This is always an important question for operations executives and managers. Determining the correct headcount for each function of the business is a dynamic and constant question in any business including manufacturing and service.
Direct employees’ hours pay everybody’s bills; therefore, having the correct number of headcounts is critical to your business success. If direct hours are higher that needed, the P&L bottom line will be negatively affected and if they are not enough, keeping the top line above a favorable threshold is close to impossible.
Performing an effective headcount analysis is important for answering this critical question. There are many parameters that need to be taken into account for painting the big picture of the business direct labor needs. Some of the data needed include:
Customer demand including planned, backlog, and forecast
Standard time for existing processes within the function
Analysis of available capacity and bottlenecks
It is important to note that time studies and motion analysis techniques differ from business to business and even from process to process. Also, calculating the actual load in a job shop with high mix, low quantity products is different from a mass production system with low mix and high quantity. Depending on the manufacturing type -labor intensive vs. machine intensive- different techniques are used to calculate the available capacity. That’s why most successful organizations rely on operations experts to perform this analysis.
Recently, Techam solutions completed a headcount analysis project in a function at one of its major clients and developed a headcount analysis spreadsheet. The developed tool is actively used by top management team to determine the full time vs. part time needs on a weekly basis.
If your business is labor intensive and you are not happy with the direct labor part of the cost of goods sold (COGS), Techam solution will be happy to be your partner in the journey of making your ratios better by optimizing your DL and eliminating labor wastes.