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Component Manufacturing dverti$er
Don’t Forget! You Saw it in the
Adverti$er
November 2018 #10232 Page #22
Todd Drummond Consulting LLC.
When Your Company’s Manufacturing Labor Pay Rate is Causing Labor Shortages Todd Drummond
S
ome of us are old enough to remember Dean Martin. Whether he stated this quotation on the right about experience and poor judgment, I will never know. But let’s face facts—it has merit. And some executives are displaying very poor judgment by not understanding what is happening in the manufacturing area when costs are on the rise. This sentiment is especially true when it comes to tight labor markets. Keeping your costs in line is hard enough when you are constantly fighting material costs in an inflationary market. However, it is not just material that is causing you headaches but the tightening of labor, which in turn will pressure your company to stay competitive for labor rates. Many of you are slow to the idea that you cannot expect your labor rates to stay flat, to somehow constantly fill the vacancies with new hires and to keep your costs and profits in line. When clients call on my services, they are normally focused on their manufacturing output, and if this is the case, I ask two very simple questions: 1. What is your labor rate ratio to sales as a percentage? (Shop labor costs with burden rates divided by total sales) 2. What is your labor turn rate in your manufacturing? In other words, how many people do you have to hire monthly compared to the total staff to keep all of the positions filled?
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