We live in a world where there is a constant push to increase profit and decrease costs. Yet there is a continual upward pressure on labor costs, through wage inflation and regulatory burden. Increasing prices to compensate for higher labor costs is either risky or not possible. Staying competitive in the market and keeping customers satisfied means giving them the best price.
“If wages keep going up every year, how do we reduce our labor costs?”
Measuring and reducing labor costs can be done the way that works, or the way that doesn’t work. One way can involve management staring at spreadsheets for hours, trying to figure out how to measure costs and success, hiring expensive consultants to measure things for you, yelling at employees to work harder, or – the opposite – motivational cheerleading. The more effective way is the Easy Metrics way. Easy Metrics’ software and tools give you granular visibility into the labor costs of every aspect of your operation.
Reveal Your True Per Unit Costs
The first step to reveal your per-unit costs. This process starts with macro information, and then incorporates micro information. Like having the ability to order a cup of coffee 10,000 ways, today’s products and services are much more diverse, and there is an associated cost for each variance. Eventually, it becomes important to know what the cost is for each variance of product and service. We make this time consuming cost process quick and easy.
Determine Your Labor Cost Inputs
The inputs Easy Metrics uses to determine your labor costs per unit are:
1. Employee time
2. Employee hourly wage + burden
3. Employee activities (units produced, details about each unit/service)
If your company just produces one type of widget and all employees produce identically, the formula is pretty simple. Unit Cost = (#1 * #2) / (#3). The challenge comes from when you have 100 employees that produce at different levels and 1000’s of different processes and products. We take care of the thousands of calculations and determine your true labor cost.