4 ways to reduce labour costs and increase asset utlisation
4 areas you can start with today to understand labour costs and asset utilsation ahead of identifying opportunities for improvements in both areas through technology.
1. Labour Cost Analysis
Establishing a baseline labour cost is key to identifying opportunities for improvement. This goes beyond salaries and should look across workflows, overtime, wasteful processes and poor quality work as a start.
Workflows – Questions to consider at this stage should include; what steps are required in the completion of the job from the initiation through to the closeout? Who is waiting on who to approve something and how much is this delay costing? Are there wasteful processes contributing to labour costs for job completion? Where are the inefficiencies?
Real example #1 – A client came to us looking for a solution to automate approval workflows for the introduction of a new product to their business. They didn’t realise the size of the opportunity but did know it was inefficient. Prior to utlising our automated workflow capability, the workflow looked like this:
- 10 page form completed by the requester
- Completed form emailed to 8 approving parties
- 8 versions of the signed form emailed back (eventually!)
- Consolidation of all forms with signatures for filing
There were so many opportunities for improvement here and we were able to take approval time from an average of 8 working days down to less than 1 working day. This was achieved by providing the ability to automate the approvals on any device at any time plus the ability to send reminder notifications automatically and see where the workflow was held up.
Overtime – this is needed on occasions but managing this closely is important without it getting out of control. Is over scheduling occurring and is it needed? If it is needed then why is it needed? Understanding the drivers behind the decisions for this will help identify opportunities for reductions.
Poor quality work – human error increases costs. This could be poor quality in producing an item, a missed step on inspecting or auditing an item, the wrong materials being used or under specified materials for the job amongst many examples. Costs are incurred with return visits to rectify, honoring warranties, breaches of SLA’s, customer service and reputation to name a few. Understanding the frequency of these occurrences feeds into the labour cost analysis.
Small changes can yield large results and understanding the baseline to start with is the first step
2. Resource allocation
Once the labour cost analysis has been completed, opportunities are more easily identified moving into resource allocation. To quote Mckinsey: “Shifting money, talent and management attention to where they will deliver most value to your company”
Maximising labour efficiency is paramount. This can be aided by several smarts to make real time decisions, such as connecting systems together rather than hybrid paper and digital. Technology can support this function but is only one component.
Perhaps the most important part is breaking down functional silos across teams, divisions and business units. The helps identify duplication and opportunities to work smarter. In doing this, skillsets need to be carefully reviewed particularly where accreditation and certification is required.
A goal should be to have the right person in the right seat doing the right job and being utilised. This has further been shown to assist in weathering tougher times for businesses through downturns.
When benchmarking labour cost reduction or increasing asset utilisation, the targets need to be Specific, Measurable, Achievable, Realistic and Time Based (SMART).
In our experience, a common scenario here is executives struggle to figure out where they should reallocate, how much they should reallocate, and how to execute successful reallocation. Previous failed attempts at this can deter future efforts, which are obstacles that need to be overcome through strong change management support.
Real example #2 – A large client manages infrastructure. This work involves day to day management, repairing it and looking after peripheral components around it. For many years these 3 functions sat in different business units, with different executives and different staff.
As the market became more competitive, they needed to explore ways to optimise their work practices. Following a labour cost analysis, each business unit was explored with many interesting scenarios surfacing.
The business unit tasked with managing the infrastructure day to day would stop work in the event of bad weather, for practical reasons such as using the equipment safely. That same spell of bad weather would see the repair team a few kilometers away stretched on resourcing and incurring high costs as a direct result.
By breaking down the silos work became visible and the business units started collaborating. Benefits realised included financial savings and large customer service improvements. Optimisation across fleet equipment reduced costs and staff had time back with their families.
3. Asset Utilisation
Understanding all assets across the business and how they are being used sets a baseline. Readily available tools in the market include in-vehicle telematics solutions to assist in efficiencies and correlation of data for maintenance planning and customer management costs.
Is the right vehicle being used for the right job and if not why? Is the vehicle too small for the route or customer and requiring multiple trips thus incurring increased running costs and labour costs to operate?
Is the vehicle too large and incurring specialist skills to operate, higher fuel costs and potentially could be better utilised on another job or contract?
4. Use Technology
There are many available products on the market for addressing different components of labour costs and asset utilisation, but it is important to select a product that has the capability to capture all this information in a single view. This doesn’t mean the system has to be the source of truth, just a system that can connect to your existing systems to provide you an easy to understand consolidated view
Automation is the name of the game now. From back office processing of tasks to interactions between teams, business units and customers. These workflows are not new but technology to reduce labour costs is now readily accessible. The staff performing these tasks can then be reassigned to revenue generating activities. To get started in automating your business processes is easier than you might imagine. A capable cloud-based project management tool helps you visualise costs, resources and asset allocation against time.
Dynamic scheduling functionality will help your scheduling team plan, dispatch and execute work in the most effective way based on your own constraints. Your constraints could typically include distance from base location
At Dusk Mobile, we support you in the identification of opportunities and delivering with our industry leading SaaS product, the Intelligent Operations Platform (IOP). We partner with you to get more done with less and maximise the use of your labour and assets. Get started today on the journey to an automated and dynamic business tomorrow.
If you’d like to find out more on automation, dynamic scheduling and route optimisation for your teams or business, get in touch.
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Mckinsey – Yuval Atsmon August 2016: McKinsey: Nimble Resource Allocation