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, proper labor management is critical to ensuring efficient operations.
What is labor management, how can you improve yours, and what human and technological components do you need to take into consideration?
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, improving worker safety, enhancing product quality, and reducing 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 Cost Per Unit. After analyzing the facility’s operations, local wage rates/benefits, and comparing to internal costs, we determined costs were 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 less 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.
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:
Find out more about the different steps that improve the financial performance of labor-intensive operations.
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:
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:
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.
Many people across the country are experiencing a labor shortage. Unemployment in many cities is at an all-time low. There is pressure in new competition as more and more facilities are constructed, and rising wage pressures. When it comes to positions in warehouses and distribution centers, there are some additional challenges that we all face in getting employees for both hours and management positions. However, one thing to consider is that many companies have policies that may be contributing to their shortages of employees
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.
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:
These tools allow the warehouse to be flexible and dynamic, even for a static warehouse. Challenges in warehouse environments today have been rapid. Customers are demanding far more services, and those have been pushed up the supply chain to distribution centers that have not had to deal with these tasks previously. The days of unloading pallets, storing, getting orders, labeling and shipping those pallets out are becoming more and more rare. With the introduction of different forms of value-added services and drop ship programs, today’s warehouses have had to become far more nimble than in the past.
Improving your labor management can help you improve the financial performance of labor-intensive operations. This improvement has business benefits allowing 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.