The cost of labor is usually one of your company’s largest line items. With a growing business, it is often easy to justify higher labor costs to keep up with demand. However, as your business matures, sales plateau and you’ll soon find that labor costs are out of control, putting a considerable strain on your operations. Thus, an adequate balance must be maintained between resourcing and cost controls for a successful cost reduction strategy.
Managers and business owners quickly cut the number of employees when a business is in its developing stage. Although lowering the cost of labor is a shrewd idea, have you considered that losing an employee doesn’t just mean losing the individual. You lose all their knowledge, skills, and perhaps most importantly, the experience they gained from working. However, there are many other ways better than simply cutting staff to improve efficiency and reduce labor costs.
Labor costs can be cut in more ways than by dismissing an employee. In this article, we will tell you ways to reduce manufacturing labor costs.
Reduce the number of working hours
Businesses can save considerable money by making some jobs part-time that were formerly full-time. Rather than being out of a job altogether, the vast majority of employees will take an hour cut.
An excellent solution for this is to use job sharing, where two part-time employees work together in a full-time capacity. By implementing this arrangement, you’ll cut labor costs and you’ll eliminate the need for an extra office since two employees can work on the same timestamp of one employee, and neither will use the office at the same time.
By cutting down on employee hours, you could also downsize your office space through job sharing if you do this on a large scale. It will be possible because your workforce will be sharing their hours, so your office will only need to be half as big as before.
Streamline processes
Streamlining processes over time can lead to significant efficiencies. As far as processes are concerned, the objective of your business is to become a well-oiled machine that offers maximum efficiency.
It is important to put in writing any task that is repeated more than twice as this creates a process and makes responsibility and management clear.
The point is that people shouldn’t be micromanaged, however, many business owners and managers spend a lot of time on less important tasks, use outdated manual methods, and juggle competing priorities.
By repeating tasks unnecessarily, the staff wastes their time and can’t focus on improving the business.
Almost any part of a business can benefit from process improvements, such as purchasing and handling stock, laying out stores and restaurants, handling cash and payments, and accounting. Knowing what impacts revenue, cost, and morale is the key to finding:
- How to do something most effectively,
- Who is the most suitable person for the job, and
- Keeping things as organized as possible.
Give your Employees a break
In addition to streamlining processes, allowing them to take advantage of their annual leaves can save your company a lot of labor costs as well.
Further, bringing both paid and unpaid leave into the mix would make the offer more attractive for them. You can achieve this by using a properly planned roster that makes sure that no area of your business remains understaffed for long, ensuring a smooth operation.
Reduce staff turnover
The cost of cycling through staff is expensive. You still have to spend time and money bringing productivity to a high level, even if you hire internally.
You should study your working conditions and culture if you are turning over staff every three months (this does not include seasonal businesses of course).
Here are some steps you can take to improve staff retention:
- Ensure an easy onboarding process
- Regularly evaluate employees
- Train and develop professionals
- Analyze the climate of the company
- Promote a healthy working environment
- Recognize, empower, and give flexibility to staff
- Establish a clear company vision
- Make sure your staff is informed, and
- By paying your workers competitively, you will reduce your operating costs.
Take advantage of cheap labor
At the peak of your business operations, if you notice that you need more workers to keep up with demand, instead of hiring full-time staff, you can cut the number of hours and salaries you have to pay by hiring interns.
Cross-train staff
Specialized roles are important in any business. They maintain your business’s efficiency and competitiveness by helping employees understand their responsibilities.
If you designate specialization for everyone, then when someone is not available, or leaves, your business will be plagued by problems.
It also becomes problematic if the company hires specialists whose duties aren’t yet critical. By ramping up the workload, you’ll be draining the company’s finances.
Take steps to cross-train staff and share the workload between the two parties to mitigate the risks. Learning and growth will be enjoyed by most employees, and provided roles are clearly defined, it won’t have a negative impact on productivity.
Employ Technology
When properly implemented, technology can be an effective tool for reducing labor costs.
Businesses can automate several processes with computers, the internet, and machines, which reduces costs and length of production. If these processes were performed manually, you would have had to spend a great deal of money. Also, make sure to use an industrial ball valve, to save yourself from wastage of materials as it will get heavier on your pocket along with labor wages. You would want to use the Dombor brand’s valves in your industry because of their durability and reputation.
Review your payment model
The best approach to cutting costs is to review your employee compensation model, or how you pay them.
The compensation you’ve been providing for your employees may be hourly wages or a fixed salary; implementing a new financial model could help you reduce expenses when you’re unable to afford a fixed salary.
The commission arrangement is one of many flexible models you can work with. Your employees may be compensated based on the value they provide to the company instead of a fixed rate.
To do this effectively, you should hire freelancers who work based on commissions.
Conclusion
These were some of the most effective ways to reduce labor costs in manufacturing without reducing the employee count. It is to be kept in mind that if your business cannot afford to keep the same labor count, you can and you should reduce the headcount without giving a second thought. Because the points above will cost you the same labor as you have before implementing them in your business model.
