Supplying Labor To Meet Demand - InformationWeek

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3/18/2005
02:40 PM
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Supplying Labor To Meet Demand

Companies want to manage their employees just like a supply chain, and vendors such as IBM are offering software and services to help

Imagine an organization that has 1.4 million employees spread around the world--in cities and rural outposts, and even on ships at sea. And suppose those employees have to be shuffled to different projects on a regular basis, some as often as every 90 days. Can your human-resources and workforce-management applications handle that?

The U.S. Department of Defense is that organization, and it's tackling the challenge with a new system that combines off-the-shelf personnel- and pay-management software with planning and analysis tools so it can more effectively match the right people with the right jobs at the right time. "Putting the right people [based on skills and experience] with the right equipment is no doubt a primary goal for any military operation," says Lt. Col. Ellen Krenke of the U.S. Air Force.

This system reflects a new trend to manage the workforce much like a traditional supply chain, where assets are matched to specific orders in the most profitable way. Backing the trend: software and services that are much smarter than traditional labor-management and human-resources tools because they let businesses more effectively match employees' expertise and knowledge to customers' needs and deploy the right people in much the same way assets would be deployed in a supply chain.

Supply-chain management basically consists of inventory management, planning, and optimization, and a lot of the same ideas can be applied to people, says Forrester Research analyst Noha Tohamy. "The new buzz is truly about managing your labor, be it blue collar or white collar," Tohamy says. The concept of "how to best utilize your employees as a 'labor supply chain' is a new way of defining the problem."

Several factors are driving this so-called labor supply chain: the increased use of contract personnel; the wholesale downsizing in recent years that's made workforce optimization critical; and the rise in demand for IT and other services, which is putting pressure on the suppliers of such services to have optimal knowledge of their employees' skills and abilities.

Leading the trend is IBM, which launched its Workforce Management Initiative in January 2004. The initiative borrows many of the same concepts of supply-chain management, such as capacity planning, supply and demand planning, and sourcing, says Bruce Richardson, a senior VP at AMR Research.

IBM began the project to help manage its global roster of about 100,000 employees and about as many subcontractors in its IBM Global Services division. The company built a taxonomy, or structure, that outlines internal and external skills and provides a minute-to-minute view of IBM's labor-supply-chain activities. The system runs on IBM's DB2 database and WebSphere business-integration software. "It catalogs skills, creating common descriptors around what people do, what their competencies are, what experiences and references they have, which goes beyond a basic job description," says Patrice Knight, VP of business transformation at IBM's Integrated Supply Chain division.

IBM's labor supply chain has reduced costs associated with labor, travel, and subcontractors in its services business by more than $500 million in 2004. Last year, IBM also saw a 3% to 5% improvement in the time IBM consultants spent with clients because it was able to gain better visibility into its talent, Knight says. The initiative has been so successful that IBM now plans to sell it to customers as software and services by year's end.

Human-resources applications and other workforce-management systems have been around for more than a decade. Though many of these systems can serve as databases for employee talent, they often don't correlate that information with other important data. For example, the systems typically can't pair employees with potential clients based on skills and availability the way supply-chain systems match inventory levels with market demands. Current human-resources systems also can't track, for example, that an employee has been on the road for 10 days and deserves some downtime. (For more on evolving labor-management tools, see story, "Supply Chain: From Plant Floor To People".)

What differentiates a labor-supply-chain system such as IBM's is that it gets into this level of detail, Tohamy says. In IBM's initiative, WebSphere pulls together employee and other data from a variety of systems, including human resources, Lotus Notes, and customer-relationship-management software. If, for example, a client in Canada needs for a two-week project a consultant who can speak both English and French, has a doctorate in physics, and has experience with Linux and Java programming, IBM's system can search among that pool of data to find the best-suited consultant and engage him or her via an E-mail that outlines the project.

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