people that do the work. In fact, about 55-70% of the project’s success is determined by the people on your floor. Engineered labor standards mean nothing if the people perform them poorly and aren’t held accountable.

The performance management portion of your ELS program must involve an expert in leadership and motivation. Do not leave this critical task to an engineer or a project manager; they don’t know how to effectively perform it. An engineer’s value is in studying processes, inputting data, and evaluating the results. They don’t know how to drive under-performers to hit the mark they created for them.

Engineers are typically not known for their people skills, and those skills are vital to the performance management segment of your ELS program. Leave the performance management to a company that specializes in human performance in logistics.

6) Have the ELS vendor put some “skin in the game.” Simply stated, if they fail to help you get to the specified labor savings figure, make sure the contract requires them to reduce their fees by X percent. Keep in mind that most ELS vendors won’t have a problem committing to this, but they will want you to commit to following every reasonable thing they ask you to do.

That said, some of their “reasonable” requests won’t sound so reasonable to you (e.g. reduce headcount in the pick module by five full time equivalents by Friday). Most companies fail to comply with such requests, and the vendors take note of it.

If the vendor fails to get the company to the labor savings specified in the contract, they will immediately throw their trump card and declare that the company’s lack of action led to the shortfall in the project savings. It gets them off the hook, and it puts the responsibility on the company’s shoulders. Don’t let this happen to you.

7) Try to choose a vendor that can provide the software (if you need it) and the engineering as a package. Some companies will purchase the LRS software license from one company, and then contract with another company to do the engineering. This might appear to be the most “dollar-wise” approach, but it usually costs you more in the end.

Why? Well, the two vendors are typically competitors in one way or another, so they sometimes withhold information from each other causing delays and/or outright failures. When the delays come–and they almost always do–there is a lot of finger pointing. Ultimately, anything that causes costly delays should be considered completely unacceptable.

Don’t forget to make sure you have an escape clause in your contract. If the vendors start blaming each other for delays, you don’t want to get caught in the crossfire.

8) Any vendor that talks about how perfect and seamless the ELS project will be is a vendor that doesn’t know much about what they are doing. EVERY engineered labor standards program experiences a few hiccups, and you want to select a firm that will honestly communicate that to you right from the beginning. Ask them what difficulties they anticipate and how they plan to overcome them.

There are many things you must consider as you move down the path to implementing an engineered labor standards program–this is not an all-inclusive list. If you proceed with caution and ask a lot of questions, you’ll weed out the vendors that aren’t right for you and your company, and you’ll end up with a great ELS program and the labor savings to prove it.

Michael Droske is president of Turning Point Training (www.trainingandgaining.com), a developer of management training program for supervisors working in logistics.