White Paper: Improve Profitability With Real-Time Tracking Of True Labor Costs

In manufacturing, one of the largest variable components in the cost of your products is labor. Labor costs can have a major impact on how you price your products and invoice your customers, ultimately impacting your sales and profitability. Detailed information about time on task and production efficiencies can also help you better manage your workforce. But tracking tasks and the associated actual labor costs can be a very complex, time-consuming and costly effort. As a result, many manufacturers make do with standard cost estimates instead of actual costs, making accurate product pricing a challenge, if not impossible. In fact, in a recent IndustryWeek poll, 75 percent of manufacturers surveyed acknowledged that standard costs do not reflect actual labor costs.* Despite how much is riding on labor costs, many manufacturers manage pricing and the production workforce based on this set of estimated time and costs, without any real knowledge of how close those standard numbers really are to true labor costs.

Labor costs affect many other areas of the business, amplifying the impact of data inaccuracies on the financial health of the business. Marketing needs accurate costing data to support the development of pricing that is competitive as well as profitable. Sales needs insight into product margins to ensure that aggressive pricing in competitive bidding situations still yields ample margins. If costs are not accurate, engineering cannot make the best business decisions in the product design phase or search for changes that could enable more cost-effective production. Estimators need accurate costing data to ensure sufficient margins on bids. Accounting needs timely and accurate costing data to issue prompt invoices to generate cash flow. The Finance and Human Resource departments need to reconcile payroll hours with production costs. The manual capture 1 WHITE PAPER: Improve profitability with real-time tracking of true labor costs and re-keying of data from paper timesheets adds overhead and expands the opportunity for errors — which can translate into inaccuracies in your labor costing that again impact margins and profitability. Moreover, unresolved variances between payroll hours and production leave everyone guessing about production efficiencies and true costs.

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