When in manufacturing, learn what the Japanese do, then do it better

By Tom Taetsch

Throughout the U.S., the greatest obstacle for Operational and Human Resource professionals hit while trying to improve their labor management is a resistance to change. The pressure to succeed makes companies less open to taking risks and trying new techniques. Yet, businesses have to make modifications to keep up with a shifting national and global economy.

Across the world, Japanese companies have gained traction as the global leaders in manufacturing.  This is a result of their history in creating sustainable labor practices and implementing a cost-per-unit (CPU) based labor model. So, what makes the CPU labor model so compelling and effective?

After World War II ended, American statistician, Dr. W. Edwards Deming, would visit an economically devastated Japan during his work at the USDA. He became fond of the culture and people and eventually influenced a group of top Japanese managers who were eager for new ideas to improve quality.  His approach was based on statistical analysis centered on 14 points for management.  Demings is also credited with devising and implementing some of the most influential concepts in today’s manufacturing industry, such asTotal Productive Maintenance (TPM) and Plan, Do, Check, Act.  Beyond Deming’s body of work, other manufacturing concepts originated through Japanese industry like Lean Manufacturing or TPS (Toyota Production System) and 5S Methodology.

The Japanese began to and still set the standard for sustainable production practices.  It is through consistent and automated implementation of these same practices that one workforce management company, nGROUP performance partners, has developed a highly effective CPU model for the American culture and business environment, and is able to achieve significant results for their partner companies.

nGROUP developed an integrated approach of converting traditional hourly rate workforces into a fixed cost per unit (CPU) arrangements, and helps clients budget labor cost more effectively, enhances stagnated quality programs, and integrates value stream mapping philosophies.  Through a commitment to lean manufacturing and Six Sigma philosophies, plus innovative human performance coaching, the nGROUP model guarantees clients positive financial and performance results, and a positive change in the production culture.

For more information on nGROUP performance partners visit www.ngroup.biz

Tom Taetsch, nGROUP Vice President,  has 25 years of supply chain experience, including 11 years of recreational vehicle manufacturing experience with Yamaha Motor Manufacturing Corp of America.  His logistical and engineering workload has embodied Supply Chain consulting for Tompkins International and within the 3PL industry, working for companies such as Exel, Saddle Creek, and Weber Logistics.

 

 

 

Grow Top Line Faster with Innovative Labor Strategy

By David Hair, President and CEO, nGROUP performance partners

Labor-intensive businesses in today’s economy are up against a number of revised tax laws, making it increasingly difficult to maintain or increase profit. The Affordable Care Act alone places additional costs and compliance burdens on businesses with 50 or more employees.  Adding to this weight is the increased litigation and costs associated with labor unions and “permatemp” employment.  So, how can a company stay in compliance, reduce or maintain labor costs, AND increase their top line? Here’s a look at three innovative labor strategies that may be a viable solution for current companies to reach top line business growth:

  1. Reduce the Workforce

Reducing the workforce is the “solution” that many political and business leaders quickly cited in response to the ACA’s “50 or more” mandate.

A reduced workforce decreases ACA cost but hinders the ability to keep up with demand which may well exceed 50 workers.  Simply put, if a business grows or has a peak production season, it needs a larger workforce.  Beyond reducing hours or limiting the workforce to 49 employees, businesses may want to consider splitting their companies into smaller entities.

Entrepreneur Magazine noted that during a webinar on Obamacare, Bob Graboyes of the NFIB Research Foundation “advised participants that entrepreneurs may not be able to avoid the large-employer fines by splitting their companies into smaller, separate businesses. Even an entrepreneur with completely separate companies may find his or her workforces combined for the purposes of the health law.”

With the law being unclear as to how the government will treat multiple companies with the same owner, reducing your workforce or splitting your company into smaller, separate businesses is a very limited, short-sided approach to begin finding real solutions.

  1. Hire Independent Contractors

In a recent article, “Data Spotlight: Independent Contractors on the Rise,” Jeffrey Eisenach, an economist at George Mason University, cited that “the number of so-called independent contractors is up by more than 1 million since 2005.”  Independent Contractors work on a contract basis, file a 1099-MISC with the IRS and don’t draw the benefits of a full-time employee. When a service provider is classified as an independent contractor, the company is no longer liable for:

  • State workers compensation
  • Federal unemployment tax
  • Federal employment tax
  • State income tax withholding
  • Employer Civil Liability (wrongful discharge or entitling the employee to benefits plans)
  • Minimum Wage Laws

While avoiding these liabilities sounds like a winning solution, any HR Director can quickly point out that the legal requirements of hiring independent contractors is limited in scope. The popular website, LegalZoom, states, “Should employers incorrectly define a worker as an independent contractor, they may find themselves liable for past taxes including FICA and federal unemployment tax.”

In relation to labor-intensive operations, retaining Independent Contractors is particularly limited in its ability to provide solutions.  Typical distribution and plant workers do not fit the legal definition of an Independent Contractor.

  1. Partner with a 3PHL

Third Party Human Logistics (3PHL) is an innovative business model that offers services with best-in-class practices for a fixed cost. Most often they operate on site in the client’s facility. These amenities include labor solutions for manufacturing and distribution facilities and process management.

Unlike traditional temporary labor providers, 3PHLs are experts in engineering labor standards and production efficiencies. It is the responsibility of 3PHL firms to provide expert analysis and oversight of the production systems that provide a safe, efficient, and compliant-based operation that meets quality standards.

Additionally, 3PHL firms are financially accountable for delivering efficiency by means of process improvements and human (workforce) improvements, making a firm more competitive in speed, quality, cost and capacity.

When it comes to meeting compliance, remaining profitable, and increasing the top line, the 3PHL model is an attractive new solution.  3PHL produces the same flexibility as temporary labor while going a step further to provide a company with efficiency. The model offers reduced cost and liability with increased throughput and quality.

Workforce optimization is no longer just an HR issue. It touches all aspects of the business and requires the strategic input from top executives. Companies must concentrate in staying compliant with ever changing labor laws, controlling payroll cost while being competitive for good workers, managing risk for an increasingly ligatious workforce and avoiding the pitfalls of a collective bargaining table.   They must do all this without losing focus of their business. In 2016 CEOs and CFOs will want to consider the competitive advantages of the innovative 3PHL production model to maintain labor effectiveness and efficiency.

 

 

 

 

A new way to think about budgeting labor costs for 2016

by Jim Zimmerman

Many executives within the manufacturing and distribution industry are facing a budgeting process that will ultimately make or break their company’s 2016 earnings. Now is the time to think about what strategies will deliver desired results.
New regulations and a changing business climate are creating an environment that forces a company to find prosperity in innovative ways.

One area often overlooked but with excellent savings potential are departments with labor intensive production. Operating costs associated with labor intensive operations are a paramount concern for companies operating in the U.S.   Whether it is the uncertainty of regulations associated with the Affordable Care Act (ObamaCare) or increasing legal risks associated with staffing companies and labor unions, many American industries will need to rethink their labor strategy.

A trending new alternative to traditional labor strategies has been started by a U.S. company, nGROUP performance partners. nGROUP encourages executives to group employees by type of function, then evaluate if there is better way to drive results for each group.

For example, nGROUP has coined the term ‘Human Logistics’ to describe the groups of employees who do repetitive tasks to move product from A to B.  Not the trucks and boat logistics, but the people who do the work pre and post transportation.  They are often general labor workers that assemble products, pick and pack products, stack and unstack the pallets, load and unload the trucks, hang and tag garments, perform quality control, etc.
As a specialized 3rd party human logistics (3PHL) provider, nGROUP is leading the way in facilitating changes by providing midsize companies and major corporations with an alternative, more cost effective, human logistics strategy.

Instead of assuming the universal burden of budget cuts, nGROUP’s 3PHL model enables companies to outsource specific work cells or facilities. This allocates budget cuts into manageable units that do not sacrifice productivity and quality.  This ‘a la carte approach reduces the burdens of labor and production in the areas they choose.

With this alternative strategy, companies can partner with nGROUP as a consultant or vested outsourcing partner.  nGROUP applies a data driven lean manufacturing philosophy, 6Sigma principles and specialized workforce management technologies to improve performance metrics and drive down unit labor costs 10-25%.

In a recently published study, nGROUP revealed how one company’s adoption of the 3PHL model produced record breaking results in not just one facility – but three facilities.

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*Per man hour

What strategies could companies consider for 2016 to make it a record breaking year? Perhaps an alternative strategy that goes beyond being cost effective, such as the 3PHL model from nGROUP, that will produce the quality, speed, flexibility and scalability that are vital for companies to be successful in the upcoming year.

To read more nGROUP Case Studies, click here.

Alternative Solutions to Corporations Seeking Labor Compliance

With the majority of the “Obamacare” Affordable Care Act (ACA), mandates going into effect in 2014, executives and human resource professionals across the country are scratching their heads trying to figure out the best strategy for labor compliance and cost improvements. nGROUP Performance Partners, a national on-site outsourcing provider, is answering their call with a business model that offers solutions in both critical areas.

Our proven business model guarantees cost savings in labor, meets the ACA mandates, and eliminates most compliance and co-employment issues,” says David Hair, President of nGROUP Performance Partners.

nGROUP provides labor and process management services to companies with labor intensive operations. nGROUP oversees entire operations or a singular work cell. For example, a client may outsource an entire manufacturing facility to nGROUP, or nGROUP may only be responsible for one work cell within the facility, such as packaging.

According to Hair, it is the role of assuming responsibility that sets nGROUP apart from other industrial engineering efficiency consultants and other flexible workforce options, such as temporary staffing. “This year our clients are expressing concerns about a number of labor compliance issues, particularly those aimed at temporary employment. At the end of the day our job is to not only produce the results we guarantee but to also deliver a workforce that is motivated, trained, and in compliance.”

When it comes to compliance regulations, the ACA has gained a lot of attention from critics, citing that the law offers little guidance as to how mandates will be regulated. For example, one of the most controversial regulations of the ACA is the mandate that companies with more than 50 full-time employees shall provide “qualified” health coverage for all their full-time employees, or pay an annual penalty of $2,000 per full-time employee. If a company does provide such coverage but it’s not “affordable,” the penalty is $3,000 per employee. (Affordable is defined as less than 9.5% of the employee’s family income.) Many economists have reported that the financial impact of the penalties associated with this mandate will reduce profit margins and drive higher prices.

Regardless of any direct financial impact, the ACA will most certainly increase compliance burdens. As reported on the Committee on Ways and Means website, the ACA will add nearly 80 million man-hours each year to individuals and businesses. Critics point out that the IRS compliance burden is the tip of the iceberg. With agencies such as Health and Human Services and the Department of Labor, the fear is that additional and duplicate oversight and regulations will continue to add unparallel compliance burdens on corporations, small businesses, and individuals.

“Whether or not the ACA is here to stay or is destined for mass revision, one solid truth remains,” Hair says. “Companies throughout the United States need to take measures now to ensure compliance when the majority of its mandates go into effect in 2014.”

In instances involving the need for cost improvements, risk protection and a flexible workforce, companies are looking for new business models that ease compliance burdens. A performance based partnership is an emerging example of how companies are adopting alternative workforce models on U.S. soil.

For more information on nGROUP performance partners visit http://www.nGROUP.biz, view http://www.nGROUP.biz/movie, or contact David Hair, CEO at dhair@nGROUP.biz