Our Experts | Victor Ing & John Wittine
Originally posted on Crain’s Cleveland Business.
What if a company could have the parts and materials they need to manufacture or assemble their product without the added cost and burden of having to inventory or warehouse them?
Welcome to the world of just-in-time manufacturing.
Pioneered by Toyota in the 1970s but built on a history of manufacturing techniques pioneered by Henry Ford, Eli Whitney and industrial engineers from the 1890s, just-in-time has been a game-changer. So much so that it is today ubiquitous among manufacturers of all sizes and covering a wide variety of industries.
A just-in-time workforce means on-demand workers
But what about a just-in-time workforce? What if the same companies could have workers ready to be utilized without the need to pay them during their downtime? What if this eliminated the expense of having to provide benefits and paid time off? What if a company didn’t have to worry about ever laying off a worker again? For that matter, what if they never had to hire or fire again?
Welcome to the world of flexible staffing.
Most people have unique perceptions of the services that a staffing partner can provide but ultimately the biggest value they can provide is flexible staffing, contingent staffing and just-in-time staffing. In short, everything named above that most employers wish they didn’t have to worry about: hiring, firing and the liability resulting from these activities.
You get what you pay for
If it sounds like the commoditization of people, think again. It’s actually quite the opposite. Top talent is not something you can bid out like you can other types of materials. You are willing to pay more for a product that lasts longer, right? You’ll pay more for a better made car, won’t you? Flexible top talent costs a little more but considering the value to your customers of less quality issues, higher production rates and no more missed shipping deadlines, it pays for itself.
But, can’t a company do it cheaper if they hire their own workers? Perhaps. But, couldn’t they also warehouse and inventory their own materials? Isn’t that cheaper in the short-term? Yet, most aspire to a just-in-time materials model. The concept as applied to workers is nearly identical but often difficult to see at first glance. If a company has a full warehouse of parts, perhaps they could be conducting business more conveniently but is it really more efficient and cost-effective? So it is with workers. For example, why pay for overtime? What about downtime? Why keep workers during times a company doesn’t have need for them? The answer is simple: flexible workers.
What is your cost per unit for labor?
Most companies ultimately look at their business as a cost per unit or on a cost of goods basis. They know to the penny how much in materials it takes to create what they sell. But then, they throw this to the wind when production dips, there are shutdowns or other instances where their labor costs remain yet they’re shipping no product and therefore deriving no revenue.
The solution? Fixed employment costs. A staffing partner provides a worker only when there is work that needs performed. The cost per unit therefore becomes more accurately derived.
There is also less risk in having a contingent workforce supplied by a third party. Just as one can reject parts from a supplier that are defective, so can one reject a worker that fails to perform to standard. No messy paperwork, just a call to the staffing partner and the person is replaced with another. They were never the company’s employer so there is zero to little chance of an unemployment claim, a wrongful termination lawsuit or a lingering workers compensation claim.
Try before you buy
A company may need to occasionally hire from the flexible workforce to maintain a baseline of employees. The flexible workforce is there to cover the peaks in business. No different from dating versus marriage, this gives a company the opportunity to try the worker out for a period of time before hiring. Most agencies will allow a company to hire their employees at no additional cost once a contractual period of time has passed.
But we’ve always done it the old way
Finding a staffing partner that is knowledgeable in manufacturing processes and able to serve as a true partner gives a company what is essentially a labor consultant. They can also help you find ways to streamline the employment process. In lean manufacturing, every step must add value to a customer. A staffing partner has the ability to add great value to manufacturers by shortening what is often an awkward and lengthy process. “Leaning” out the hiring or on-boarding process is especially beneficial. The goal is to eliminate redundancies. Many companies are stuck on age-old hiring practices that make no sense in today’s business environment.
A simple example is when a company asks a staffing partner to find them employees who they then also interview. If the staffing agency is interviewing — and they know how to do it better than anyone — then why is the company performing interviews? Especially if the staffing partner offers the opportunity to review a video resume.
All businesses have peaks or valleys
Just-in-time manufacturing costs money. Every step of a process does. But, if managed appropriately, it can yield great savings and most importantly, enhanced flexibility during lean times. So it is with a just-in-time workforce. Why carry burdensome costs you don’t need and people you don’t want or need when the work demand flexes?