Optimising personnel costs in production

Personnel play an important role in the production of companies. The efficiency of your production stands and falls with trained specialists. At the same time, personnel is also an immense cost item that you should regularly keep in mind and optimise accordingly. In this article, you will learn which options are available to you to reduce the costs of production personnel – and ideally without reducing staff!

What are personnel costs in production?

Personnel costs basically include four components:

  • Wages and salaries
  • Social security contributions
  • Workplace costs
  • Other personnel costs, e.g. for training

A distinction can be made between labour-intensive manufacturing, as typically occurs in workshops and in one-off or small batch production, and less labour-intensive manufacturing, as can be observed, for example, in highly automated series production and in the process industry.

In the latter industries, the type of personnel deployment differs. While in the first group personnel are mainly deployed in production itself, in the second group personnel are mainly deployed for retrofitting equipment, for trouble shooting and for maintenance and repair.

Accordingly, not only the required qualifications differ, but also the potential for replacing personnel with automation in the future.

More complex production processes require more overview of personnel costs

With increasing differentiation of submarkets, customer applications and product variants, production processes are becoming more complex. The trend is towards series production with customer-specific individualisation.

This has an impact on the variety of product specifications, on procurement, on work preparation, on the complexity of production planning and control and on production management itself. The production process in this complexity must be made controllable and monitored.

It is not just about managing the production process in general, but about managing the individual customer orders that go through this production process and compete for resources. This is the reason why even in well-managed manufacturing companies the ratio between directly productive employees and overhead employees tends to become less favourable.

To manage the complexity and constantly balance both customer interests and manufacturing capabilities, coordinators and project managers are needed who see the whole picture as well as your personal mission.

How to effectively reduce personnel costs in production

Effectively reducing labour costs in manufacturing can be done through three different levers:

  • Improving employee productivity and efficiency
  • Reducing workplace accidents and absenteeism
  • Efficient personnel scheduling

Productivity can be achieved through applied REFA methodology. In this process, individual work systems are optimised so that as little unproductive time as possible occurs for employees within the work systems. In particular, overhang times are analysed. These are times when employees are waiting for machines to finish their cycle time.

In particular, set-up and preparation times for the next machine cycle can already be carried out during the last machine cycle instead of waiting until the cycle is finished. The goal is always to achieve the highest output per unit of time for which the worker – and the machine – must be paid. The introduction and application of REFA recommendations require a REFA qualification, but also the will and consistency of managers to realise the potential for improvement.

In addition, relevant qualifications and good instruction and ongoing training of employees can optimise productivity and prevent accidents at work.

The quality of leadership in companies should not be neglected either, as it has a significant influence on the motivation, commitment and initiative of employees. Appreciative leadership that both promotes and demands opportunities for the professional and personal development of employees favours productivity not only in production, but in the entire company. Invest in the leadership quality of your management personnel, down to the foreman or team leader level.

Grateful scope for optimising personnel costs usually exists in administration. Do not save on directly productive employees as long as their capacity can be utilised. This is where the money is made, unless work processes performed by employees are sensibly automated.

Another way to improve productivity is to plan staffing appropriately, always ensuring capacity is available to meet demand. Also, introducing flexible working time models and reducing overtime to minimise workload and absenteeism.

Low wages may have their appeal, but are not recommended in times of a shortage of skilled workers. Pay your staff at least in line with the market and you will benefit from loyalty and motivation advantages. Staff qualification is a company’s asset that managers should not gamble with lightly.

By combining these measures, an effective reduction in personnel costs can be achieved without reducing the number of employees.


What are your challenges?

Restart Dialogue