Manufacturing businesses are highly dependent on labor due to their operational demands. As a result, most of the budget planning for a manufacturing company is around labor cost optimization. If your company is struggling with managing the cost of labor continuously, then there is a need for a successful cost reduction strategy.
In this article, we will explore how to reduce labor costs in manufacturing by efficiently balancing resources and the workforce. We explored several direct and indirect methods to improve a manufacturing company’s bottom line.
Read on to learn what methods some of the most successful manufacturing companies use to reduce labor costs.
Table of Contents
Four ways to reduce the labor cost in the manufacturing industry
1. Reduce the number of working hours and cut overtime if not required
You can save a lot of money by converting full-time jobs into part-time roles by reducing the number of working hours. If your manufacturing unit struggles to keep the budget low frequently, it is preferable to reduce the number of hours than the headcount.
An easy way to reduce the number of working hours is by job sharing, where two part-time employees share a full-time role. There are several benefits of this approach. It cuts labor costs, reduces the need for extra office space, and makes shift scheduling easier.
Manufacturing companies can also downsize office space by reducing employee hours through job sharing. As fewer workers will be there, say about just half the usual, so less workspace will be needed during a shift.
2. Train employees when they are not performing well
One of the reasons for increased labor costs in manufacturing companies is poor productivity. When the workers are not properly trained to perform their duties, they are more likely to commit mistakes, and the manufacturing process has to be repeated.
This is why it is essential to monitor their performance and individual contributions to be able to customize a training program for them. Establishing a training plan for employees is how you can reduce labor costs in manufacturing. There should be initial training when onboarding new labor and an ongoing training regime to ensure that employees stay current.
A well-trained workforce in the manufacturing company is necessary to enhance productivity and reduce rework. It is also beneficial for the workers as they can perform their roles much better and take further initiative.
3. Create a proper schedule of how many work hours and how many employees required
Another effective way to reduce labor costs is to create a proper employee schedule. Overscheduling is common in manufacturing companies due to poor shift scheduling. This is why some companies still bear avoidable labor costs in any operation.
As a manager, when you don’t have access to correct information about the production demands, workforce, and skill sets, your scheduling will be a “best guess.” Here scheduling software can provide the needed information for well-planned schedules.
Managers can use the software to have complete information about the workforce, available employees, and production demand. This ensures they make their scheduling decisions from the data, not guesswork. You can checkout our guide on manufacturing shift scheduling here and create shift schedules that actually works for your organization.
Adopting scheduling software is how you can ensure that your business is always adequately staffed to meet the demands and eliminate any excessive and unnecessary labor hours. It is also a way to keep employees happy, as a study by Harvard University shows that 70% of workers’ schedules are changed last minute, disrupting their personal and financial lives.
4. Invest in automated machines and software
Technology is the solution for cost management in several industries. If you are wondering how to reduce labor costs in manufacturing, it is through adopting automated machines and software. Many manufacturing units can substantially reduce labor costs by automating or assisting processes with efficient tools.
For example, using the internet of things sensors within the manufacturing industry helps reduce technicians’ workload. Automation is also the answer to increase productivity and reduce the total time it takes to manufacture goods. You can save a lot of money otherwise spent on manual labor costs.
How can Truein help?
Truein is a complete employee attendance and time tracking software that you can deploy without additional hardware. It is cloud-based employee management and shift scheduling software that offers features like attendance tracking, overtime calculation, real-time tracking through geofencing and GPS targeting, leave management, shift scheduling, and much more.
It also easily integrates with most payroll software ensuring workers are paid accurately for the number of hours worked.
Conclusion
You can try these methods when your manufacturing business starts feeling the pressure to reduce labor costs without affecting production. Paying overtime or hiring new labor to increase production can quickly affect profits.
You must be familiar with methods to reduce your reliance on overtime or temporary workers. Adopting new technology and making employee scheduling efficient is best for controlling costs.
