Manufacturing Supply Chains: Solving Workforce Challenges with Output-Based Staffing
The COVID-19 labor shortage has made hiring and retaining top employees more important than ever as companies scramble to staff up. Employers are hustling to fill enough positions to return to full output, while employees can pick and choose between jobs competing to offer the best benefits and pay.
Better wages and quality of life for workers is always a good thing, but companies looking to maintain production may need to look to a different solution: an output-based staffing model that lets companies increase their productivity even when they can’t increase their headcount.
Switching to an output-based workforce strategy may be the best way to maximize productivity when employees are in short supply. This strategy applies as much to understaffed firms as to those whose workforces are rocked by disasters like COVID-19, the supply chain crisis, or other challenges that pop up. By focusing on output over headcount, company leaders can create a production culture that is agile, resilient, and prepared for worst-case scenarios.
Output-based staffing focuses a company’s operations around output key performance indicators (KPIs) rather than headcount. Companies collaborate with output-based staffing partners to crew and schedule their workplaces, paying based on meeting this KPI standard. The staffing partner manages headcount swings to provide the right amount of workers to meet the needed KPIs per day, with no increase in cost.
In a cost per unit (CPU) output-based model, the staffing partner assigns workers based on the total returns or number of shipments a company must process. KPIs such as throughput, safety, and quality measure the team’s performance. A CPU-based staffing plan offers the client a fixed cost to reach the required performance. Companies using such systems generally save 10-20% in costs and boost output by as much as 25%.
Our volatile times are perfect for a switch to output-based staffing, as this model can create predictability even when market conditions are uncertain. By ensuring the workplace is optimized for productivity, company leaders can rely on hitting milestones during peak periods and crises. Staffing partners use incentive-based compensation to improve productivity and discourage turnover, making workforces more reliable and efficient.
Trying times raise the risk of turnover as employees step away for personal reasons or take advantage of the market to find better work. An output-based staffing partner can reduce this burden by hiring and training workers at no additional cost to their client, as the partner’s pay depends on the ultimate productivity of the entire team.
Output-based models also incentivize employees based on items processed, earned hours, attendance, and other key metrics, motivating and engaging team members to perform to their goals, instead of seeking greener pastures.
Output-based staffing makes the staffing partner, not the client business, responsible for hiring and training workers. The model helps companies maintain productivity while also rewarding peak performance. Using this model, business leaders can ensure they have a system that guarantees success through efficiency, rather than hoping to cross the finish line with pure numbers.
Harold Baro is senior vice president and general manager of SIMOS Solutions, a labor management firm that specializes in improving the ways organizations staff and manage high-touch environments by providing engineering expertise, a frontline workforce, and management at a guaranteed fixed cost per unit while meeting quality and safety standards. He leads a core of certified engineers and experienced onsite workforce leaders who help optimize processes for budget certainty and increased efficiencies in distribution, fulfillment, reverse logistics, and light manufacturing.