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nGROUP Performance Blog

Why Is Cost Per Unit Better Than Traditional Hourly Labor

Posted by Bob Duron on Feb 19, 2019 10:51:00 AM

In the right environment a Cost Per Unit (CPU) model is far superior to a traditional hourly staffing model. In a CPU the provider shares in risks and rewards, and there is an economic incentive to drive performance in a way that aligns with the client. In an hourly model, it’s the opposite. The provider is paid regardless of the outcome or performance and the client bears many of the risks associated with managing the workforce.

nGROUP vs Traditional Staffing


 For a CPU partner recruiting and retaining people is just as important, if not more, as it is to a traditional staffing provider, but it is just the tip of the iceberg. A CPU partner is on the hook not just to deliver people, but to deliver a service level within the confines of a fixed cost. They will have a team of productivity experts consisting of Industrial Engineers, experienced operators, and technology personnel with production backgrounds. The team works with the clients to drive performance in a way that traditional staffing companies are not equipped to.

 

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A CPU partner will also bring technology to the table that is not typically a part of a traditional staffing relationship. Properly managing a CPU operation requires systems to measure productivity at the most granular level possible in real time, provide actionable feedback to the management team, and support the incentive pay program. The data being gathered by these systems can be used to build dashboards and reports that provide previously unavailable insight to the client.

 

You may be wondering, “If CPU is so great, why doesn’t everyone do it?”. The answer is the application is more limited. Traditional staffing works for anyone who requires flexible labor and/or HR support. CPU applies to a subset of those people with appropriate volume, processes, and culture. For with the right combination it can yield as much as $10,000,000 per year in labor cost reduction as it did for one of our clients. If you’re interested to find out if your operation can benefit from a CPU model we’d be happy to spend some time learning about what you do and sharing our expertise.Click To Speak To A Specialist

Topics: Cost Per Unit, Reduce Cost Per Unit, Operational Support, Great Labor Management, Warehouse Technology, Labor Cost Solution, reduce labor costs, Outsourcing, nGROUP, performance partners