How Manufacturers Can Both Reduce Labor Costs and Add Value for Employees

Your workforce is one of your largest expenses. It’s also your greatest risk. To be competitive, manufacturers need to be agile, responsive, and understand how to maximize their talent. Cutting-edge manufacturers are adding value to their employees by providing a workplace where they can grow and develop. They’re also wisely allocating labor costs to the projects and shifts that will maximize efficiency.

Labor costs are the largest item on your balance sheet, so an effective cost-reduction plan should balance resources and cost control. While a reduction in force is typically the go-to action when discussing cost-cutting, it’s often not the best way. Replacing employees can be very costly, and lost institutional knowledge can take years to recover. It makes more sense to keep your employees and make sure they’re engaged and motivated. But how does that idea gel with cutting costs?

Here are a few methods to think about if you’re looking to reduce cost:

Eliminate Overscheduling

Overtime and overscheduling are the largest contributors to out-of-control labor costs. If you’re uncertain about your company’s production demands, your scheduling is haphazard at best. Without clear oversight, you could be unnecessarily staffing the business at non-peak times or needlessly paying overtime. Making sure the business is appropriately staffed to meet demand can eliminate unnecessary labor and overtime hours.

Provide Great Training

Workers who are well trained have improved productivity and a lower chance of errors and workplace accidents. By creating a formal training program, you can help employees stay engaged and motivated, which means they’re more likely to stick with the company.

Consider Using Part-Time Workers

Temporary or part-time workers can be called in at peak production times on an as-needed basis. When you use part-time labor, you’re off the hook when it comes to paying for the benefits, 401(k) contributions, and bonuses that your full-time employees receive. If you hire workers through a staffing agency, you’re also not responsible for paying payroll taxes.

Enhance Safety

Your employees are extremely valuable business assets, so make sure you’re providing them with a safe work environment. By implementing well-documented safety protocols, you can reduce the chance of accidents, which can, in turn, reduce costly Workers’ Compensation claims and paid time off work.

Labor costs are a significant portion of the budget for any company. Making smart decisions such as gaining deeper insight into scheduling and doing everything you can to help ensure employee satisfaction can go a long way to reducing your expenditures.