Uncover the Secrets to Gaining a Competitive Edge:

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1 Uncover the Secrets to Gaining a Competitive Edge: How Workforce Management Drives Productivity and Quality Service Sponsored by: Conducted by: On behalf of:

2 Background Businesses today are facing many similar challenges as they work to maintain or struggle to revive profitability. Companies are pressured to do more with fewer resources while simultaneously looking to manage their logistics and supply chain operations with greater efficiencies through, productivity improvements, greater control over expenses, upgrading customer services and delivering products and services to market more rapidly. To address these issues and attempt to attain their goals, companies are focusing on initiatives to better optimize, understand and manage their workforce. Workforce or labor management applications are viewed as a key to enabling greater visibility into labor activities for the purposes of effectively managing and maximizing worker productivity, controlling labor costs and tracking operational tasks. Critical Issues in Managing a Workforce As the economic recovery continues, labor will be scarcer and increasingly difficult to find quality workers for our jobs. Vice President, Retail With the recovery from the economic crisis, it will be more important to manage your workforce, expenses, and in general how you conduct day to day business. Increase workforce productivity 53 % Corporate Manager, Business Services Control labor costs Accurately track hours to tasks Minimize risks related to collective bargaining agreements Other 5 % 7 % 27 % To better understand how companies are managing employees and leveraging this asset, a study was conducted among logistics and supply chain executives in February, 2010 by Logistics Management and Supply Chain Management Review magazines to examine the usage and applications of workforce management solutions in mid-size and large organizations. Rising labor costs, retention of current employees and raising their productivity are the main issues we face in our company. To accommodate expansion of our business, labor management will only become more important. Logistics Manager, 3PL The results of the survey reveal that: Efficient supply chain and logistics operations often results in reduced expenses and promotes greater productivity. One mission-critical initiative considered to help accomplish these objectives is superior utilization and management of labor. Workforce management solutions are strategically deployed to enable managers to optimize workforce efficiencies to directly impact profitability, productivity, employee utilization and overhead. 2 Uncover the Secrets to Gaining a Competitive Edge: How Workforce Management Drives Productivity and Quality Service

3 Companies running labor management solutions have seen immediate results through improved workflow efficiencies, increased performance and productivity, improved scheduling and reducing extraneous labor costs. Organizations who have implemented workforce management solutions have garnered the benefits. Most have seen productivity increase by at least 10% with nearly one out of three realizing more than a 25% gain in production. In addition, labor costs have been trimmed. Four out of five companies have reduced costs while labor-related expenses are down, on average, a full 17%! Workforce Management Usage and Adoption More than one-half of the companies studied have already implemented and are receiving benefits from a workforce management solution. Among those who are not currently using a workforce management system, one in four are planning to evaluate or implement these applications during the next few years. For those who have not yet implemented but will be adopting workforce management solutions in the near future, many are looking to upgrade labor productivity, gain greater control over labor-related costs and develop higher visibility across disparate systems. Most will be automating workforce management procedures that are currently done manually or with a home-grown system. These implementations will likely include best-of-breed applications or be an upgrade or expansion of current labor management systems. Many expect to integrate these solutions into existing enterprise platforms or as a component of a larger IT upgrade. At these companies adoption of workforce management applications will be pervasive and largely deployed on enterprise or divisionwide levels. Critical Issues in Managing a Workforce Have WFM in place 54 % Don t currently have, but will evaluate/implement during next 2 years 26 % No plans at present 20 % Usage and Adoption of Workforce Management Solutions Based on Company Size Businesses managing larger workforces have been quicker to adopt a labor management strategy. In contrast, a greater percentage of smaller operations have yet to experience the benefits of these applications, but are more likely to evaluate workforce management solutions over the next few years. Overall, only one in five respondents claims there are no plans at the present time to adopt labor management solutions. These companies either lack IT resources or believe that the manual procedures they now have in place are sufficient. Now in use Plant to evaluate/adopt No plans at present 34 % 27 % 39 % employees 50 % employees 19 % 56 % ,999 employees 11 % 28 % 61 % 5,000+ employees 3 Uncover the Secrets to Gaining a Competitive Edge: How Workforce Management Drives Productivity and Quality Service

4 The Importance of Workforce Management Principles Users and future Significance of adopters of workforce Workforce Management management recognize the intrinsic value in Extremely important 39 % these solutions as a means of achieving their Very important 49 % strategic business goals. Somewhat important 11 % Nearly nine out of ten Not very / not at all important 1 % (88%) consider labor management as a highly important initiative within their organization. Workforce management will become increasingly more crucial as a means of understanding productivity measures linked to labor tracking. Two out of three indicate that labor management is more important today than it was only a few years ago. And, looking ahead over the next few years, two out of three also assert that workforce management will become even more fundamental as a business-critical solution with several factors feeding the criticality of labor management. Businesses are re-engineering and redefining business processes and embracing operational strategies such as lean and sales and operations planning (S&OP) which demand greater process efficiencies. Business growth and expansion along with the ability to contend in highly competitive markets also hinge on effectual labor optimization and forecasting. Scope of Workforce Management Solutions As validation that workforce management is a core business practice, these applications are wide-spread throughout organizations and encompass the majority of employees. Most deployments are enterprise and division level. Scope of Deployment Enterprise-wide 39 % Division-wide 27 % Departmental level 23 % Global 7 % Other 4 % Furthermore, companies have, on average, nearly two-thirds (61%) of their workforce tied into their labor management program. One out of three organizations (31%) have nearly all employees - 90% or more of their workforce - using their labor management system; one-half have at least three-fourths of their workforce accessing this application. Growing Importance of Workforce Management Less important Same More important 2 % 35 % 63 % Now vs. in 2 years I believe that to stay competitive or to exist at all will be directly affected by labor management tracking. Corporate Manager, Retail Our company is on the verge of doubling its current size. We need to be proactive and prepare by adjusting to the growth in all areas including labor management. Operations Manager, Food & Beverage Forecasting is the cornerstone of future labor needs. We should know where we are now but we need to know the what s and the why s in the next 2 years. Operations Manager, Transportation and Warehousing Services Employees in distribution centers (60%), those paid on an hourly-wage basis (59%) as well as salaried employees (47%) are accessing their company s workforce management system. 4 Uncover the Secrets to Gaining a Competitive Edge: How Workforce Management Drives Productivity and Quality Service

5 Automating Workforce Management Procedures Among those running workforce management systems roughly one in six (17%) have a fully automated implementation. For others, workforce Current Level of Workforce Management Automation Fully or mostly automated 17 % Some automated, some manual 73 % Mostly or totally manual 10 % management is a hybrid of automated and manual solutions Extent of Workforce Management Automation in 2 years Fully or mostly automated 73 % Some automated, some manual 27 % As workforce management becomes more critical the majority of companies plan to migrate many of their manual procedures to automated methods. Over the next two years a radical shift is expected as almost three-fourths of these companies believe that their workforce management processes will be mostly or fully automated. Evaluating Workforce Management Solutions When evaluating workforce management solutions, decision-makers look for solutions that are reliable, flexible and easily adaptable to changing business needs, and are easy to use. Ease of integration with other enterprise applications such as ERP platforms, warehouse management systems and transportation management software is also an essential requirement for many buyers. Features Considered Highly Important When Evaluating Workforce Management Solutions We have identified performance metrics that establish skills sets that are a condition of employment. This has given an accurate tool to coach the few individuals that are not performing at the minimum requirement. We now have a tool to incentivize the labor force based on specific goals for specific functions, Positive recognition. Supply Chain Manager, Warehousing and Transportation Services Reliability Ease of use Reliability / Adaptability Real-time visibility into productivity Ease of integration Complete workforce management capabilities Variety of time data collection options Scalability Well-recognized name / is a market leader 19 % 50 % 57 % 80 % 79 % 75 % 74 % 70 % 88 % We have a need for more control and visibility of labor costs to maximize investment value and limit/reduce cost increases. Supply Chain Manager, Aerospace Having real-time visibility of labor costs gives us the ability to implement changes quickly. VP, General Manager, Wholesale 5 Uncover the Secrets to Gaining a Competitive Edge: How Workforce Management Drives Productivity and Quality Service

6 Real-time reporting capabilities that look at overtime, schedule effectiveness, productivity, absenteeism, as well as other key performance indicators are also important measurements for many organizations. Details linking man-hours to budgets, productivity trending analysis and measuring labor hours against freight and tasks are additionally critical. Types of Solutions Being Utilized The types of solutions most commonly used in overseeing and maneuvering personnel are time and attendance software, time recording and time clocks and labor activities tracking. The Benefits of Workforce Management Solutions The primary purposes for using these applications are for monitoring and controlling three critical areas: task performance and productivity, scheduling, and HR/payroll. Specifically, workforce management applications are used to track labor hours with assignments, monitor employee time and attendance, keep an eye on budgets, plan and schedule labor requirements, analyze real-time performance and administer payroll and benefits. Types of Workforce Management Systems in Use Time & attendance software Time recording / Clocks 68 % Labor activities tracking 58 % Scheduling 46 % Analytics / Reporting 44 % Abscence management 40 % GPS / Mobile devices 15 % Uses of Workforce Management Solutions PERFORMANCE-RELATED MEASUREMENTS Track # of hours worked to tasks 70 % Analyze labor performance & requirements for future planning 67 % Provide feedback on employee performance 66 % Identify underperforming employees 63 % Monitor worker productivity during shift 62 % Monitor team productivity during shift 57 % Real-time visibility across disparate systems 38 % SCHEDULING APPLICATIONS Plan / Schedule required labor (shift, weekly, monthly, etc.) 62 % Tracking labor against budget 61 % Schedule labor to volume 50 % Manage hours of service requirements 38 % HR / PAYROLL TASKS Track time and attendance 68 % Payroll and benefits 58 % HR administration 46 % Track & pay employee incentives 45 % 78 % 6 Uncover the Secrets to Gaining a Competitive Edge: How Workforce Management Drives Productivity and Quality Service

7 Accordingly, the functions that businesses are tracking pertain to employee performance, productivity and measures such as hours work, number of orders processed, etc. Staffing requirements and man hours necessary to fulfill specified assignments, worker availability and budget allowances all influence job scheduling while functions that HR oversees involve attendance, hours of service and contracts. Areas Monitored Using Workforce Management PERFORMANCE-RELATED MEASUREMENTS Employee performance 73 % Productive/Non-productive hours worked 68 % # of orders handled 44 % Peak time evaluations 41 % Skill sets 31 % SCHEDULING APPLICATIONS Staffing requirements 67 % # of man hours to tasks 47 % Worker availability 43 % Budget allowances 35 % HR / PAYROLL TASKS Attendance / Absenteeism Hours of service Wage terms / Contracts 21 % 39 % 60 % 7 Uncover the Secrets to Gaining a Competitive Edge: How Workforce Management Drives Productivity and Quality Service

8 Strategic Objectives of Workforce Management Solutions Workforce management applications are strategically used to allow managers to make well-informed decisions that directly affect business process efficiencies, productivity, labor optimization and cost savings. Strategic Objectives of Workforce Management Solutions PERFORMANCE-RELATED MEASUREMENTS Minimize non-productive/idle times Improve customer service Analyze / Monitor supply chain process Understand order handling capabilities 35 % 35 % 51 % 67 % Our solution delivered a measurable performance improvement (dollars) that showed up in our financials. CEO/CTO/ COO/CIO/President/ Partner, Plastics SCHEDULING APPLICATIONS Optimized staffing / Forecasting # of workers required Improve scheduling Manage worktimes Integrate employees into scheduling process 30 % Optimize other resources (vehicles, equipment, etc.) 26 % 45 % 57 % 63 % HR / PAYROLL TASKS Reduce high overtime costs Create better work / home life balance Manage employee contracts 17 % 45 % 8 Uncover the Secrets to Gaining a Competitive Edge: How Workforce Management Drives Productivity and Quality Service

9 Results and Impact of Workforce Management Solutions Most companies who are now using workforce management solutions have attained many of the tactical business goals they set out to achieve. Companies have been able to reduce overtime costs, improve job scheduling, minimize workers idle or non-productive times, better manage workflow and forecast the number of personnel and expertise required to handle job-related assignments. Business Goals Attained PERFORMANCE-RELATED MEASUREMENTS Minimized non-productive / idle times Improved customer service Analyzed / Monitored supply chain process 28 % Understand order handling capabilities 26 % SCHEDULING APPLICATIONS Improved scheduling Managed work times Optimized staffing / Forecasting of personnel Integrated employees into scheduling process 31 % Optimized other resources (vehicles, equipment, etc) 21 % 46 % As respective markets HR / PAYROLL TASKS become increasingly Reduced high overtime costs more competitive, the Created better work / home life balance need is further raised 26 % to deliver products and Managed employee contracts services more rapidly 19 % thus necessitating upgrades to procedural proficiencies and greater workforce productivity. Through workforce management improvements, businesses have earned key strategic advantages resulting from better customer service and improved supply chain processes. 49 % 48 % 53 % 54 % 53 % We are seeing productivity increases. The other benefits that we realized were the work force has become self-directed. They fully understand and have been engaged with establishing the engineered standards. They have become more involved in providing suggestions for improving operations, and we have seen the relationship between the hourly and supervision become collaborative. It has also advanced continuous improvement teams to levels we never thought possible before going through the labor management process. Sr. Vice President, 3PL We are more productive and we have more coaching conversation with the associates weekly. Associates are also aware of how they are performing daily, weekly and monthly. We still have more improvements before we reach our peak performance as a group. Supply Chain Manager, 3PL 9 Uncover the Secrets to Gaining a Competitive Edge: How Workforce Management Drives Productivity and Quality Service

10 Since implementation, the majority have further noticed significant improvements in productivity and competency which has produced considerable savings. More than three out of four (77%) have realized at least a 10% boost in productivity, and one-third have gained more than a 25% increase in labor output. In addition, four out of five businesses have produced cost-savings as a consequence of greater process efficiencies attributed to improved workforce management competencies. These companies have seen labor costs reduced by an average of 17%! Businesses Experiencing Labor-related Cost Savings Have experienced labor cost reductions 80 % Have not realized cost savings 20 % Return on Investment 19 % 17 % We are able to see who is approaching overtime before it occurs. We are also able to see who is the most productive in particular areas so that we can pinpoint what they are doing to be so productive and share this with others. We have also been able to identify lost productive time due to too many job task shifts that we have now been able to minimize. Director of Supply Chain, Logistics, Operations, Sourcing, Wholesale Outlook for Workforce Management Systems Average % productivity increase Average % labor cost reductions As just noted, the impact of workforce management applications on business operations is considerable. Subsequently, organizations plan to develop and expand their labor management programs during the next few years by adding new applications or upgrading solutions with more robust functionality. Workforce management systems will become more comprehensive and extended to more employees. Labor management has reduced our labor costs by about 15% in the half of the workforce where implemented. We plan to roll out to the rest of our distribution center employees over the next year and expect to see the same labor cost savings. Vice President, Textiles Anticipated Changes to Workforce Management Applications Over the Next Two Years Have changes to system planned over next 2 years (NET) Will be expanding / adding apps & functionality 41 % Considering a new solution within 2 years 33 % Upgrading as part of larger IT initiative 27 % More employees will access system Deployment will be expanded 20 % No plans 17 % 83 % 10 Uncover the Secrets to Gaining a Competitive Edge: How Workforce Management Drives Productivity and Quality Service

11 Methodology This research was conducted by RBInteractive Research Group on behalf of Logistics Management and Supply Chain Management Review magazines for Kronos Incorporated, a provider of automated workforce and labor management solutions. The study was executed in February, 2010, and was administered over the Internet among subscribers to Logistics Management and Supply Chain Management Review magazines. Respondents were prequalified for being employed at companies with 250 or more employees, for being involved in purchase decisions regarding workforce or labor management solutions for their company and for either having a workforce management solution in place or are planning to evaluate or implement a workforce management system within the next 24 months. In total, 243 supply chain executives or logistics managers were interviewed for this study. Non-manufacturing businesses (53%) are well-represented and include transportation and warehousing services, 3PLs and retail and wholesale trade. Manufacturers (47%) are distributed across industries such as food and beverage, computers and electronics, automotives, chemicals and pharmaceuticals, etc. About Kronos Incorporated: How do you do more with less? Gain a competitive advantage? Achieve true operational efficiency? Kronos helps organizations of all sizes unlock opportunities hidden within their workforce processes to drive profitability and deliver exceptional customer service. Our easy-to-own time and attendance, scheduling, absence management, HR and payroll, hiring, and labor analytics solutions provide complete automation and high-quality information so you can improve workforce productivity, control labor costs so you can gain a competitive edge. KRONOS INCORPORATED Phone: Uncover the Secrets to Gaining a Competitive Edge: How Workforce Management Drives Productivity and Quality Service

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