Reduce labor by hiring more hands
Guess what? Having a minimum number of staff members is often not the way to
have the lowest possible labor cost!
I am sometimes regarded as (and perhaps even dubbed) a “hatchet” man because I am known for reducing staff members and reducing payroll. But
sometimes the way to save labor is to add people!
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At every job station in your plant, there should be a standard of an appropriate
sort. And this standard cannot be an off-the-cuff guess. You cannot have
arrived at that because Billy-Bob said that he can’t go any faster. That doesn’t count. It has to be a lot more scientific than that.
Pressing standards (although rarely treated with much authority), are far easier
to come by than some other employee standards. The Drycleaning and Laundry
Institute, for example, has published pressing speed standards for virtually
all types of pressing machines. But how many garments can your drycleaning
inspector inspect in a given amount of time? And of course, I am referring to
the complete job with whatever quality standard you desire.
It doesn’t matter if you think it is 50 garments per hour, or triple that, while your
competitor firmly believes that no one can inspect more than 25 garments per
hour.
It really doesn’t matter what your number is for any given job station. At least not for the
point that I want to make today, because today, I want to show you how to save
money by adding staff members.
The prerequisite is to have standards and to pay attention to them. An example
of this is the person who presses shirts on your single buck. How many shirts
does this person press per hour? Many people have an overly optimistic digit
here, but regardless, let’s say that you think that it’s 55. It’s actually 48, but your presser quits and is replaced with someone else that
presses 37 shirts per hour.
That, of course, isn’t good, but let’s ignore the presser entirely for a minute and consider the supporting roles — the wash person, the touch-up person, the inspector, the assembler, the bagger.
These roles, at some plants, could all be done by the same person, but my point
is easier to explain if there are a few people involved, so let’s imagine the following scenario:
• A part time wash person.
• One full-time presser on a double buck who presses 50 shirts per hour.
• One additional person that does the inspection, assembly and the bagging.
There needs to be a standard for each of these roles. Usually, the most reliable
way to arrive at that standard is to have a manager (or yourself) do the job
for some amount of time and decide what is possible. This can be quite a
challenge for many supervisors, but what other choice is there?
If Bertha has been folding shirts at your plant since your great-grandfather
owned the place and can fold five shirts per hour, which is twice as fast as
you can, is the standard five shirts per hour? Or is it 60 because you think it
should be that?
Is your standard for shirts per hour on your double-buck (with one presser only)
50 because that is what your pressers do and you haven’t hired anyone faster?
And what about your Inspector/Assembler/Bagger? What is the productivity rate
from the pressers at which this person is fully utilized? If you think that it
is 50 shirts per hour, then let’s go with that.
In order to calculate your efficiency here, we divide the number of labor hours
into the number of shirts produced in return for the expenditure of those labor
hours. So you have one presser and an IAB (inspection, assembly, bagging)
person.
Add in a part-time wash person. That is 2.5 people to produce 50 shirts, or 20
shirts per labor hour (not too good, by the way.)
If you have done a proper time study on the IAB person, perhaps you have
determined that this person can effectively touch-up, inspect, assemble and bag
90 shirts per hour.
Let’s say that this plant is doing 400 shirts per day and everybody is working about
eight hours per day. How can you possibly save labor dollars in a plant like
this?
At first glance, this is quite a dilemma. Your drycleaner probably does the
shirt washing, but if you tried to cut down on half a person in the shirt room,
you wouldn’t save any cash dollars because the drycleaner currently washes shirts “in between the acts,” so to speak. If you mandated that he stopped washing shirts, he would, quite
likely, work exactly the same amount of hours.
This, by the way, does not mean that you are getting your shirts washed for
free. Some plant operators look at the scenario stated here (50 shirts per hour
with one presser and one IAB person and half a person for wash) as two people
to do 50 shirts per hour resulting in 25 pieces per labor hour (PPLH).
This may seem right, but it is technically incorrect. The shirts didn’t wash themselves. You paid somebody to wash them. Who?
Some argue that charging some of Freddie the Drycleaner’s hours to the shirt department is pointless. I argue that it is far more
pointless to lie to yourself with numbers. Besides that, the shift in the
classification of those hours means that the drycleaning PPLH will improve.
Some of Freddie’s time is associated with the shirt laundry. That point must be incontestable. A
counter-argument is that Freddie doesn’t work more hours when he does wash shirts and, conversely, does not go home
early when he doesn’t wash them.
Another example that you can probably all identify with is the customer service
person at the slow store. One person does it all. Whether or not
tagging/mark-in/check-in take place there and are all done by this person, the
labor cost for the CSR is identical.
These two examples are illustrations of employee underutilization. The
drycleaner can do the shirt washing and the CSR can do the check-in/tagging
because otherwise these employees are under-utilized.
This doesn’t mean that the washing is free or that the clothes are tagged for free. This is
not free labor, this is pre-paid labor. There is a big — a very big — difference. I did not just go off on a tangent. This is very much linked to
what I opened this column with. Saving money by adding employees.
The fact is that there may be numerous instances of other under-utilized
employees in your employ. You must identify these people. These people are not
maliciously trying to hose you. They are merely under-utilized because you
allow it.
If you have a double-buck shirt unit with two people operating it and together
they do 55 shirts per hour, they are underutilized by 50 percent. End of
discussion. You are giving them your profit. You are throwing money away. You
are wasting $25,000 per year.
Do not whine about tough times, declining piece counts and not being able to buy
a new Mercedes. The money is there. You’re just wasting it. And that crock about going slowly in order to do a good job?
Don’t go there. That a safehouse.
Alright. Back on track. In our example — 2.5 people to do 50 shirts per hour — how can we save money there? Need the presser. She is going nowhere. Must have
touch-up, inspection, buttons, assembly and bagging. She is keeping her job.
There is no place to cut labor, right? Wrong.
Presently, the (estimated) cost per shirt for labor in this is example is
calculated as follows:
2.5 people at $12 per hour for 40 hours to do 2,000 shirts. Assume that the $12
is burdened with PTAX, worker’s comp and bennies. The total labor dollars cost is 12 x 40 x 2.5 = $1,200,
which comes to 60 cents per shirt. That comes to, in case you’re interested, $62,400 per year in shirt department labor cost.
Still with me? Remember that you determined that your IAB person’s job had a production standard of 90 shirts per hour? (Don’t doubt the plausibility of this. Go to www.tailwindsystems.com There is a
reason that I am a busy guy.)
We are only feeding this person 50 shirts per hour, but the systems in place
cause this person to be underutilized by a considerable amount.
The remedy here, is to hire another shirt presser that will boost shirt
productivity to 90 shirts per hour, fully utilizing the IAB person. The result
is 3.5 people that produce 90 shirts per hour and work only 22.25 hours per
week (Hold on. I know what you’re thinking). The net result is substantial cash savings. Watch.
3.5 people at $12 per hour for 22.25 hours to do 2,000 shirts. Assume that the
$12 is burdened with PTAX, worker’s comp and bennies. The total labor dollars cost is 12 x 22.25 x 3.5 = $934,
which comes to 46.7 cents per shirt. That comes to, in case you’re interested, $48,568 per year in shirt department labor cost and a savings — by adding one employee – of almost $14,000 per year, forever and ever. Try that by switching to Geico.
OK. Q&A time.
Q. You have a double-buck unit but only one collar-cuff machine. How can this
work for you?
A. Buy another collar/cuff machine. Remember, we are talking about a $14,000 per
year savings, not a one-shot deal. Few investments will give you such an
incredible ROI.
Q. You only have a single-buck unit. How can this work for you?
A. Buy a double-buck and two collar machines. The savings are there although the
return on investment will be substantially slower. You can always look for a
good, used double-buck shirt unit. This is why I rarely recommend a single-buck
unit. You can always use a double as a single unit and expand the department
when the need arises by adding another collar machine, but once you have
out-grown a single-buck unit, the party’s over.
Q. I have one of those three-in-one shirt units. How can this work for me?
A. Once again, a capital expenditure will have a payback, but often, those that
have these units have them because of space issues. However, if you doing less
1,200 shirts per week, you can probably save buckets of money on labor cost.
This is true regardless of your equipment. We will need to have a telephone
conversation for that.
Q. My IAB person cannot do 90 shirts per hour alone. How can this work for me?
Call me.
Q. My employees want full-time hours. They will work somewhere else if they only
get part-time hours from me. How can this work for me?
A. I know that this is tough, but I am not going to apologize for this either.
Your labor cost can be cut. This is certain. If you choose to pay out more in
payroll dollars and make little or no profit, you have the right to do so. But
what is the point of owning a business that makes no money?
In the final analysis, the prognosis isn’t that bad. The final scenario is more likely to be seven (for instance) fully
utilized full-timers rather than 10 people working 30 hours per week.
Q. My employees “pad” the time clock now that their hours have been cut. How can I work around this?
A. The inmates are running the asylum. Managers run businesses, not employees.
“If you do what you’ve always done, you’ll get what you always got.”
