In today’s volatile marketplace, manufacturers need to function as efficiently as possible to control costs and maintain agility — both fundamental aspects of competitive positioning. As such, good labor management is critical to ensuring efficient operations. But what is labor management, how can you improve yours, and what human and technological components do you need to take into consideration?
What Is Labor Management?
At its core, labor management is a discipline that studies, analyzes, and optimizes the policies, processes, and capabilities that pertain to an organization’s labor resources, both human and technological. It can have various objectives, including streamlining the production process, improve worker safety, enhance product quality, and reduce cost per unit (CPU).
Every organization wants to optimize its labor management to improve efficiency and achieve better outcomes. Nevertheless, at nGROUP, we’ve seen even some of the world’s most prominent companies make common labor-management mistakes that drive up costs by millions of dollars on an annual basis.
For example, when we started working with one of the largest electronics providers in the world, one of its facilities consistently had a high CPU. After studying the facility’s operations, we determined that costs were so high because the company employed a team of long-term employees whose salaries had risen to well above industry standards over the years. Moreover, there was no flexibility to scale the workforce down in times of low demand, nor was there any measure of productivity and efficiency. We helped the company identify and retain top performers; plus, we implemented performance and productivity improvement measures that resulted in a savings of $2 million in labor costs in the first 12 months alone.
Another client in the fresh foods industry had a high CPU for a different reason. It employed a small workforce, which resulted in high labor costs due to overtime when demand was high. We determined that the company could achieve considerable savings by expanding its full-time workforce and utilizing temporary workers during times of peak demand. Moreover, we helped it streamline processes, resulting in a significantly increased output and a CPU that decreased from $1.41 to $0.47.
Improving Labor Management
With the support of an experienced labor management consulting firm, you can avoid these types of mistakes. At nGROUP, we begin each engagement with a detailed process analysis to determine what the current situation is, what the pain points are, and what we can do to optimize the labor process for the client to reach its operational objectives.
Our process analysis consists of the following six steps:
- Introduction to nGROUP’s concept: This initial step is crucial to establishing trust and getting all of the stakeholders on board. We explain who we are, how we can drive value for the business and how other clients have benefitted from our customized strategies.
- Identification of key areas to improve: We utilize a comprehensive method that looks at people, processes, and technology to pinpoint areas of improvement. In general, labor-intensive processes that involve more than 50 people or rely on temporary labor for large portions of their labor supply.
- Definition of program objectives: We assess the client’s desired outcome to find every possible solution.
- Data collection: Data provides the foundation for understanding all of the factors that contribute to the client’s current CPU.
- Production process analysis: This step enables us to identify process inefficiencies that are driving up CPU and examine what kind of process improvements can be made.
- Unit-labor cost proposal: We present the client with a unit-labor cost proposal that outlines a reduced CPU that can be attained by implementing our customized strategy.
The Value of Production Standards for Process Improvement
Process improvement is central to implementing a strategy to improve labor management. Once a specific process has been documented and analyzed, realistic process improvements can be determined, along with best practices and process improvement techniques designed to help the organization attain the desired future state. In this endeavor, it’s critical to establish realistic production standards. Production standards function as benchmarks against which everyone in the organization can measure their performance. When correctly utilized, they reveal the performance of workers and the effectiveness of process adjustments.
At nGROUP, we distinguish between two types of production standards:
- An engineered standard: A heavily data-driven, highly time-intensive type of standard that has to meet specific criteria.
- A reasonable expectation or production expectation: An ideal output/performance rate that’s based on current and historical data.
To fully leverage production standards, a suitable production tracking mechanism needs to be in place. This tracking provides you with the data you need to see all the factors that are impacting your outcomes and enables you to refine the steps as needed to improve the process.
When implementing process improvements, you need to offer your workers feedback as early and often as possible. There are several ways to do this, including providing:
- Individual performance graphs that are presented at the end of every shift
- Hourly feedback, which can be used to train new employees
- Real-time feedback, which is especially helpful for an assembly line process
One of the most important aspects to bear in mind in labor-management is the human element. Everyone in your workforce, from your C-suite to your managers to your employees on the floor, needs to support process improvements for them to be successful. Unfortunately, adherence to the status quo frequently stands in the way of any change. Sometimes decision-makers believe the reasons to change aren’t compelling enough or will threaten their influence. Other times, employees are comfortable with the way things have always been done. Often workers fear that change will jeopardize their jobs.
For this reason, it’s essential to get your management team on board before making any labor-management improvements. At nGROUP, we always work closely with the management team from the very first step of each engagement. We listen to their pain points, needs, and suggestions, and we incorporate all that information into the customized strategy. In addition, we provide operational support throughout the entire process, so it becomes easier for managers to communicate and implement the change from the top down.
Technological Tools for Labor Management
With the rapid advancements in technology, it should come as no surprise that there are several labor management tools available to manufacturers today. At nGROUP, we use three technological tools that can significantly enhance your existing workforce management applications:
- nVISION provides a visual representation of every step in the production process, which helps you improve efficiency and increase production.
- nSITE tracks employee activity, reports on productivity levels and allows you to measure those levels against production standards so you can manage your incentive pay program accordingly.
- nGROUP University provides a custom training and education program tailored to the needs and experience of each employee that goes through our program.
Achieve Your Full Operational Potential With Improved Labor Management
Improving your labor management can help you achieve your full operational potential. This improvement has many business benefits. It allows you to utilize people, equipment, and facilities better while simultaneously lowering overall costs. It can reduce your CPU, improve product quality, increase speed, boost your agility, and enhance worker safety. Ultimately, all of this together can result in much stronger competitive positioning, both as a business and as an employer.